LEI does not have to fund appeals during “unmeritorious claims”

Hancock: Claim was not always easy to follow

Legal expenses insurance (LEI) does not have to fund interlocutory appeals that are likely to succeed as part of claims that overall are predicted to fail, the High Court has ruled.

Christopher Hancock QC, sitting as a deputy High Court judge, said requiring insurers to “continually re-evaluate individual applications in the context of unmeritorious claims” was “a profoundly unattractive suggestion”.

Sebastian Townsend Ukegheson, a Nigerian barrister and registered foreign lawyer who represented himself, claimed a total of £387,800 from Gresham Insurance for breach of contract in declining cover, fraudulent misrepresentation, loss of income and mental distress.

Looking at the wording of Mr Ukegheson’s legal expenses insurance, which was administered by Arc Legal Assistance, Mr Hancock said “the appeal referred to is an appeal in respect of a decision on the claim – not an appeal in respect of an interlocutory decision during the course of the claim”.

He said this construction was “much more commercially likely” than one covering all kinds of appeals.

“The alternative construction would involve the necessity for insurers to continually re-evaluate individual applications in the context of unmeritorious claims. That is a profoundly unattractive suggestion, in my judgement.”

Mr Ukegheson resigned from his job at the London Borough of Haringey in January 2013.

He took the council to an employment tribunal, claiming unfair dismissal and discrimination among other things, and applied to Gresham to cover the costs.

The insurer refused, on the grounds that its lawyers, Irwin Mitchell, and counsel had advised that the case did not have a greater than 50% chance of success.

While Mr Ukegheson was in Nigeria completing his studies to become a barrister, an employment judge struck out his claim as having no real prospect of success.

He was granted permission to appeal to the Employment Appeal Tribunal (EAT) in January 2015 and again asked for funding.

Irwin Mitchell concluded that although there were “good arguments” in support of the appeal against the striking out, the prospects of the claim “as a whole” succeeding were still less than 50%.

The EAT ruled that the employment tribunal should not have struck out the barrister’s claims of religious and disability discrimination, and victimisation.

At this stage, Gresham wrote to the claimant and said it would consider paying the costs of the appeal to the EAT.

However, Mr Ukegheson was not satisfied and appealed to the Court of Appeal to have all his claims remitted to a fresh tribunal.

His insurers reassessed the case, but concluded that his chances of success remained less than 50%. The Court of Appeal rejected the appeal.

The claims remitted to the employment tribunal were settled with the council.

Delivering judgment in Ukegheson v Gresham Insurance Company [2020] EWHC 2903 (Comm), the judge said the suggested causes of action put forward by the barrister were “not always easy to follow”.

The first was a claim for breach of contract, in refusing the to fund the claim despite its “good prospects”, the second a “more far-reaching accusation of fraudulent misrepresentation”.

Mr Hancock said Mr Ukegheson claimed £62,800 in costs for his appeal to the EAT. The insurers assessed them at £1,280 on the basis he was a litigant in person.

The barrister claimed a further £40,000 for his failed appeal to the Court of Appeal, £35,000 for loss of income he could have earned on other cases and £250,000 for mental distress, making a total of £387,800.

Mr Hancock ruled that the claim of fraud was “not adequately particularised” and “there is no tenable cause of action pleaded”. He said it had no reasonable prospect of success and dismissed it.

He ruled that there was no breach of contract on the part of the defendants in failing to pay the claimant’s costs of the appeal to the EAT.

However, the insurers had accepted that they should pay the costs of the appeal and “must stand by this agreement”. The quantum should be determined by a costs judge, bearing in mind the policy limit of £50,000.

Mr Hancock said there was no breach of contract by the insurers in failing to pay the costs of the appeal to the Court of Appeal, which they had correctly assessed had a less than 50% chance of success.

He also dismissed Mr Ukegheson’s claim for inability to earn other income as lacking a “clear cause of action” and for mental distress as no claim was possible for a breach of contract of this type, had it occurred.

“In summary, I hold that all of the claims made in this action fail except for the claim for costs of the appeal to the EAT.”

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