A man who was jointly liable for costs that were covered by his co-claimant’s after-the-event (ATE) insurance has been ordered to reimburse half of the payment to the insurer.
His Honour Judge Keyser QC, sitting as a High Court judge in Cardiff, said that though the case did not “raise any significant legal problems”, the insurer, ARAG, “considers that it raises issues that are of wider importance to its business”.
Leighton Jones, the defendant, was co-tenant with a Ms Gibson of a residential property. Together they brought a housing disrepair claim in the county court against their landlord, Mr Francis. He in turn counterclaimed for arrears of rent.
The tenants’ solicitors, Newbold & Co, successfully applied to ARAG for ATE on behalf of Ms Gibson only.
In March 2016, judgment was given on the claim for £1,290 and on the counterclaim for £3,135. The tenants were ordered to pay Mr Francis’s costs on a joint and several basis.
Newbold lodged a claim with ARAG and Mr Francis put in a bill of costs of £55,000; the law firm ceased to act for the tenants.
In February 2019, Mr Francis’s costs was agreed at £40,000, which ARAG paid. It also paid £1,200 (inclusive of VAT) to a firm of costs lawyers it had instructed.
ARAG then launched the current proceedings seeking a 50% contribution of each sum from Mr Jones.
HHJ Keyser ruled that Ms Gibson had a cause of action for a contribution from the defendant “simply on the basis that they were joint debtors in respect of the costs liability and there was accordingly a common law right to contribution to the extent that Ms Gibson paid more than one half of the debt”.
The fact Ms Gibson had not actually paid anything to Mr Francis, discharging the costs liability instead by means of the ATE policy, was “immaterial”.
The judge rejected the argument that the liability arose under section 1 of the Civil Liability (Contribution) Act 1978. The costs order created a debt, “or at the very least something analogous to a debt”; it was not in the nature of a remedy for a wrong. “An action for a debt is not within the scope of section 1 of the 1978 Act.”
Though he ordered Mr Jones to pay £20,000 towards the costs, he rejected the claim for contribution of one half of the payment to the costs lawyers.
“The only admitted or agreed facts in that regard are that the claimant instructed the costs lawyers to consider Mr Francis’s bill of costs and thereafter paid them £1,200 inclusive of VAT.
“The facts do not show that the instruction was given jointly on behalf of Ms Gibson and the defendant. The defendant may well have benefited from the work done by the costs lawyers; if he did, that is his good fortune, but it does not mean that he has any obligation in law to share the bill.”
HHJ Keyser also ruled that ARAG had a right of subrogation to pursue the contribution on the basis that the ATE policy was one of indemnity insurance rather than contingency insurance.
He noted that the defendant would now seek to recoup the £20,000 in a part 20 claim against Newbold & Co.