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(A Different) Mitchell Case: Proportionality & Additional Liabilities?

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In this recent SCCO matter, Master Leonard found that a £10,000.00 ATE premium incurred in a clinical negligence matter was both reasonable and proportionate. Seamus Kelly, Costs Consultant, reports.

Background

The claim related to negligent treatment of an ovarian endometrioma. The Claimant’s solicitors were engaged in June 2013, and following a review of the medical records, instructed an expert in gynaecology and obstetrics to prepare an initial report in February 2015. The expert’s report supported the contention that the Defendant had provided negligent treatment. The Claimant subsequently prepared and sent a Letter of Claim, and the matter eventually settled for £200,000.00 plus costs in May 2016. The matter was backed by a July 2014 CFA, and an ATE insurance policy (also taken out in July 2014).

The Defendant’s Disputes

It is certainly worthwhile reading the Judgment in full to see how the Judge addresses (and rejects) the plethora of issues raise by the Defendant challenging the ATE premium. The three main issues addressed in this matter were:

  1. Proportionality;

  2. Whether the Premium was Reasonably Incurred;

  3. Whether the Amount of the ATE Premium was Reasonable.

Master Leonard found in favour of the Claimant on all three grounds, rejecting the Defendant’s submissions.

Proportionality

Master Leonard highlighted that guidance on the test of proportionality is awaited from the Court of Appeal (BNM v MGN Limited [2016] EWHC B13 (Costs) (03 June 2016 ). Consequently, the Judge did not consider it necessary for the purposes of this judgment to follow in the footsteps of Masters Gordon-Saker, Rowley, Haworth and Brown in setting out a considered view of his own. Master Leonard took the view that “even if the Defendant was entirely correct and the insurance premium incurred by the Claimant can be considered in isolation in the way contended for, it cannot be said to be disproportionate” (para 52).

In reaching this conclusion Master Leonard considered CPR 44.3 (5), having regard to all the circumstances.

55. Notably, CPR 44.3(5) provides that costs are (my emphasis) proportionate if they bear a reasonable relationship to the specified factors. It seems to me that the wording of the rule leaves no room for the Defendant’s attempt to measure the proportionality of the Claimant’s ATE premium by reference to the amount ultimately paid for the expert evidence covered by it. That is not the test.

56. There are other objections to the Defendant’s approach, perhaps the most obvious being the application of hindsight, but given that I must apply CPR 44.3(5) it does not seem to me to be necessary to go further into the merits of a proposed proportionality test which is not consistent with it.

57. Applying the correct test, my conclusion is that even assuming that it stands to be considered in isolation, an ATE premium of £10,000 could not be characterised as disproportionate in the context of a Clinical Negligence claim that settled, in the circumstances I described above, for £200,000.

Whether the Premium was Reasonably Incurred  

The Defendant raised a number of issues in this regard. The Defendant challenged the Claimant to “state whether there was any financial benefit to the firm from selling or recommending the policy. In the absence of such evidence, the Defendant asked the Court to assume that the ATE insurance was purchased either as a matter of internal, routine procedure or simply because it was believed that most of the cost could be passed on to the Defendant.”

Further the Defendant argued that the Claimant had taken out the policy too early that it was not necessary.

At paragraph 58 of the Judgement, Master Leonard states:

“I do not accept the assertion in the Points of Dispute that “the risks being insured against are…controlled entirely by the solicitor (for it is the solicitor who decides if or when to instruct an expert to prepare a report)”. Any requirement for independent medical evidence is dictated by the needs of the case, not by the whim of the conducting solicitor. It is not suggested, nor could it realistically be suggested, that it was not necessary to obtain independent medical evidence in this case.”

Ultimately Master Leonard concluded that it “was reasonable for the Claimant to take out the policy in July 2014, as soon as it was clear that the case was going to proceed. The subsequent history of this case (in particular the firm line taken by the Defendant on causation) seems to me to demonstrate that it was prudent to do so.” (para 73).

Whether the Amount of the ATE Premium is Reasonable

Master Leonard summarised the Defendant’s position at Paragraph 74:

“The Defendant’s case in this respect rests on four propositions: that a premium of £10,000 to cover expert evidence costing no more than £2,000 is self-evidently unreasonable; that the level of cover, at £100,000, was excessive, so that the premium was excessive; and that it was unreasonable for the Claimant to enter into the block-rated scheme arranged between Irwin Mitchell and Allianz, suitable cover being available from other insurers at a lower cost.”

He then went on to comment:

  1. “I have already addressed the block-rating issue, but even on the basis that the block-listed policy taken out by the Claimant should be considered as if it were individually rated I do not accept that the arguments advanced by the Defendant raise any real doubt about the reasonableness of the amount of premium paid. I say so for these reasons.
  1. The comparison between the premium paid by the Claimant and the cost of the expert evidence on liability and causation obtained by the Claimant prior to settlement falls foul of the observation I have already made: the Defendant is applying hindsight. There is really nothing to support the proposition that the Claimant’s solicitors must (or at least should) have known that the cost of the expert evidence covered by the recoverable part of her ATE premium would have been in the region of £2,000. On the contrary, if they had made that assumption they would probably have been wrong. If this case had not settled, it seems likely that there would have been a need for significant further expenditure on expert evidence in relation to causation.
  1. As regards the overall level of cover, as Ms Lyddon has pointed out it is not limited to the cost of expert evidence. I have heard nothing to substantiate the suggestion that the policy limit is excessive for the overall cover offered.
  1. Nor have I seen any evidence to justify the conclusion that there is any direct relationship between the level of cover offered by the Claimant’s ATE policy and the level of premium payable. It would clearly be wrong to assume that, particularly where the policy is block-rated: Mr Waszak has referred me to the judgment of Mr Justice Langstaff in Pollard v University Hospitals of North Midlands NHS Trust, in which (at paragraph 50) the learned judge concluded, on the evidence in that particular case, that there was no such relationship between the limit of indemnity and the policy premium.”

Master Leonard also highlighted that the Defendant provided: “No real evidence to support the proposition that suitable, less expensive alternative policies were available to the Claimant. The redacted policy schedules offered by the Defendant in support of that argument, entirely unsupported by witness evidence, are of very limited if any evidential value.”

Conclusion

The issue of proportionality and ATE premiums is being considered by the Court of Appeal in BNM v MGN Limited next month, and as such many practitioners are hesitant to seek decisions on this issue in the meantime. This case demonstrates that even with the Court of Appeal decision in the pipeline, the Court still needs to consider the submissions made and the evidence provided. The issue of evidence is one of the key matters to take away from this case. This case is helpful for Claimants in that it rejects many of the stock arguments advanced by Defendants, and looks at the merits of the actual claim at hand. Whilst we await the Court of Appeal’s decision this is a helpful case to refer to, but as with many matters, it is case specific.

Should you have any issues arising from the above or concerning the recoverability of an ATE Premium then we can help guide you.


Seamus Kelly is a Costs Consultant at PIC. 

To contact him about any matter raised in this blog or for help with a costs law matter, please click here.

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