Legal expenses insurance

Hawksford Trustees Jersey Ltd v Stella Global UK Ltd [2012] EWCA Civ 987

A dispute arose between the parties. The matter went to court and judgment was given for Hawksford. Stella Global, were ordered to pay interim costs of £200,000. Hawksford had tried but failed to obtain After the Event (ATE) insurance to cover a potential adverse costs order at the trial. Stella Global then appealed. On the day before the appeal hearing was scheduled to take place, Hawksford procured an ATE policy for a premium of £394,638, an amount greatly in excess of the other costs of the parties. The ATE policy provided cover to Hawksford, in the event of the appeal being allowed, against having to pay Stella Global’s costs of the action and the costs of the appeal. It was common ground that, had the appeal been allowed then the Court of Appeal would have ordered Hawksford to pay both the costs of the action and the costs of the appeal, so that the cover would have been necessary. In the event the appeal was dismissed and Hawksford sought to recover £331,038, the cost of the ATE premium discounted by a sum representing the premium charged for Hawksford’s potential liability to repay the interim costs ordered by the judge.

The Court of Appeal held, by a majority (Rix and Etherton LJJ, Patten LJ dissenting), that section 29 of the Access to Justice Act 1999 – which provided that: “Where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in those proceedings, the costs payable to him may, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy” – was to be construed as drawing a distinction between the trial and the appeal. They were to be regarded as separate proceedings, so that it was not open to the Court of Appeal to award by way of costs the amount of an ATE premium which related to the trial.

For further information: Hawksford Trustees Jersey Ltd v Stella Global UK Ltd [2012] EWCA Civ 987.

Pine v DAS Legal Expenses Insurance Company Ltd [2011] EWHC 658 (QB)

The claimant brought an action in an employment tribunal against her previous employers. She was represented by solicitors, Royds LLP. The claim was lost and Royds LLP sought to recover substantial sums from her by way of legal fees. She counterclaimed, asserting that Royds LLP and two members of the bar had conducted the claim negligently. The claimant had a Home and Contents Policy, one section of which – underwritten by a separate organisation, DAS, provided “Family Legal Protection”. The policy applied where it was more likely than not that the assured would recover damages or otherwise successfully invoke a defence, and covered all reasonable and necessary costs incurred by an “appointed representative” up to £50,000. The identity of the appointed representative was determined by condition 2(b) which allowed her to appoint a lawyer of her choice. The clause stated that the insurers “may choose not to accept your choice, but only in exceptional circumstances”. The claimant wished to appoint a barrister on a public access basis, so that there would be no instructing solicitor.

DAS argued that the circumstances were exceptional, in that an instructing solicitor was required to conduct the complex litigation, and insisted upon a solicitor being appointed. HHJ Richard Seymour QC held that there were no exceptional circumstances. The claimant was capable of conducting her case to the extent that her barrister was prevented from doing so by the professional conduct rules of the Bar. There was nothing exceptional in the action which demanded the appointment of a solicitor. The court issued a declaration that DAS was bound by the terms of the policy to indemnify Miss Pine in respect of the reasonable and necessary fees charged to her by Mr Hyams. However, the court refused to award damages to Miss Pine. It was accepted in Farley v Skinner [2002] 2 AC 732 that damages could be awarded for breach of contract where a major or important object of the contract was to give pleasure, relaxation or peace of mind. The court ruled that a defence costs policy did not fall into this category. If it did, then logically all policies of insurance intended to provide cover against mishap would have to be treated in the same way.

For further information: Pine v Das Legal Expenses Insurance Company Ltd [2011] EWHC 658 (QB) (25 March 2011).

Brown-Quinn v Equity Syndicate Management Ltd [2011] EWHC 2661 (Comm)

The assureds each wished to bring proceedings, and sought cover under their Before The Event legal expenses policies. The insurers maintained their own panel of solicitors, but the assureds wished to use another firm whose rates were over twice as high as those of the panel solicitors. Burton J held that the effect of the Legal Expenses Directive, Council Directive 87/344/EEC, as implemented in the UK by the Insurance Companies (Legal Expenses Insurance) Regulations 1990, was as follows.

  1. The assureds were entitled to instruct non-panel solicitors.
  2. The insurers could not cap their liability at the fees charged by panel solicitors, although the assureds were only entitled to recover reasonable fees as determined in accordance with Civil Procedure Rule (CPR) 48.3, taking into account the scale figure charged by panel solicitors as a comparator.
  3. A policy condition, which provided that cover would terminate if the assured initially instructed a panel solicitor but then decided to dismiss that solicitor and appoint a non-panel solicitor, was void.

For further information: Brown-Quinn & Anor v Equity Syndicate Management Ltd & Anor (Rev 1) [2011] EWHC 2661 (Comm) (21 October 2011)