This article originally appeared in Issue 2 (July 2019).
In these conjoined appeals the Court of Appeal (Sir Terence Etherton MR, Irwin and Coulson LJJ) have taken the opportunity to deal with a number of issues relating to the reasonableness and proportionality of costs in clinical negligence cases and the proper approach to costs assessments.
The case is important because it considers and explains the unique position of ATE insurance premiums in clinical negligence cases. In clinical negligence it is almost always necessary for an ATE insurance policy to be obtained by a claimant to insure against the risk of incurring a liability to pay for an expert report(s) relating to liability or causation. Specifically, the Recovery of Costs Insurance Premiums in Clinical Negligence Proceedings (no.2) Regulations SI 2013/739, provide (by way of exception to the general rule in s.46 LASPO 2012) that such premium (insofar as it relates to the risk of incurring liability to pay for expert reports relating to liability or causation in respect of clinical negligence in connection with the proceedings) may be recovered.
Brooke LJ had stressed in Rogers v Merthyr Tydfil County Borough Council  EWCA Civ 701 that the availability of such ATE insurance and the recoverability of the relevant premium is an important means by which access to justice continues to be provided in clinical negligence cases. It was therefore unsurprising that the present Court of Appeal began their analysis of the issues in the instant case by affirming:
“[a]ccess to justice must therefore be the starting point for any debate about the recoverability of ATE insurance premiums in any dispute about costs”.
The facts of the instant appeal were that the Claimants, D and W, had each brought successful clinical negligence claims against the Respondent Trust. The claims had settled without proceedings being issued. D’s claim had settled for £4,500, W’s for £10,000. Their respective cost bills were £18,376 and £31,714. Both had taken out ‘block-rated’ ATE insurance. Under the Regulations, £5,088 of the premium was recoverable, yet when it came to assessment the Respondent Trust successfully challenged the recoverable amount and reduced it to £650 in D’s case and in W’s case £2,500. On appeal from the district judge, the judge upheld both assessments saying that – on the evidence – the district judge had been entitled to reduce the recoverable amount to what he considered “reasonable and proportionate.”
The Court of Appeal allowed the appeal from the judge. In doing so they reviewed the authorities on challenging insurance premiums and stated the proper approach to apply, having regard to Rogers v Merthyr Tydfil; Peterborough and Stamford Hospitals NHS Trust v McMenemy  EWCA Civ 1941; and Kris Motor Spares Ltd v Fox Williams LLP  EWHC 1008 (QB). The principles which the Court helpfully distilled at  are as follows:
- Disputes about the reasonableness and recoverability of the ATE insurance premium are not to be decided on the usual case-by-case basis. Questions of reasonableness are settled at a macro level by reference to the general run of cases and the macro-economics of the ATE insurance market, and not by reference to the facts in any specific case [McMenemy];
- Issues of reasonableness go beyond the dictates of a particular case and include the unavoidable characteristics of the ATE insurance market [Rogers];
- District judges and cost judges do not have the expertise to judge the reasonableness of a premium except in very broad-brush terms, and the viability of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces [Rogers];
- It is for the paying party to raise a substantive issue as to the reasonableness of the premium which will generally only be capable of being resolved by way of expert evidence [Kris].
The court explained that these principles,
“must be applied in every case because the insurance market is integral to the means of providing access to justice in civil disputes [now limited to clinical negligence cases] in what may be called the post-legal aid world”.
The court then went on to clarify the correct approach to assessment, making clear that they were not saying that a paying party is bound to accept the reasonableness of whatever premium has been paid. The mere fact that ATE insurance provides access to justice does not mean that the relevant premium must automatically be regarded as reasonable. The approach rather should be that:
- If the ATE policy is bespoke, then the grounds of challenge will be relatively wide.
- If the ATE policy is ‘block rated’ then the grounds of challenge will be more restricted and will usually have to relate to the market and expert evidence is likely to be necessary.
- Comparing the value of the claim to the amount of the premium was inapposite. It was not a reliable measure of reasonableness. It would ignore the way a block rated policy was calculated by reference to a wide range of cases. The cost of a reasonable ‘block-rated’ policy was something the paying part would simply have to bear. In saying so court drew a similarity with the fixed costs regime about which
Briggs LJ (as he then was) had commented in Sharp v Leeds City Council  EWCA Civ 33 at  as follows:
“… The fixed costs regime inevitably contains swings and roundabouts and lawyers who assist claimants by participating in it are accustomed to taking the rough with the smooth, in pursuing legal business which is profitable overall.”
On the issue of proportionality, (as distinct from reasonableness) the court was asked to decide whether a proportionality challenge was limited to the particular circumstances of the case (“the narrower interpretation”) or whether it was to be assessed by reference to all the circumstances, and so encompass matters which were not necessarily related to the case in question (“the wider interpretation”). The court’s answer was the latter. Questions of proportionality were not limited to the particular circumstances of the case but rather to be considered by reference to the specific matters in CPR 44.3(5) and, if relevant, any wider circumstances identified under CPR 44.4(1).
That led on to the question whether, if an ATE insurance premium was held to be ‘reasonable’ could it still be subject to a proportionality assessment? In the case of a relevant block-rated premium (such as in the instant cases) the court said that once assessed as “reasonable” it could not be then assessed as disproportionate.
That was so for two reasons. First, being a block rated policy, its amount bears no relationship to the value of the claim, still less to the amount for which the case settled. Second, because ATE is critical to access to justice in clinical negligence claims: when it comes to proportionality there are some issues which cost judges must simply leave out of account. These exceptional items will be those items of costs which are fixed and unavoidable or which have an irreducible minimum without which the litigation could not be progressed. The block rated ATE premium was one such exceptional item.
Approach to assessment
Finally, the court summarised its views on the ‘right approach’ to costs assessment by judges, noting the absence of any consistent approach being applied around the country to the assessment of costs bills in clinical negligence cases. The suggested approach from the Court of Appeal is as follows:
- The judge should go through the bill line by line, assessing the reasonableness of each item, if possible, the proportionality of each item should be assessed at the same time.
- This exercise should produce a total figure which the judge considers to be reasonable.
- The proportionality of that figure has then to be assessed by reference to CPR 44.3.5 and 44.4(1). If it is proportionate no further assessment is required.
- If a further proportionality assessment is required, then that should not be line by line but should consider various categories of costs e.g. disclosure of experts’ reports or specific periods where particular costs were incurred etc. In respect of such categories the judge may then make reductions as appropriate on grounds of proportionality but this part of the exercise would have to exclude those elements of costs which are properly regarded as unavoidable, such as court fees, the reasonable element of the ATE premium in clinical negligence case etc.
The net result in the instant case was that both appeals were allowed and the ‘reasonable’ sum of the ATE premium was recovered in each case without any discount for proportionality (i.e. £5,088).
The appeal has highlighted the inconsistency of approach by costs judges to assessments of reasonableness and proportionality of bills of cost in clinical negligence cases. It has also clarified the integral role of the ATE insurance market for ensuring access to justice in clinical negligence cases and explained that, if block-rated policies are used, then proportionality has little or no role to play because the policy will bear no relation to the sum claimed, still less to the settlement value, but will be set at a figure by reference to the wider basket of cases which is necessary to allow access to justice for all claimants. If the paying party has to pay a premium which is (as it was in D’s case) higher (at £5,088) than the sum he actually recovered viz. £4,500, that is just part of the ‘swings and roundabouts’ in this subset of civil litigation which is dependent upon a buoyant ATE insurance market for maintaining access to justice in the ‘post-legal aid world’. For the paying party in clinical negligence, usually NHSR, it might reasonably be said: civil litigation of this kind is not a playground – these further restrictions on the NHS’s ability to reduce its liability to costs for disproportionately expensive low value cases are yet more burdens which the NHS (and we all as taxpayers) must bear as the consequence of successive governments’ practical extinction of the legal aid system and the transfer of the cost of access to justice to the insurance market.
A different version of this article has previously appeared on the UK Human Rights Blog.