Sarwar v Alam

In a small road traffic personal injury claim, a claimant with apparently satisfactory pre-existing before-the-event insurance should ordinarily be referred to that insurer. The claimant and solicitor need make only inquiries which are reasonable and proportionate to the value of the claim.

Before-the-event cover controlled by the opposing party’s insurer is not necessarily a reasonable alternative. A passenger who may blame the insured driver need not accept cover under which that insurer’s chosen representative retains full control of the claim. The apparent objectivity and independence of the proposed representation are material.

The reasonableness of incurring an after-the-event premium is a costs question under the Civil Procedure Rules 1998. It is distinct from whether the solicitor acted negligently.

The claimant was injured while travelling as a passenger in the defendant’s car. He instructed solicitors and obtained after-the-event insurance after saying that he knew of no existing legal expenses cover. His personal injury claim settled for £2,250 plus reasonable costs, but the defendant’s insurers disputed recovery of the after-the-event premium.

The defendant’s motor policy included before-the-event cover for passengers. It allowed the insurer’s administrator to retain full conduct and control of a claim, subject to limited rights to choose another lawyer. District Judge Wallace treated that cover as adequate and disallowed the premium. Judge Halbert upheld that conclusion.

The claimant appealed on the central question whether it had been reasonable to incur the after-the-event premium without discovering and using cover provided through the opposing driver’s policy.

Appeal allowed unanimously. Lord Phillips MR delivered the judgment of the court, with Brooke and Longmore LJJ.

1. Under Rules 44.4 and 44.5 of the Civil Procedure Rules 1998, the court must consider all the circumstances when deciding whether costs were reasonably and proportionately incurred. The availability of pre-existing insurance is relevant but not conclusive. For a road traffic personal injury claim likely to be worth less than about £5,000, satisfactory before-the-event cover should ordinarily be used.

2. A solicitor should normally ask the client to produce relevant motor, household and stand-alone legal expenses policies belonging to the client or a spouse or partner in the same household. The solicitor should also ask about funding by an employer or trade union. A passenger should ordinarily be asked to obtain the driver’s policy where reasonably practicable. These inquiries must remain proportionate; they do not require a speculative search through every family member’s insurance arrangements.

3. The guidance is not an inflexible code. The overriding principle is reasonable conduct by the claimant, assisted by the solicitor. The availability of modestly priced after-the-event cover limits the time reasonably spent investigating alternatives. The costs judge’s inquiry into reasonableness is distinct from the test for professional negligence.

4. Where there is a reasonable possibility that a passenger will blame the driver, the passenger need not use cover resembling the policy in this case. Representation arranged through the opposing driver’s insurer was not a reasonable alternative where the claimant had never joined or known of the policy and the insurer’s chosen representative retained full conduct and control. Contractual safeguards and arbitration did not remove the reasonable appearance of conflict. Transparently independent administration might produce a different conclusion.

5. Freedom to choose a solicitor is not invariably decisive. For a small claim it may yield to proportionality where a genuinely reasonable and suitably qualified alternative is available. The earlier guidance in Callery remained applicable, but a conditional fee agreement and after-the-event insurance should await reasonable and proportionate inquiries into before-the-event cover.

6. Judge Halbert was clearly wrong to regard this policy as appropriate cover. The appeal was allowed with costs here and below. Permission to appeal to the House of Lords was refused.

1. Court of Appeal: The appeal was allowed. Judge Halbert’s conclusion that the before-the-event policy provided appropriate cover was held to be clearly wrong.
2. Chester County Court, Judge Halbert: The claimant’s appeal was dismissed. The judge held that it was unreasonable to incur an after-the-event premium without checking the driver’s policy for passenger cover.
3. Chester County Court, District Judge Wallace: The after-the-event premium was disallowed because the defendant’s motor policy provided adequate before-the-event cover and the premium therefore amounted to double insurance.