Accident Group Test Cases Sharratt v London Central Bus Company

Under section 29 of the Access to Justice Act 1999, recoverable insurance premium costs are confined to the sum paid to the insurer for cover against the specified litigation risk. A claims-management intermediary cannot turn charges for other services into a recoverable premium by labelling them as such. The premium must therefore be identified by analysing its component risks and excluding non-qualifying elements. The costs judge may then assess reasonableness and proportionality under CPR 44.4, but comparison with hypothetical alternative funding arrangements does not determine the premium actually paid. A payment made after the relevant policy year to support future insurance capacity is not retrospectively part of an earlier client’s premium. A compulsory, standardised and excessive payment to a connected company for pre-retainer investigation may be an unlawful referral fee and is not recoverable as a client disbursement.

The appeal arose from conjoined test cases concerning premiums paid by personal-injury claimants to The Accident Group Ltd (TAG). TAG provided claims-management services, arranged conditional-fee litigation and obtained after-the-event insurance. Senior Costs Judge Hurst assessed which parts of the sums charged to clients were premiums within section 29 of the Access to Justice Act 1999, whether an investigation fee paid to Accident Investigation Limited (AIL) was recoverable, and whether the resulting sums were reasonable and proportionate under CPR 44.4.

The TAG parties appealed findings adverse to them, including the treatment of a later payment made to underwriters, the allowance for insurance services, the assessment of the 2001 Lloyds premium, and the AIL fee. The central issues were how the qualifying premium should be identified and whether the AIL payment was a referral fee, disbursement or recoverable charge.

1. Appeal dismissed. The Senior Costs Judge’s decision was upheld in its entirety, with costs.
2. Section 29 of the Access to Justice Act 1999 refers to a premium. Adopting the definition accepted in Claims Direct [2003] EWCA Civ 136, the relevant premium is the consideration paid to the insurer for the insurer’s contractual undertaking. A claims-management intermediary offering a basket of services cannot make its whole fee a premium merely by calling it one. The deconstructionist method, starting with sums paid to underwriters and deducting amounts attributable to non-qualifying risks, was therefore the correct approach.
3. The Loss Experience Adjustment Premium could not be allocated to 2000 policies. No 2000 client paid more for that insurance, and the payment supported later capacity. In any event, it would have been disallowed as unreasonable under CPR 44.4.
4. The allowance of £30 for insurance services could not be disturbed. Although the court expressed substantial reservations about allowing such an element, the appellants produced no evidence isolating the services properly attributable to a qualifying section 29 risk. The costs judge was entitled to rely on the comparable assessment in Claims Direct.
5. Reasonableness and proportionality under CPR 44.4 and CPD §11.10 required assessment of the actual qualifying premium. Hypothetical alternative conditional-fee arrangements, success fees and insurance costs did not establish error. The Senior Costs Judge was entitled to use the 5% uplift indicated in Halloran v Delaney [2003] 1 WLR 28 and to reduce the Lloyds 2001 figure from £608 to £525.
6. The AIL fee was an unlawful referral fee under rule 2(3) of the Solicitors Introduction and Referral Code. The objective substance of the arrangements was decisive. The compulsory, standardised and excessive fee, paid to TAG’s sister company and returned to TAG as administrative charges, included a referral element.
7. Even apart from its illegality, the AIL fee was not a disbursement. The work preceded the solicitor’s retainer, was undertaken to enable the solicitor to decide whether to accept the case, and was not shown to be expenditure for which the client had assumed responsibility. It was not recoverable as a separate charge under CPR 43.2(1)(a), because contractual responsibility rested with the solicitor, not the client.

• Court of Appeal (Civil Division): [2004] EWCA Civ 575 — appeal from the Senior Costs Judge dismissed with costs.
• Supreme Court Costs Office: Senior Costs Judge Hurst determined the qualifying section 29 premium, the recoverability of the AIL fee, and reasonableness and proportionality under CPR 44.4. No separate citation is stated.