Hawksford Trustees Jersey Ltd v Stella Global UK Ltd & Anor

For the purposes of section 29 of the Access to Justice Act 1999, first-instance proceedings and an appeal are separate proceedings. An after-the-event insurance premium first incurred during an appeal is recoverable only to the extent that it insures against costs liabilities in the appeal.

A premium cannot be recovered for retrospectively insuring against liability for first-instance costs. That liability remains a liability in the trial proceedings, even though an appellate court may alter the costs order below. This construction promotes access to justice without unfairly increasing an opponent’s first-instance costs exposure after the trial has concluded.

The appellants unsuccessfully appealed against a High Court judgment dated 9 March 2011. The Court of Appeal handed down its judgments on the merits on 1 February 2012. Costs ordinarily followed the event, but the parties disputed whether the respondent could recover part of an after-the-event insurance premium obtained one working day before the appeal was originally due to be heard.

The total premium was £394,638. The respondent sought £331,038 after excluding the element relating to repayment of an interim costs payment. The disputed cover included the appellants’ costs of the trial, although the respondent had obtained no insurance for those costs before or during the trial.

The question was whether section 29 of the Access to Justice Act 1999 permitted the Court of Appeal to include, in its appeal costs order, the part of an appeal-stage premium which insured against liability for first-instance costs.

1. By a majority, Rix and Etherton LJJ, Patten LJ dissenting, the respondent was not entitled to recover from the appellants the part of its after-the-event insurance premium relating to potential liability for the appellants’ trial costs.

2. The phrases “in any proceedings” and “in those proceedings” in section 29 of the Access to Justice Act 1999 were capable of a broad or narrow meaning. In the law of costs, however, proceedings at first instance and proceedings on appeal have traditionally been treated as separate. That distinction appeared in Wright v Bennett and Masson Templier & Co v De Fries and remained reflected in the Civil Procedure Rules.

3. The statutory purpose favoured the narrower construction. Section 29 sought to improve access to justice for parties with meritorious cases while maintaining fairness. A party which had conducted the trial without insurance had already accepted the risk of liability for trial costs. Retrospective insurance obtained during an appeal did not facilitate access to the trial court.

4. Allowing recovery would unfairly and substantially alter the parties’ costs exposure after trial. The appellant could not avoid that exposure by abandoning the appeal because the trial costs had already been incurred and the premium liability would arise upon an outcome favourable to the respondent. The notice regime for funding arrangements did not contemplate such retrospective alteration of trial costs.

5. An appellate court may vary the costs order below by exercising the lower court’s powers. That does not convert the underlying first-instance costs liability into a liability in the appeal proceedings. A premium incurred at the appeal stage is an appeal cost, but, insofar as it insures against trial costs, the insured risk remains a liability in the trial proceedings and falls outside section 29 for the appeal costs order.

6. Patten LJ would have construed “proceedings” as embracing the claim through all its stages. He considered section 29 to confer a broadly framed power, subject to rules of court, and would have left reasonableness and quantum to the costs judge.

1. Court of Appeal (Civil Division): Having previously dismissed the appeal on the merits, the court held by a majority in [2012] EWCA Civ 987 that the respondent could not recover the part of its appeal-stage ATE premium which insured against first-instance costs.

2. High Court, Chancery Division, Manchester District Registry: On 9 March 2011 His Honour Judge Stephen Davies gave judgment for the respondent, ordered the appellants to pay the claim’s costs and directed an interim payment of £200,000. No citation is stated.