Ali v Ali & Ors

A costs direction may be revoked under CPR 3.1(7) where it was made on the basis of a material misunderstanding and the court would not have made it had the true position been known. Separate representation is not, in principle, justified merely because an insurer has avoided a motor policy if the insured is effectively indemnified, subject only to the risk of losing that protection through non-cooperation. In such circumstances, the question of necessity, reasonableness and proportionality of individual steps should ordinarily be left to detailed assessment. The interests of justice may require revocation where the direction would materially constrain that assessment.

The claimant had suffered catastrophic spinal injuries in a road traffic collision. The court found the first defendant wholly liable and entered judgment against the second defendant, an Article 75 insurer. The third defendant was the driver of the other vehicle and the fourth defendant was his insurer, which had obtained a declaration entitling it to avoid the policy.

At the conclusion of the trial, the court directed that the detailed assessment should proceed on the basis that it had been reasonable in principle for the third and fourth defendants to be separately represented. The second defendant later applied to revoke that direction, relying on correspondence showing that the fourth defendant had agreed to indemnify the third defendant against damages and costs, conditional on his cooperation with the defence. The central issue was whether the direction had resulted from a material misunderstanding and, if so, whether it should be revoked.

1. Revocation of direction. The costs direction was revoked under CPR 3.1(7). It had been made because the court understood that the third defendant was potentially at personal risk of liability for damages. The court had not been told that he was protected by an indemnity from the fourth defendant, subject only to his cooperation.
2. Effect of the true funding position. Had the court known the true position, the third defendant would have appeared, for practical purposes, in the same position as a motorist with a valid policy of insurance. Absent a special feature, such a motorist would not be entitled to separate representation from the insurer at the insurer’s expense. The mere possibility of divergent interests, including a possible dispute over liability or settlement, did not justify a general costs direction. Any such dispute could be addressed if and when it arose.
3. Detailed assessment. The costs direction would have required the costs judge to assume that separate representation had been reasonable in principle throughout the proceedings. Removing it was therefore capable of materially affecting the assessment. The second defendant remained entitled to challenge the indemnity principle and the necessity, reasonableness and proportionality of particular steps.
4. Costs. The third and fourth defendants were ordered to pay the second defendant’s costs of and incidental to the application. Those costs were summarily assessed at £11,736.50.

The judgment records an order made by the same court at the conclusion of the trial on 10 November 2010. The present application revoked the costs direction contained in that order.