West v Stockport NHS Foundation Trust

A reasonable block-rated after-the-event insurance premium recoverable in a clinical negligence claim is not assessed by reference to the facts, value or settlement of the individual claim. Its reasonableness is determined at a market-wide level. A paying party must raise a substantive challenge, normally supported by expert evidence; a cheaper policy schedule or an assessing judge’s own calculation will usually be insufficient.

Although proportionality is assessed by reference to CPR 44.3(5) and any relevant wider circumstances under CPR 44.4, a reasonable recoverable block-rated premium is an unavoidable cost of the litigation. It must therefore be excluded from any subsequent reduction for proportionality. This does not restore the former Lownds approach for ordinary costs.

The two claimants settled clinical negligence claims against the same NHS trust. Each had taken out an ARAG block-rated ATE policy and sought recovery of the part of the premium insuring the cost of liability and causation reports.

In Ms West’s case, the premium was reduced as unreasonable by reference to alleged LAMP comparables. In Mr Demouilpied’s case, it was reduced as disproportionate. HHJ Smith, in the Manchester County Court, dismissed their appeals from the respective costs assessments.

The Court of Appeal directed a fact-finding report by Kerr J and Master Leonard concerning the policies and the ATE market. The central issues were the proper tests of reasonableness and proportionality for recoverable clinical negligence ATE premiums, and whether either reduction could stand.

1. Appeals allowed. The recoverable ARAG premium in each case was reasonable and neither reduction could stand.

2. Reasonableness. The court followed the market-level approach in Rogers v Merthyr Tydfil County Borough Council [2006] EWCA Civ 1134 and McMenemy v Peterborough and Stamford Hospitals NHS Trust [2017] EWCA Civ 1941. A block-rated premium reflects a basket of risks and the economics of the ATE market, rather than the prospects, value or outcome of an individual case. A paying party must first raise a genuine, substantive challenge, ordinarily requiring expert evidence. An isolated policy schedule is not enough unless expert evidence establishes that it is directly comparable. Nor may a costs judge substitute an instinctive or freestanding calculation for the evidence. The assessors’ findings showed that the ARAG premium was typical and reasonably competitive; the LAMP policies were not adequate comparables.

3. Proportionality. CPR 44.3(5) does not impose an exhaustive, case-specific test. Proportionality may also be established by relevant wider circumstances under CPR 44.4(1). The prior proposition in Lownds v Home Office (Practice Note) [2002] EWCA Civ 365, that necessary and reasonable costs were automatically proportionate, is no longer good law.

   However, once a block-rated clinical negligence ATE premium is reasonable, it cannot then be reduced for proportionality. It is a fixed and unavoidable cost that enables access to justice, and bears no reliable relationship to the settlement sum. Excluding it from the proportionality reduction does not revive Lownds; ordinary discretionary costs remain subject to proportionality.

4. Costs assessment. The judge should first assess each item line by line. If the resulting total is disproportionate, the judge should reduce the relevant categories of non-unavoidable costs. Court fees, a reasonable recoverable clinical negligence ATE premium, and similar irreducible costs should be left out of that reduction. There should be no further overall proportionality review after those reductions.

5. Future challenges to block-rated premiums should ordinarily await identifiable market changes and be determined through grouped test cases, rather than uncontrolled individual assessments.

• Court of Appeal (Civil Division). Allowed both appeals in [2019] EWCA Civ 1220 and set aside the reductions to the recoverable ATE premiums.
• Manchester County Court. HHJ Smith had dismissed the claimants’ appeals from the costs assessments, which had reduced Ms West’s premium for alleged unreasonableness and Mr Demouilpied’s premium for alleged disproportionality.