The Claimant’s (Margaret & Paul Kelly) took out a loan with the Defendant (Black Horse Ltd) in 2001 and purchased payment protection insurance (PPI) at the same time.
In 2011, the Claimants brought an action on the basis that the insurance had been mis-sold. The claim was fully defended and went to a trial when it was ordered that the current balance outstanding from the loan agreement between the parties of £5,202.63 be written off by the Defendant, that the Defendant should re-pay the Claimants the sum of £6,000.00 and that the Defendant should pay 70% of the Claimant’s costs to be subject to detailed assessment if not agreed.
The detailed assessment came before Senior Costs Judge Hurst on 1 August 2013, when the majority of the major issues were dealt with. One of the outstanding issues concerned the level of insurance ATE premium (i.e. £15,900.00 inclusive of IPT @ 6%).
Senior Costs Judge Hurst had been told that the issue of ATE premiums recurs constantly and given the great number of PPI mis-selling claims which were currently before the courts, he decided to reserve his judgment in the case of Kelly –v- Black Horse  EWHC B17 (Costs) and hand down a written judgment in a hope that the judgment would assist in resolving future disputes in this area.
The Claimant’s bill totalled £46,661.22 which included disbursements, success fee of 100% and ATE premium. In contrast, the Defendant’s own costs including Counsel’s fees totalled £5,387.10.
It was pointed out within the points of dispute, that the Defendant’s maximum exposure was £7,243.30 (i.e. Claimant’s disbursements – £1,406.20 plus Defendant’s costs £5,387.10).
Since the premium was significantly more than the damages recovered, the Defendant argued that it was disproportionate, and asked for disclosure of the calculation which had been undertaken in order to arrive at the premium claimed. No such disclosure was provided by the Claimant.
The Defendant relied on the decision of the Court of Appeal in Rogers –v- Merthyr Tydfil County Borough Council  EWCA Civ 1134, Senior Cost Judge Hurst’s decision in Motto & Ors –v- Trafigura  EWHC 90207 (Costs) and the Court of Appeal decision in the same case  EWCA Civ 1150, and the decision in Redwing Construction Ltd –v- Wishart  EWHC 19 (TCC). The Claimant also relied on these judgments in part.
Relying on the above authorities the Defendant submitted that the recoverable premium should be arrived at by calculating the “burn” premium (i.e. the risk of paying out times the exposure) to which should be added brokerage and profit in respect of which an suggestion of 10% and 15% was made respectively. The above calculation produced a figure of £3,165.95 for the premium.
The Claimant urged Senior Costs Judge Hurst to have regard to what was said by Lord Justice Brooke at paragraph 117 of Rogers, and to recognise that he did not have the expertise to judge the reasonableness of a premium “except in very broad brush terms”.
Senior Costs Judge Hurst concluded that there was no doubt that the ATE premium claimed within the Claimant’s bill was wholly disproportionate. The Senior Costs Judge had previously found that the Claimant’s base costs and success fee were also disproportionate. Senior Costs Judge Hurst assumed that the insurers were not given accurate information as the Claimant failed to produce any evidence as to the information which was given to the ATE insurers to enable them to rate the policy as well as the fact that the risk assessment completed for the purpose of the CFA was entirely meaningless. And by utilising the Defendant’s formula mentioned above, it appeared that the ATE insurers were provided inaccurate information with regard to predicted exposure.
In Senior Costs Judge Hurst’s judgment, it was reasonable to expect the Defendant to pay 25% of the premium claimed (i.e. £15,000.00 x 25% = 3,750.00), which compared favourably with the £3,677.00 which the Senior Costs Judge calculating utilising the Defendant’s formula. In light of this, Senior Costs Judge Hurst allowed a premium of £3,975.00 inclusive of IPT @ 6%.
As a result of this judgment, it appears that you are able to challenge the amount of an ATE premium, if you can prove to the court that inaccurate information was provided to the ATE insurers when rating the policy.