ATE insurance premium not recoverable legal expenses: Supreme Court
The premium for after-the-event (ATE) legal expenses insurance is not a recoverable cost against the unsuccessful party in a litigation, the UK Supreme Court ruled today.
A panel of three judges comprising the President, Lord Neuberger, Deputy President Lady Hale, and Lord Reed, held that David McGraddie, who successfully appealed against a decision of the Inner House in a dispute with his son over the ownership of a house, was unable to recover from the Scottish Legal Aid Board a £40,000 ATE premium, which protected him from liability in expenses up to £100,000.
Lord Neuberger, giving the opinion of the court, said the judges had "no hesitation" in awarding expenses against SLAB under s 19 of the Legal Aid (Scotland) Act 1986: – even though the defender had succeeded in the Inner House, "it was unfortunate that the Board decided to support the appeal against the decision of the Lord Ordinary, and it would be simply unjust if the pursuer was out of pocket as a result of that appeal".
As respects the ATE premium, although it could be said to be a liability reasonably incurred, it could be regarded as part of the "costs of any appeal" in terms of the Supreme Court Rules, "as a matter of ordinary language". There could be no question of a before-the-event (BTE) premium, for legal expenses liability generally, being recoverable, and "it would be somewhat surprising if wholly different considerations applied to the recoverability of ATE and BTE premiums".
"It seems unlikely that, in the absence of an express provision so stating, the rules would have envisaged that a losing party’s liability for a substantial sum should depend on the successful party’s appetite for, and financial ability to take, the risk of losing and paying costs", Lord Neuberger commented.
The court approved decisions to the same effect in both Scotland and England, based on the respective legislation and rules applying in each jurisdiction.
Lord Neuberger however added: "I regret the conclusion in this case, because it seems to me unjust that the pursuer should be out of pocket to the tune of the £40,000 ATE premium. He should be able to recover the £40,000 from the Board, given that he reasonably incurred that sum in connection with rightly seeking to challenge in this court the result of an appeal to the Inner House which was a questionable appeal, which had only been brought because of the support of the Board."