We have already looked at the judgment of Master Haworth in Savings Advice Limited -v- EDF Energy Customers Ltd [2017] EWHC B1 (Costs) in relation to the admissibility of evidence. Here we look at the judgment in relation to calculation of the premium.

The onus here was on the Defendant’s solicitors to provide as the Claimants’ Pursuit policy set out ‘the total cost the opponent may have sought to recover under an order for costs or other entitlement to costs’. There is a danger it seems to me where reliance is placed on the losing party to provide evidence as to their costs to the winning party in order to calculate the premium for an ATE policy that a self-serving estimate of costs is given. In my judgment the evidence in this case points to that being the situation here”


  • The Master upheld the claimants’ claim in relation to the amount of ATE policies.
  • The claimants had carried out a clear and logical calculation of their potential exposure to the defendant’s costs.
  • The defendant had not produced any evidence to displace the claimants’ calculations.
  • The amounts were proportional.


A case settled for £200,000 for each claimant. It settled early, after service of the Statements of Case and had not been budgeted.  The bill of costs totalled £587,598.56. £255,963.88 of this related to insurance premiums.  The sole issue for determination at the assessment related to the recoverability and quantum of the insurance premiums.  The only issue on assessment was the amount of the premiums. The defendant disputed the amount of the premiums on the basis that the claimants had made an inaccurate assessment of the defendant’s costs when assessing the premium.


    1. It is common ground that the basic methodology for fixing the premiums in this case and the multiplier set at 90.196% of the sum insured excluding the premium itself, was not disputed. Accordingly this is not a case where it can be said that the insurers have overstated the risk that they face nor claimed excessive overheads, profits or brokerage. The argument centres on whether Burford were contractually liable to approximate ‘Opponent’s Costs’ and if so whether that approximation was flawed.
    2. I was told during the course of the assessment that the Defendant’s solicitor had a copy of the Pursuit policy and would therefore be well aware of the definition of ‘Opponent’s Costs’ and in particular the following wording:
“The figures used for the calculation of the premium in respect of the Opponent’s Costs shall be the total costs the opponent may have sought to recover under an order for costs.” [my italics]
    1. The calculation of premiums in relation to Pursuit policies rely on the parties communicating with each other and providing information concerning the level of their costs. The policy wording deals with this issue in the following way:
“In the event that the opponent refuses to provide us with the value of the Opponent’s Costs then for the purposes of the calculation of the premium we reserve the right to make an approximation as to the quantum of the Opponent’s Costs using the best information available.”
    1. The relevant costs information as supplied by the Defendant was initially contained in two emails to which I have referred to on 28th May 2015, timed respectively at 14:44 and 17:14. They provide details of the Defendant’s costs up to and including the mediation which were referable to SAL alone at £155,000 (approximately) with an overall cost to trial of £400,000. That figure was revised downwards some two hours later to £140,000 (excluding VAT). To my mind that must mean that in the intervening two hours the Defendant’s solicitors put some thought into the level of their costs. The statements made in those emails are bald figures. They simply refer to “our client’s costs“. They do not refer to costs specifically by reference to the Pursuit policy or make reference to whether any of those costs were solicitor and own client costs as opposed to those recoverable in the course of litigation.
    2. Post settlement there is further correspondence with regard to the costs on the basis that the Claimants’ solicitors now require formal details of the Defendant’s costs to calculate the premium in accordance with the policy terms. Those costs are set out in the schedule referred to in paragraph 13. That schedule was subsequently certified by a partner at Lewis Silkin in the following form:
“I certify that the figures stated above represent our best assessment of the adverse costs to which the Claimants were potentially exposed.”
That schedule records that the total costs in relation to both SAL and Zinc including profit costs, Counsel’s fees and other disbursements totalled £107,986.
    1. Mr Foster in his witness statement at paragraph 9 makes it clear that the difference between the costs referred to in the emails of 28th May 2015 and the schedule of costs in February 2016 was that the costs incurred in respect of the mediation had been excluded by reason of the wording of the Mediation Agreement. Neither the Claimants nor the Defendant were entitled to claim any costs in connection with the Mediation in the absence of a Court order. The action had settled some seven months after the mediation and no such order had been made. It was said by the Claimants that the Defendant’s solicitors had refused to provide the Claimants’ solicitors with the real extent of their costs. The Defendant claimed that the Claimant and Burford may have disagreed with the figure but one had been provided and furthermore certified. As a consequence the primary submission of the Defendant was that Burford had no basis for making their own approximation of the Defendant’s costs.
    2. The Claimants’ submitted that this disparity between the level of the Defendant’s costs calls for an explanation. I agree. Absent a cogent explanation in my judgment it seems to me that it is entirely appropriate for Burford, the insurer, to exercise the term in their policy to make an approximation of the quantum of the Defendants costs using the best information available. That approximation has of course got to be a reasonable and rational one.
    3. The onus here was on the Defendant’s solicitors to provide as the Claimants’ Pursuit policy set out ‘the total cost the opponent may have sought to recover under an order for costs or other entitlement to costs’. There is a danger it seems to me where reliance is placed on the losing party to provide evidence as to their costs to the winning party in order to calculate the premium for an ATE policy that a self-serving estimate of costs is given. In my judgment the evidence in this case points to that being the situation here. It is clear from the letter from the Defendant’s solicitors dated 1st March 2016 that they had obtained the assistance of a costs lawyer who detailed their ‘actual costs’ which it was said were synonymous with the actual exposure of the Defendant. In other words the reasonable and proportionate costs that are recoverable on an interparty basis. The letter makes it clear that any solicitor and own client costs had been disregarded and on the evidence of Mr Foster the costs of Mediation. In my mind costs calculated on this basis are flawed when set against the costs that the opponent may have sought to recover under an order for costs or other entitlement to costs. For example, the costs of mediation may have included substantial costs that may have related to the main action in any event and not simply relate to the actual mediation process itself. The matter could have been put beyond doubt by a witness statement from the Defendant’s costs lawyer setting out the assumptions and the basis on which he had arrived at the bald figures contained in the Schedule of Defendant’s Costs set out in paragraph 13. Similarly the Defendant could have exhibited redacted interim bills of costs submitted to their clients in relation to the matter and/or other documentation to demonstrate how the exact calculation of £107,986 was arrived at. Furthermore, the fact that a partner of the Defendant’s solicitors firm has certified that schedule does not assist. Providing as the certificate does ‘our best assessment of the adverse costs to which the Claimants were potentially exposed’ is to my mind somewhat different from the provisions of the Pursuit policy which would have been available and known to the Defendant, namely the costs ‘the opponent may have sought to recover under an order for costs or other entitlement to costs’.
    4. For those reasons I prefer the submissions of the Claimants to those of the Defendant and, accordingly, Burford were entitled in my judgment to make their own approximation of the Defendant’s costs.
    5. So far as the approximation is concerned, I accept the Defendant’s submission that this has to be a rational and reasonable procedure. Mr Burbury in paragraph 25-30 details how he carried out his approximation and the documents that he used to calculate the premiums due in relation to the two policies. In particular at paragraph 27 he took into account nine specific factors. At paragraph 28 he analyses the Defendant’s overall costs, their hourly rate and in paragraph 29-30 explains how he arrives at his approximation of the total costs at the date of settlement and his apportionment between SAL and Zinc.
    6. The Defendant’s principal objection referred to by Mr Foster at paragraph 5 of his witness statement is that the approximation used by Mr Burbury was exactly double the figure certified by the Defendant. When taken with his second witness statement his evidence is self contradictory and gives no explanation for the fact that the precise figure he has chosen for his approximation is exactly double the certified figure. Also the assertion that the action was more than half way through its course was extraordinary bearing in mind the matter had not got beyond the pleading stage. When set against the Defendant’s overall costs of £400,000 to trial, it was wholly unreasonable to suggest that more than half of that sum would be a reasonable approximation of the costs incurred following the close of pleadings but before any other step in the proceedings had taken place.
    7. I reject the argument that the approximation used by Mr Burbury was exactly double the figure certified by the Defendant’s solicitors. The Defendant had every opportunity to put in witness evidence to counter the careful analysis of Mr Burbury set out in paragraphs 25-30 of his first witness statement but chose not to do so. Their argument that he has simply doubled their costs as certified in their schedule is to my mind over simplistic. Mr Burbury in my judgment has carried out a careful analysis of the Defendant’s costs in this case and has come up with an approximation, purely that and no more. To my mind it is cogent, rational and has been carried out in an ordered way with the information available to him. I am satisfied that his witness statement deposes and provides sufficient evidence as to how the premiums were calculated and for those reasons I do not intend to interfere with his approximation.
    1. The Defendant claims that the Claimants’ costs and disbursements agreed at £218,500 together with the ATE premiums giving a total of £474,463.88 are wholly disproportionate.
    2. It is common ground that the ATE policies were incepted prior to 1st April 2013. Accordingly the provisions of section 46(3) Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) apply:
46 Recovery of insurance premiums by way of costs
(3) The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings who took out a costs insurance policy in relation to the proceedings before the day on which this section comes into force.”
    1. The transitional provisions in relation to recovery of pre-1st April 2013 ATE premiums are to be found at CPR 48.1 and its associated Practice Direction which at paragraph 1.2 states:
“Sections 44(6) and 46(3) of the 2012 Act makes saving provisions to the effect respectively these changes do not apply so as to prevent a costs order including such provision where the conditional fee agreement in relation to the proceedings was entered into (or in relation to a collected fee agreement services were provided to a party under the agreement) or the costs insurance policy in relation to the proceedings taken out before the date on which the changes come into force.”
    1. After the hearing of this matter but before delivery of judgment Master Rowley handed down judgment in the case of King v Basildon and Thurrock University Hospitals NHS Foundation Trust on the 30th November 2016 which concerned funding arrangements entered into before 1 April 2013. He decided that base costs should not be aggregated with additional liabilities for the purpose of determining proportionality. He found that proportionality should be dealt with under the old rules in particular CPR 44.4(2) and the guidance in Costs Practice Direction Section 11(as it then was). I adopt his reasoning in particular the following paragraphs:

“20. In my view, the reforms arising from the reports of Sir Rupert Jackson, enshrined in LASPO 2012 and the recasting of CPR as of April 2013, sought to produce a completely new regime from that date. No longer would success fees and ATE premiums be recoverable from the opponent save for very limited cases such as in BNM itself. Costs incurred by the parties would be subject to the more stringent proportionality test and elsewhere in the rules, cases would be subject prospective cost control through budgeting. Part 48 sought to preserve, as if in aspic, the pre-April 2013 regime for cases which had begun before that date until such cases concluded.

26. Furthermore, the purpose of the Jackson reforms in initiating sea change could have resulted in Parliament disallowing the recoverability of success fees and ATE premiums from 1 April 2013. But it did not do so and has allowed the run off of recoverable success fees and premiums in the main and the continued recovery of success fees or premiums in particular instances. It seems to me that the fact that additional liabilities are still allowed for by the provisions of CPR Rule 48.1 simply means that they remain in existence. It does not mean that they have to be assessed in aggregate with the base fees using a test which has no recognition of additional liabilities. This is particularly so when aggregation will render those additional liabilities effectively irrecoverable in practice.”

    1. Accordingly in my judgment the law relating to the recovery of insurance premiums is governed by the pre-April 2013 costs rules and costs practice directions will continue to apply. Consequently I must assess proportionality on the basis of the law as it applied prior to 1st April 2013.
    2. In Home Office –v– Lownds [2002] EWCA Civ 365 Lord Woolf CJ (as he then was) said this:
“39. Turning to the specific points of principle …
Whether the costs incurred were proportionate should be decided having regard to what it was reasonable for the party in question to believe might be recovered. Thus
(i) The proportionality of the costs incurred by the Claimant should be determined having regard to the sum that it was reasonable for him to believe that he might recover at the time he made his claim.”
    1. In Rogers –v– Merthyr Tydfil CBC [2006] EWCA Civ 1134 it was said that the approach to be adopted was that a premium is proportionate if it bears a reasonable relationship to the risk that the insurer faced and cannot be disproportionate if the insured needed to incur it. Brook LJ (as he then was) said this:
21. Evidence justifying the ATE premium claimed
117. If an issue arises about the size of a second or third stage premium, it will ordinarily be sufficient for a claimant’s solicitor to write a brief note for the purposes of the costs assessment explaining how he came to choose the particular ATE product for his client, and the basis on which the premium is rated – whether block rated or individually rated. District Judges and Costs Judges do not, as Lord Hoffman observed in Callery v Gray (Nos 1 and 2) [2002] 1 WLR 2000, para 44, have the expertise to judge the reasonableness of a premium expect in very broad brush terms, and the viability of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces. Although the claimant very often does not have to pay the premium himself, this does not mean that there are no competitive or other pressures at all in the market. As the evidence before this court shows, it is not in an insurer’s interest to fix a premium at a level which will attract frequent challenges.”
    1. In this case I have been provided with no evidence from the Defendant with regard to any alternative policies or levels of premium. Based on the test in Lownds where, as was the case here, the Claimant’s pleaded case was significantly greater than the sum recovered of £400,000. There is no evidence before me for me to come to the conclusion that based on the law as it stood prior to 1st April 2013 that the premiums sought to be recovered in relation to both SAL and Zinc of £255,963.88 are disproportionate.
    2. If I am wrong in relation to the test of proportionality to be applied in this case I will deal with the submissions made by Mr Kirby on behalf of the Defendant that the new test of proportionality pursuant to Part 44.3(5) applies. That test states:
“(5) Costs incurred are proportionate if they bear a reasonable relationship to:

a) the sums in issue in the proceedings;

b) the value of any non-monetary relief in issue in the proceedings;

c) the complexity of the litigation;

d) any additional work generated by the conduct of the paying party; and

e) any wider fact involved in the proceedings such as reputation or public importance.”

    1. Furthermore rule 44.3(2) also states:
“(2) where the amount of costs is to be assessed on the standard basis the court will:

a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred;

b) resolve any doubt… in favour of the paying party.”

    1. The Defendant submitted that I should follow the judgment of the Senior Cost Judge in BNM –v– MGN Ltd 2016 Costs LO441 in which the Claimant recovered agreed damages of £20,000, the Defendant undertaking not to use or disclose confidential information. Detailed assessment costs of £241,817 had been sought in the Claimants’ bill. Following a line by line assessment the reasonable and necessary costs to be allowed were £167,389.45. However, those costs had all been incurred post 1st April 2013 and CPR 44.3 in force on that date applied. The Senior Cost Judge ruled that the test of proportionality applied both to additional liabilities as well as to base costs. Given that the sum in issue in the proceedings was always going to be modest, the non-monetary relief not substantial and absent wider factors involved in the proceedings, the assessed costs were disproportionate and he allowed the sum of £83,964.80. At paragraph 30 of the judgment he said this:
“30. The old test of proportionality applied to additional liabilities but rarely had an impact on assessment. If the base costs were reasonable and necessary the reasonable success fee would also be necessary. An After the Event insurance premium, if reasonable, would rarely not be necessary; although greater enthusiasm developed for disallowing disproportionate or unreasonable premiums;…
31. A consequence of the reduction of the base costs to a proportionate figure will be that the success fee a percentage of those base costs also reduces. It would be absurd and unworkable to apply the new test of proportionality to the base costs but the old test of proportionality to the success fee.
32. Ring-fencing and excluding additional liabilities from the new test of proportionality would be a significant hindrance on the court’s ability to comply with its obligation under CPR 44.3(2)(a) to allow only those costs which are proportionate.”
    1. It seems to me that I can distinguish the case of BNM on the facts of the present case. In this instance I did not have the luxury of assessing on a line by line basis the Claimants’ costs. It has been left to me simply to determine the issue of what is recoverable in respect of the ATE premiums. The parties themselves have agreed the costs and I have been provided with no evidence upon the basis of which the agreed sum of £218,500 was arrived at. It may be that had I dealt with the detailed assessment of the Claimants’ costs I may have concluded that the sum of £218,500 was in itself disproportionate irrespective of my findings in relation to the ATE premiums. In those circumstances it seems to me that it is difficult if not impossible for me to deal with the issue of proportionality on a piecemeal basis. Simply to say that costs of £218,500, agreed by the parties, coupled with a premium of £200,000 in respect of an ATE premium is globally disproportionate, is both unfair and unjust to the receiving party. To my mind it smacks of double jeopardy in the sense that the Claimant has already agreed his costs, save for the ATE premiums which both parties in the absence of any evidence to the contrary may have considered to be entirely proportionate. That being the case I do not intend to follow the judgment in BNM. Consequently applying the proportionality of the ATE premiums of £255,963.88 solely in the light of the factors contained in CPR 44.3(5) and not globally with the costs already agreed the relevant factors in this case would appear to be:

(a) the sums in issue in the proceedings and

(c) the complexity of the litigation”

The remaining three factors appear not to be relevant in the context of this case. I have already referred to the fact that the sums in issue in the proceedings do not equate to what was recovered. The sum claimed was considerably in excess of what was recovered and I must bear that in mind. Secondly, whilst I have not seen the Claimants full file of papers I have been provided with a copy of the Bill of Costs, together with Points of Dispute and Replies. To my mind this was complex commercial litigation. The fact that it settled relatively early in the course of proceedings does not allow me the luxury of using hindsight in determining whether it was appropriate for the Claimants to take out the ATE policies they did. Applying the new test of proportionality to the ATE premiums sought I have formed the conclusion that the premium for both SAL and Zinc, totalling £255,963.88 is not disproportionate.
  1. Accordingly, I allow ATE premiums of £181,537.86 in respect of SAL and £74,426.02 in respect of Zinc.”