Legal Update

Information on legal cases and legal developments will be added as they occur.

1. Flora v Wakom Judgement 280706 - periodical payment appeal defeated

The Court of Appeal on 28 July dismissed the defendants’ appeal in the case of Singh Flora v Wakom (Heathrow) Ltd, that periodical payments for future loss of earnings and future care costs should be indexed by reference to the Average Earnings Index rather than the Retail Prices Index.

The claimant's arguments were based on a Cardiff Business School report which sought to show that, historically, care costs and earnings have risen at a rate consistently higher than the RPI.

The defendants had argued that the legislation was meant to ensure that periodical payments should follow the same valuation criteria as for lump sum payments, with RPI being applied as the appropriate index in all but ‘exceptional’ cases. The claimant acknowledged that this case was not exceptional.

After the Court of Appeal's refusal to allow Allianz Cornhill’s application in Flora v Wakom, the insurer released a statement saying “We find the Court of Appeal's treatment of the Explanatory Notes to the Act both breathtaking and cynical. The Industry will continue holding its breath awaiting the outcome of this case. The uncertainty created will lead to a slowing down of settlements and potential log-jam of cases awaiting trial. The cost to the Industry will be huge, fuelling claims inflation by tens of millions every year.”

The insurer is seeking permission to appeal to the House of Lords.

2. Rogers v Merthyr Tydfil CBC Court of Appeal judgement 310706
- backs ATE insurers over stepped premiums

This morning (31 July) the Court of Appeal handed down judgment in the important test case of Rogers v Merthyr Tydfil CBC. The judgment of the Court was given by Lord Justice Brooke in one of his final acts as Vice-President of the Court of Appeal prior to his retirement from that post.

The Court allowed the appeal and ordered that the full premium should be recovered, accepting that far from being too high, it was “not fixed at a sufficiently high level to reflect the risk and to provide a contribution to the insurer’s reasonable overheads and profit”.

The Court also gave guidance on how “proportionality” applies to these premiums and as to the approach which Courts should adopt in considering these sorts of challenges in future.

The Court also agreed with the views previously expressed by Master Hurst that production of generalised material such as that found in Litigation Funding - upon which the Defendants had relied - was of no assistance in determining the level of premium which should be allowed. In essence, the Court has accepted that if a solicitor reasonably in selecting a reputable ATE insurer for his clients generally, that will usually be sufficient to enable recovery of the premium charged

The case involved a claim by Jonathan Rogers for damages suffered by him in a fall in a local park. The defendant Merthyr Tydfil CBC contested liability but at trial the claim was successful and damages of just over £3,000 were awarded to the Claimant. The case was conducted under a Conditional Fee Agreement supported by an ATE policy taken out with 80e - the specialist After The Event Insurance division of DAS Legal Expenses Insurance.

This policy provided for the premium to increase at stages as the case progressed, and the total premium payable as a result of the case going to trial amounted to £4860 plus IPT.

The District Judge who heard the case allowed the premium in full, but on appeal to the Circuit Judge, Merthyr were successful in having this reduced to £900.

The Court of Appeal gave permission for a further appeal recognising the importance of the case to the ATE industry and the need for guidance as to the approach to be taken on recoverability of ATE premiums generally. This was the first opportunity the Court of Appeal had to consider these issues since Callery v Gray and in view of the significance of the issues various parties - including other ATE insurers, liability insurers and the Law Society - were given the opportunity to intervene.

This is an important test case and the judgement and guidance should now stop the large number of challenges to the full recoverability of ATE premiums.