Expenses of court proceedings are an age old problem for clients. In the normal course of events, the successful party will be able to recover their reasonable expenses from the unsuccessful party. This can be a very big risk for litigants on either side of the fence depending on the deepness of their respective pockets.
The risks associated with expenses are leading to more clients using what is called "After the Event Insurance" or "ATE" for short. The idea of ATE is that a premium is paid to an insurance company in return for them agreeing to pay the expenses of the litigation in the event that you are ultimately unsuccessful. It is effectively a means of buying off the expenses risk. The cost of the premium payable can be very modest indeed, although it is often related to the value or the complexity of the claim.
The issue of ATE has been in the legal news recently following the Supreme Court's decision in a Cost Order application in the case of McGraddie v McGraddie & Anr [2015] UKSC 1. The substance of the case had been decided by the Supreme Court previously but this particular Opinion considered the costs aspect of the case. Specifically, it was discussed whether or not the cost of the premium for ATE could also be recovered from an unsuccessful party on the basis that it was a reasonable expense of the litigation.
The Supreme Court categorically held that the ATE premium paid was not a recoverable expense. It was, of course, reasonable to incur the premium but it could not be described as an expense in terms of the Rules of Court. We can, therefore, now say with certainty that, unless some prior agreement is reached between the parties, the premium is simply something that is going to have to be paid out by the client; a sunk cost.
Ultimately, the cost of the ATE insurance will require to be balanced by any client with the undoubted peace of mind and security that it brings. In many circumstances, for a lot of clients, the modest cost of the premium will greatly outweigh the potential risk of an enormous expenses bill landing in their lap at the conclusion of proceedings if they are unsuccessful.
Drummond Miller can offer a number of funding arrangements to suit your particular needs, depending on the type of case which you may have. Should you wish to discuss any area of litigation then please do not hesitate to contact a member of our litigation team.