Too much information

To maximise the prospect of recovering an ATE premium it has long been the case that the claimant solicitor had to issue an N251 notice of funding in accordance with the CPR where one party intends to expose the other to this additional liability. Originally, it was simply necessary to disclose the policy commencement date, the insurer's details and the policy number. In October 2009, the rules relating to notice of funding changed imposing a greater level of disclosure.

Under rule 44.15 of the Civil Procedure Rules, 'a party who seeks to recover an additional liability must provide information about the funding arrangement to the court and to other parties as required by a rule, practice direction or court order'.

Section 19 of the costs practice direction explains precisely what needs to be disclosed. The party must give the name of the insurer, the date of the policy inception, the claim to which it relates, and, following judicial commentary in Rogers v Merhyr Tydfil, the trigger points that apply to the staged premium, if applicable.

The enhancements made to the disclosure requirements in respect of the premium staging were seen by all parties as appropriate improvements. There is now a greater level of transparency, affording defendants an opportunity to settle without incurring an increased ATE premium. Not only did they know there was an ATE premium, they would also know when it would increase in price.

Crucially, however, one must also state the level of cover the insured has purchased. This seemingly innocuous change has a significant impact on the bargaining position between the parties in certain cases. Where a defendant has far greater financial resource than a claimant, frequently the case when ATE is purchased, the defendant can exploit their knowledge about the claimant's level of cover to stifle the claim by escalating costs beyond the claimant's cover. They will know that if the client struggles and ultimately fails to get the additional cover to deal with the defendant's aggressive legal spend, that claimant's action might fold through lack of funding. In a high-value case, it might just be worth the defendant testing the claimant's resolve. With this information the defendant can formulate a strategy for escalating costs above the cover they know is in place. The mandatory disclosure of the level of cover in the new N251 form is therefore directly prejudicial to the claimant and potentially serves to encourage behaviour that is certainly not in the spirit of Jackson or Woolf.

Dangerous tactic

Trying to price the claimant out of the case is a dangerous tactic for defendants who risk making a rod for their own back by increasing their exposure to more ATE premium, assuming the ATE insurer is willing to provide the additional cover the claimant would then need.

Why then can we not simply make the level of cover a non-mandatory field? Some defendants might argue that it provides protection for defendants who may face a shortfall in their recovery from the claimant if they are successful in defending the claim. Isn't that what the security for costs application process is for? If the claimant seeks to rely on the ATE insurance cover to satisfy such an order, then the court can decide whether the policy is adequate and whether the level of cover is sufficient. In accordance with the spirit of Master Hurst's judgment in Ocensa Pipeline Group Litigation [2010], the court can look at the policy to determine its suitability without disclosing the level of cover to the opponent and make their decision on a case-by-case basis. The notice of funding cannot tailor itself to the case-specific facts in the way a judge can.

Prejudicial and unnecessary

The blanket requirement for disclosure of the level of ATE cover has been prejudicial and unnecessary. If it is helpful to disclose the limit then no doubt the insured's solicitors would do so but a mandatory obligation aggravates the access to justice problem, which the Legal Aid, Sentencing and Punishment of Offenders Bill 2011 (LAPSO) is about to make a whole lot worse.

The Ministry of Justice's intention to abolish premium recoverability under the LAPSO Bill would see an end to the notice of funding issue but certainly not an end to the access to justice problem encountered by defendants deploying such aggressive strategies. While they will no longer know the level of cover under the policy, they will instead have the benefit of knowing that, by escalating their costs estimates, the claimant will have to budget for a higher insurance premium, which will no longer be recoverable from the defendant. At some point, the claimant's action might just become uneconomic to pursue if the premium level carves too big a chunk out of the claimant's damages.

Access to justice was better served before the level of cover was a mandatory field, but, whether there is a need for notice of funding for the ATE premium or not in the future, claimants look set to be disadvantaged against well-resourced opponents.

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