A landmark decision by the Court of Appeal recently will mould the future of personal injury litigation in the UK and give everyone access to justice.

The Court of Appeal's judgment in the matter of Callery vs Gray sent a clear message to motor and liability insurers that conditional fee agreements (CFAs) and after the event (ATE) legal expenses insurance are here to stay.

The case brings into the spotlight the government's Access to Justice Act 1999, which gives claimants the right to recover any success fee that their solicitors charge the person responsible for the accident (or their insurers). The act also gives claimants the right to recover the premium they pay for after the event insurance.

The act was passed partly in recognition of the fact that solicitors were taking a risk by agreeing to conduct litigation on a no win, no fee basis. However, since the act was introduced, many motor and liability insurers have been reluctant to pay success fees and ATE insurance premiums.

In Callery vs Gray, Callery (the claimant) was a passenger in a vehicle that was struck by another vehicle driven by Gray. Callery suffered fairly minor injuries.

The case has focused on four key issues:

  • at what time it is appropriate for a policyholder to enter into a CFA and take out an ATE insurance policy
  • whether or not the success fees charged are reasonable in light of claims being resolved quickly and without the need for court proceedings
  • whether or not a claimant should be entitled to recover an ATE insurance premium at all
  • whether or not the cost of the after the event insurance premium levied was reasonable.

    The Court of Appeal held that:

  • it is perfectly proper for a claimant to enter into a CFA and take out an ATE insurance policy when he or she first consults a solicitor
  • it is not necessary for proceedings to have been issued to ensure ATE insurance premiums are recoverable
  • a success fee of 20% is acceptable in a non-complex road traffic accident case.

    The court rejected the insurers' argument that a claimant should wait until they receive the defendant's response before entering into a CFA or taking out ATE legal expenses insurance.

    What is reasonable?
    Regarding whether ATE insurance premiums in general are reasonable, the court referred the case to a senior cost judge who has received written submissions from all parties concerned. The Court of Appeal has delivered a separate judgment on the level of premiums it considers to be reasonable.

    In the test case, Callery vs Gray, the claimant's solicitors asked for a 60% success fee, 20% being a non-recoverable charge for late payment. The court indicated 40% was too high but that 20% was acceptable.

    Although the success fee was reduced, the court gave a clear endorsement of the government's “access to justice” programme. Solicitors will now be more inclined to accept riskier cases rather than “cherry-picking” the lucrative ones.

    We anticipate reasonable ATE insurance premiums will now be allowed, which will give everyone access to the legal system. Claimants will be able to pursue their personal injury compensation claims following an accident, knowing they won't have to pay anything if they lose. Previously only the very poor – with the benefit of legal aid – or the very rich could afford justice. Now everyone is effectively eligible for legal aid. It's great news for the public at large.

  • Anthony Dennison is a partner at Manchester and London-based law firm Rowe Cohen.

  • Topics