ATE Premium Is Not A “Solicitor’s Disbursement” | Disclosure Application Dismissed | Herbert v HH Law Applied

Bendriss v Nicholson Jones Sutton Solicitors Ltd [2024] EWHC 1100 (SCCO) involved an application by the claimant, Fadila Bendriss, for specific disclosure of documents from the defendant, Nicholson Jones Sutton Solicitors Ltd, in relation to legal costs. The application was heard by Costs Judge Rowley in the Senior Courts Costs Office.

Chronology of relevant events:

• The claimant retained the defendant firm.
• The defendant’s bill to the claimant included a £392 ATE (after-the-event) insurance premium
• On 25 September 2020, DJ Bellamy ordered disclosure of the defendant’s full file of papers
• In January 2024, Costs Judge Rowley required the defendant to comply with the original disclosure order
• On 15 February 2024, the defendant’s costs lawyers stated that communications with the ATE broker Amberis took place via an online portal that does not retain records
• On 22 March 2024, the claimant applied for specific disclosure of 9 categories of documents, 8 of which related to the ATE premium
• On 27 March 2024, the defendant’s director Justine Sutton provided a witness statement suggesting all ATE communications were via an online portal that does not store messages
• The application proceeded to hearing on 4 April 2024

Issues to be decided by the court:

1. Whether the documents sought by the claimant should have already been disclosed as part of the “full file” originally ordered by the court. The judge found most of the accounting, regulatory and centralized ATE documents would not be expected to be in a typical client file.
2. Whether it was proportionate for the claimant to seek further disclosure and bring this application, given the modest £392 amount of the ATE premium in dispute, and the much higher costs of over £28,000 the claimant incurred in pursuing the application. The judge had grave doubts about the proportionality.
3. Whether the ATE premium could even be assessed as part of the statutory bill under the Solicitors Act assessment process, or whether it should be excluded and dealt with separately as part of the solicitor’s client account. This was the key issue.
4. Whether disclosure of the defendant’s telephone recordings with the claimant should be ordered. The judge found this disproportionate.

Claimant’s position and arguments:

The claimant, represented by Roger Mallalieu KC, argued that:

• The defendant had failed to disclose relevant documents as originally ordered, including accounting records, regulatory records required by the SRA, and electronic ATE records.
• The disclosure was necessary to investigate potential “secret commissions” received by the defendant in relation to the ATE premium. This went to the reasonableness of the defendant’s charges overall.
• Detailed assessment procedure involves disclosure first, before the client has to specify their challenges. The claimant should not have to set out her case before seeing relevant documents.
• If the ATE premium issue could not be explored via disclosure within the detailed assessment, it would have to be dealt with later when determining the solicitor’s client account, so disclosure should be provided now.
• The defendant had included the ATE premium in its signed bill of costs, so it was not now open to the defendant to argue it should be excluded from the assessment.
• Telephone recordings should be disclosed to assess the reasonableness and accuracy of the defendant’s charges for calls.

Defendant’s position and arguments:

The defendant, represented by Martyn Griffiths, argued that:

• Most of the requested documents did not exist. ATE communications were via an online portal that does not retain records.
• Detailed assessment under the Solicitors Act is a statutory jurisdiction limited to assessing profit costs, success fees and disbursements. Investigating the ATE premium was beyond its proper scope.
• Under the Court of Appeal’s decision in Herbert v HH Law, an ATE premium is not a “solicitor’s disbursement” to be included in a statutory bill for assessment, unless the solicitor is obliged to pay it regardless of funding by the client (which was not the case here) or there is a custom to include such premiums in bills for assessment (which was not proved by evidence here).
• Although the defendant had included the ATE premium in the bill, this mistake did not change the legal position that it could not be assessed as part of the statutory assessment.
• Any dispute over the client account should be pleaded later, after the statutory assessment.
• Ordering disclosure of all telephone recordings was disproportionate – it would cost more to review them than the amounts in dispute.

Judge’s findings:

Costs Judge Rowley found that most of the accounting, regulatory and centralized ATE documents requested by the claimant would not be expected to be in a typical client file disclosed by the defendant:

“…the entitlement of the claimant to have received the documents now requested up to this point depends on whether they were in the solicitors’ file of papers. I do not think realistically that any firm of solicitors would keep the sort of accounting and regulatory records sought by the claimant in their file of papers, whether that is electronic or in an old-fashioned cardboard file. Such documents are centralised and so too would be documents where the firm had been advised to alter its ATE arrangements globally as is suggested occurred here. I do not think therefore that the defendant can be criticised for failing to provide any such documentation in compliance with the original order of DJ Bellamy and which I required to be undertaken once more in January. However, as Mr Mallalieu pointed out, an application for specific disclosure was not limited to documents that should be on the notional file of papers. If those documents were relevant, then centralised documentation in the custody and control of the defendant could be ordered to be disclosed by the court.” [4/5]

He had grave doubts about the proportionality of the claimant pursuing disclosure and bringing this application, given the modest £392 amount of the ATE premium in dispute, and the much higher costs of over £28,000 the claimant incurred:

“It seems to me that the size of the sum which the claimant has been charged by her former solicitors for the ATE premium, a little less than £400, must have an impact on how unpalatable the choice before her might be. The sum in issue is the first factor in considering whether the costs incurred are proportionate according to CPR 44.3(5). It is difficult to see how the claimant here could have thought it appropriate to instruct her solicitors to spend the sums incurred in this application over a premium of this size.” [21]

He held that based on the Court of Appeal’s decision in Herbert v HH Law, an ATE premium is not a “solicitor’s disbursement” to be included in a bill for assessment under the Solicitors Act, unless there is a legal obligation or professional custom to treat it as such, which was not shown here. The defendant’s mistaken inclusion of the ATE premium in its bill did not change the legal position that it could not be assessed as part of the statutory Solicitors Act assessment:

“In my judgment, the fact the defendant has claimed the ATE premium as a disbursement in its bill does not prevent the conclusion that it should be excluded from the assessment under s70 in accordance with Herbert. In my view, the Court of Appeal’s guidance at paragraph 69 (see [31] above), plainly prevents a client and their solicitor from altering the general position in an individual case. Whether, and in what manner, that figure should be deducted from the bill may be a matter for argument, not least if the effect of the one fifth rule in s70(9) depends upon it. But that can be dealt with separately, as it was in Bentine v Bentine [2013] EWHC 3098 (Ch) albeit in different circumstances.” [40]

He held that detailed assessment is not the appropriate procedure for the kind of investigation into the ATE premium that the claimant sought:

“I do not think the challenge to the ATE premium should be set out in the points of dispute. Not only will this potentially make the points of dispute unwieldy but since such points are generally negative in nature, it will not help to set out the claimant’s positive case as to why there is a dispute regarding the cash account. I consider it to be important that a positive case is set out so that the defendant can respond in a similar fashion. It may be that the claimant is not yet able to do this and indeed I noted from correspondence with the various insurance entities that further enquiries and complaints were being made. The cash account can only be determined once the assessment of the statute bill has taken place and, as such, I consider there can be a staggered approach to the pleadings here. The points of dispute need to be dealt with now, but the cash account pleading can be scheduled for later. Indeed, subject to the parties’ views, it might not be required until the assessment of the bill has been completed.” [41]

He found that even though the ATE premium will have to be addressed later in determining the solicitor’s client account, that does not justify ordering pre-emptive disclosure of ATE documents within the statutory assessment:

“To some extent these comments deal with Mr Mallalieu’s point that if the ATE issues are going to be decided at some point, the claimant should have the documents now. I am not convinced that the claimant is yet able to settle upon her challenge to the ATE premium based on her other enquiries. Moreover, I would like to think that the first part of this judgment will lead the parties to reflect upon the extent of the documentation actually needed. This should include the defendant considering the decision of Ritchie J upon the starting position of the Court of Appeal in Herbert.” [48]

Finally, he held it would be disproportionate to order disclosure of all telephone recordings between the claimant and defendant, as the time and cost for the claimant to review them would far exceed the amounts of costs in dispute:

“It is simply disproportionate to adopt the approach suggested by Mr Carlisle of gaining insight into the calls and whether they are reasonable by listening to them all over again. I raised with Mr Mallalieu the number of calls involved if the routine items were included, rather than just the timed calls, but I did not understand him to move away from the wording of the schedule and the evidence of Mr Carlisle. Since 52 of the 58 telephone calls are expressly claimed as routine items, the defendant is simply claiming that they do not exceed 6 minutes. There is no warranty that they will last at least that long. Consequently, for the great majority of the calls, there is no “accuracy” to be considered in any meaningful way.” [55]

In conclusion, the judge dismissed the claimant’s application for specific disclosure, both in relation to the ATE premium documents and the telephone recordings:

“I dismiss the claimant’s application for specific disclosure, both in relation to the ATE documentation and in respect of the call recordings.” [58]