Redwing Construction Ltd V Wishart (No 2)
Technology and Construction Court
17 January 2011
Akenhead J formulated propositions in relation to the recoverability as costs of the uplift under a conditional fee agreement or the premium for an after the event insurance in relation to adjudication enforcement proceedings. He stated that whilst there was no exemption in the court rules for these cases, with the result that parties were entitled to enter into such funding arrangements in such cases, the large majority of reported cases on adjudication enforcements were successful and claimants were sufficiently confident to pursue summary judgment applications in almost every case on the basis that there was no realistic defence. This meant that the courts, and particularly the TCC which dealt with virtually all such cases, would think long and hard about allowing substantial CFA mark-ups, particularly when there was a summary judgment application by the party with the CFA. It was important that claimants did not use CFAs and ATE insurance primarily as a commercial threat to defendants. It was legitimate for the court to ask itself whether a CFA or ATE insurance was a reasonable and proportionate arrangement to make in any particular case.
Akenhead J held that the claimant was entitled to recover its costs on a standard basis but with only a 20% mark up or enhancement of its solicitor's basic charges as allowed to reflect the claimant’s CFA 20% of the ATE insurance premium. The 20% mark up or enhancement of the solicitor's basic charges as allowed to reflect the CFA was reasonable where (i) The claimant was virtually bound substantially to "win" its claim in the court enforcement proceedings judged at the time when the CFA was entered into (ii) The only real risk was that the defendant might do what it subsequently did, namely pay out what he was virtually bound to lose and fight the balance and (iii) The risk of losing was somewhere between 30 and 40%. It would only be reasonable to make the defendant pay 20% of the ATE insurance premium when (i) There was no presumption that the premium was reasonable and no evidence from the claimant as to its reasonableness (ii) The risk of losing judged at the time when it was entered into was sufficiently low to undermine the reasonableness of imposing anything near 100% of it on the defendant and (iii) It should be presumed that a wholly unrealistic assessment of risk was made to justify the imposition of a premium of some 42% of the insured amount.