Ireland: Can An ATE Insurance Policy Defeat An Application For Security For Costs?

Last Updated: 2 August 2015
Article by Donogh Crowley, David O'Donohoe and David Strahan
Most Read Contributor in Ireland, October 2018

What is the effect of an After the Event ("ATE") insurance policy on an application for security for costs? The Court of Appeal considered this question for the first time in Greenclean Waste Management Ltd v Leahy [2015] IECA 97, where a "hopelessly insolvent" company was seeking damages against its former solicitor for professional negligence.

What is ATE Insurance?

ATE insurance enables plaintiffs to insure against the risk of having to pay a defendant's legal costs, and cover their own outlay, in the event that they lose. The cover is taken out after the dispute has arisen and the premium is usually only payable if the plaintiff's claim is successful.

As we reported last July, the High Court in Greenclean upheld the legality of an ATE insurance policy for the first time in this jurisdiction, finding that it does not offend against the torts of maintenance or champerty. Maintenance is the improper funding of litigation by somebody who has no legitimate interest in it. Champerty is an aggravated form of maintenance that involves a person maintaining another's action to share in the proceeds of that action.

The High Court further held that the specific policy sufficiently mitigated the risk that Greenclean, as plaintiff, would be unable to pay the defendant's costs in the event that it lost its action. Accordingly, the High Court refused to grant an order for security for costs. The defendant, who was seeking the security, appealed this decision to the Court of Appeal.

CAN AN ATE INSURANCE POLICY DEFEAT AN APPLICATION FOR SECURITY FOR COSTS?

An order for security for costs is an order requiring a plaintiff to provide security (usually by way of cash lodged in Court or a bond) to cover the costs that the defendant is likely to incur in defending the case. If the defendant successfully defends the case, the plaintiff may be liable for his costs.

In this case, the Court of Appeal held that there is no reason in principle why an ATE policy cannot provide sufficient security for a defendant's costs so as to justify a refusal of an order for security. In deciding whether to order security in circumstances where a plaintiff has ATE insurance, the Court must consider the following questions:

  • Is the plaintiff unable to pay the defendant's costs?
  • Has the defendant established a prima facie defence?

If the answer to these questions is yes, the Court will have regard to the ATE insurance policy when considering whether to exercise its discretion to make an order for security for costs.

WAS THE ATE POLICY IN THE PRESENT CASE SUFFICIENT TO DEFEAT THE APPLICATION FOR SECURITY FOR COSTS?

No, the Court of Appeal concluded that on the basis of the information put before it, there was no justification for refusing an order for security for costs.

The policy was expressly conditional on the existence of a no-win no-fee agreement which provided that Greenclean's solicitor would not take a fee if the claim failed. Kelly J stated that Greenclean's failure to put this agreement before the court, as a "fundamental proof", was the first and most important matter. It effectively meant that the Court could not be satisfied that the ATE policy had come into effect.

The Court found that even if the no-win no-fee agreement had been produced, the ATE policy was so conditional that it could not provide sufficient security to the defendant to warrant the refusal of an order for security for costs. Kelly J noted that the policy was voidable for many reasons which were outside the control, responsibility and knowledge of the defendant.

One such clause, which had particularly concerned the High Court, was the "prospects clause". This clause allowed the insurers to end cover under the policy if they, after discussion with Greenclean's solicitor, were of the opinion that Greenclean would more likely than not lose the case. An undertaking by the insurers not to exercise the "prospects clause" satisfied the High Court that the policy negated the need for an order for security for costs. However, the Court of Appeal disagreed stating there were numerous other issues which had not been similarly resolved. Examples of these included the fact that the policy would terminate "at once" if Greenclean's solicitor "refuse[d] to continue acting for [Greenclean] with good reason" or the "no-win no-fee agreement end[ed] for any reason".

GENERAL PRINCIPLES ADOPTED BY THE COURT OF APPEAL

The Court noted that while ATE insurance has only recently "crept" into this jurisdiction, it is relatively common in England and Wales and the courts there have previously considered how it can impact on applications for security for costs. The Court adopted the following general principles from the English courts:

  • There is no reason in principle why an ATE insurance policy cannot provide sufficient security for costs, even if it cannot provide complete security for costs.
  • An ATE insurance policy will rarely provide as good security as a payment into court or a bank bond or guarantee due to its conditionality and voidability.
  • An ATE insurance policy must provide security as a matter of fact.

WHAT DOES THIS MEAN FOR PLAINTIFFS, DEFENDANTS AND ATE INSURERS?

The High Court and Court of Appeal judgments in Greenclean suggest that ATE insurance might be a legitimate means of financing litigation in this jurisdiction. This method will likely prove most attractive to plaintiffs in financial difficulties (including the liquidators of insolvent companies). It will also allow plaintiffs to manage risk and obtain more certainty as regards their likely expenditure on the litigation in question. It may provide an opportunity for Irish companies to transfer some of the risks of litigation, which can be costly and unpredictable. However it is worth noting that, in general, ATE insurance policies are expensive. In Greenclean, the premium was €52,500 for a maximum policy cover of €210,000.

A plaintiff who seeks to rely upon an ATE policy to defeat a defendant's application for security for costs will need to avoid the pitfalls of conditionality and voidability which proved fatal in the Greenclean case. This will involve reviewing in detail the provisions of the policy before signing. The plaintiff will also need to be fully prepared to address any potential weaknesses in the policy in the event of an application for security for costs. In Greenclean, Kelly J commented on the fact that the defendants had raised fourteen criticisms of the ATE policy and the plaintiffs had at no stage addressed these.

Reliance upon an ATE policy to avoid an order for security for costs being made against a plaintiff is not without consequences for the insurer involved. The insurer may be asked to give an undertaking not to exercise certain provisions under the insurance policy, such as a "prospects clause."

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions