The following is a letter from our Business Development Manager, Ben Hawkins to the
Insurance Press in the aftermarth of the Callery –v- Gray ruling in The House of Lords.

Thursday, 25 July 2002

Dear Sir,

Callery –v- Gray – The End of The Beginning

There may have been some last minute doubts, but now, two years down the line, the House
of Lords have now confirmed what most thought they would: that the system that the
Government put in place through the Access to Justice Act 1999 for recoverability of ATE
premiums and success fees does what it intended to do.

The question must then be “Where do we go from here?” The House of Lords have not done
what may in the insurance industry called for and provided certainty to avoid the need for legal
argument on individual cases of recovery. In fact, they have very much washed their hands of it
by firmly advising that this is the ambit of District Judges (from whom uniformity can certainly
not be expected) and any appeals should remain with the Court of Appeal.

When the Court of Appeal heard Callery –v- Gray themselves, even after conducting a formal
consultation process with the insurance industry, they shied away from providing guidelines as
to “spot rates” for premiums and “tariffs” for success fees. Many including myself would agree with their logic for doing so: that the market is too immature to produce meaningful statistics.

Mustn’t it then be up to us in the industry to sort out the mess that we are still in? Or can the
insurance industry let its prices be controlled by non-economic forces such as judicial
intervention? With over 150 000 cases outstanding pending the House of Lords’ decision, we
cannot deny that customers have suffered as a result of this extended legal dispute, but let’s
face facts: the ATE funding system is here to stay. As Lord Bingham said

“Under the new regime, a claimant who makes appropriate arrangements can litigate without
anyrisk of ever having personally to pay costs either to those acting for him or to the other
side and without any risk of ever having to pay an after the event insurance premium whatever
the outcome: the practical result is to transfer the entire cost of funding this kind of litigation to
the liability insurers of unsuccessful defendants (and defendants who settle the claims made
against them) and thus, indirectly, to the wider public who pay premiums to insure themselves
against liability to pay compensation for causing personal injury.”

This is the framework that we have to work within so lets accept it and move on. Previous
attempts to broker industry negotiations via the Law Society and the ABI did not prove
successful largely because the timing was wrong: the result of the Callery –v- Gray case was
unknown and the possibility of the Norwich Union winning the case could not be wholly
discounted. The landscape is now different so shouldn’t we start again?

As both a pre-paid and an after the event insurance provider, Composite is acutely aware of
the wider picture here. We crave certainty in the same way that solicitors and liability insurers
do and we would like to be the first to say openly to the industry, “Let’s talk about it.” We see
value in shared information as a way of benefiting our clients and are prepared to discuss our
pricing and protocols in an attempt to create a framework of certainty.

Yours faithfully,

Ben Hawkins
Business Development Manager
Composite Legal Expenses Insurance