'Appearances Matter'

Sarwar v Alam 1 is the natural sequel to Callery v Gray 2 . Like its predecessor it is a low value motor claim, with unexciting facts, which has attracted a degree of attention that must surprise the protagonists very much indeed.

In this case, the issue for consideration by the Court of Appeal was the impact of before the event legal expenses insurance ("BEI"). Since 1st April 2000, a successful litigant has been able to recover the premium paid for after the event insurance ("AEI") from his opponent, subject to the court's discretion. Under the CPR, the factors which the court may take into account in exercising its discretion include "the other methods of financing the costs which were available to the receiving party".

Defendants argued that where a claimant already had a policy of legal expenses insurance in place before the accident/event giving rise to the claim, this amounted to "another method of financing" for these purposes. Consequently, any premium paid for AEI was not recoverable. Claimants disagreed.

The Court of Appeal in Callery v Gray identified this as a topical dispute, acknowledging that 17 million British households were paying premiums for BEI.

The AEI/BEI distinction can have a significant impact on costs. Unlike the AEI premium, the BEI premium is not recoverable as costs inter partes. As the Court of Appeal acknowledged, in straightforward low value motor claims, the claimant's costs, increased by the AEI premium, can quickly outstrip the sums in issue.

The facts

These can be stated very briefly. Muhammed Alam drove into the side of another vehicle while Imran Sarwar was travelling as a passenger in his car. Mr Sarwar was injured in the accident and brought a claim against Mr Alam, which was settled for 2,250, plus reasonable costs. Mr Sarwar sought to include in the claim for costs the premium which he had paid for an AEI policy.

During the subsequent costs-only proceedings it transpired that Mr Alam's motor vehicle policy included legal expenses insurance. This extended to provide cover to any passenger travelling in the car who brought a claim against the driver of another vehicle or the insured driver. At first instance, the District Judge accepted the defendant's argument that this cover was available to Mr Sarwar and disallowed the AEI premium.

The decision provoked an outraged response from the claimant's camp. Like Callery v Gray, the case was fast-tracked to the Court of Appeal which heard...