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  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.