HT-2022-000022 - [2025] EWHC 1238 (TCC)

There was no dispute before me that, in an appropriate case, an ATE insurance policy is capable of providing sufficient protection for the purposes of security for costs. Such policies have been considered in a number of cases. The test for whether the ATE policy is acceptable is whether there is a real risk that the ATE policy will not respond in full. As set out in Asertis:

“20.

An ATE policy will rarely provide the same level of security as a payment into court but, of course, it may very well be that, in the event, the policy would pay out without difficulty. All the defendant is required to show on an application such as this, however, is that there is a real, as opposed to fanciful, risk that the ATE policy will not respond in full (see Ingenious at paragraph 138) or, in Master Steven's words in Giaquinto, at paragraph 79, an "unjustifiable element of doubt about the extent of the cover". In considering whether there is such a risk the court will approach the matter with pragmatism. In Versloot Dredging v HDI Gerling Industrie Vesicherungag AG [2013] EWHC 658 (Comm) Christopher Clarke J, as he then was, said at paragraph 10:

"In my view, it is necessary to take a pragmatic view or, as the Master of the Rolls expressed in Shlaimoun & Anor v Mining Technologies International Inc [2012] EWCA Civ 772, a realistic view. There is no magic in the provision of security from a first-class London bank. The essential question for the court in deciding on what form of security is acceptable is whether what is proposed does indeed provide real security. This it may do if it amounts to a promise which would in all likelihood be honoured, given by an entity with the wherewithal to pay and against whom enforcement can readily be obtained; in short, if given by a truly creditworthy entity."

The market has developed in answer to concerns raised in the various cases. Indeed, it is clear that the market developed the concept of an Anti-Avoidance Endorsement (‘AAE’) to meet concerns about the adequacy of policy wording, and the ability for the Insurer to avoid coverage. In the present case, as I will come to consider, the wording central to the AAE is likely to have derived from a recent case (Saxon Woods Investments Limited v Francesco Costa & Ors [2023] EWHC 850 (Ch)) in which the policy together with the AAE was, at least in the context of that case, found to be sufficient. In many of the cases in which ATE insurance was found to be insufficient, no AAE clause existed (or so it appears from the various judgments), but an AAE clause of itself is not a panacea: the outcome will depend on the precise wording and, particularly in the context of fraud, potentially the substance of the litigation. For example, the AAE was insufficient in Asertis. In this context, I echo the words of Nugee J in Re Ingenious Litigation where he observed that there may be something to be said for litigation funders and ATE insurers to seek to develop a form of policy that could both act as insurance for claimants and sufficient protection for defendants. Perhaps understandably, the development of wording in the industry tracks case law development which is inevitably case-specific.

In the present case, the Policy was accompanied by an AAE. I set out the material terms of the AAE as originally provided attached to Ms Emerson’s third witness statement:

The AAE also provided that terms were “intended to benefit the Opponent and may be enforced by the Opponent directly pursuant to the provisions of the Contracts (Rights of Third Parties) Act 1999.”

Of relevance, in addition, is Clause 11.15 of the Policy which provides:

I address the various points raised by Accor in turn below.