Arroyo & Ors v BP Exploration Company (Colombia) Ltd

In this case management conference in the above litigation the Defendant makes application that the Claimants disclose the ATE Insurance policy they have obtained. The Defendant advances its case for disclosure on the basis that the policy is relevant, is not privileged and without sight of its terms it cannot properly assess whether it is likely to be able to recover its litigation costs against the Claimants in the event that it succeeds in the litigation. The Claimants resist the application on the basis that there is no jurisdiction in the court to order the disclosure of the policy and/or that it is irrelevant and/or privileged and/or that if its disclosure is ordered, it will cause irremediable prejudice to the Claimants’ case. The Defendant relies heavily in its submissions on the fact that this is a group litigation action by non resident Colombian farmers who it says it is highly likely could not have brought this litigation without the benefit of ATE insurance, so it has a legitimate interest in knowing whether or not it is likely to be able to recover costs and up to what level. In summary I uphold the Claimants’ submissions. In my judgment I do not have the jurisdiction under the CPR in general or under that part relating to group litigation to compel them to produce their ATE policy or policies; they are not relevant documents for the purposes of disclosure; they are in any event privileged; their disclosure would in any event be likely to prejudice the Claimants in the conduct of this litigation.

The statutory regime on which the current version of conditional fee agreements, together with after the event insurance policies, is based is in sections 27 and 29 of the Access to Justice Act 1999. Section 27 deals with the recoverability ofthe success fee and section 29 with the recovery of the ATE premium, both as “additional liabilities” from an unsuccessful Defendant. Although in this case we are concerned only with an application for the disclosure of the terms of the insurance policy and not with disclosure of the level of the premium for the policy which the Claimants will seek to recover from the Defendant if they are successful in their claim as an additional liability, many of the points made in this application would apply equally to both policy and the level of success fee.

The Access to Justice Act 1999 at section 29 provides as follows,

This statutory provision was given effect to in the court rules from April 2000. Old style conditional fee agreements taken out under the provisions in force before that had frequently been accompanied by ATE insurance, but the success fee on the CFA was recoverable from the client and not from the unsuccessful Defendant. The premium for the ATE insurance had to be paid by the client and was not recoverable from the unsuccessful opponent. From the date of commencement of the new rules in April 2000, that situation was reversed.

The key provisions in the CPR concerning provision of information about ATE insurance are found in the rules, the Costs Practice Direction [‘CPD’], and the Pre-Action Conduct Practice Direction [‘PACPD’]. They are as follows:

CPR 44.15 ‘Providing information about funding arrangements’;

CPD 19 (practice direction to CPR 44.15) as it applies to the insurance arrangements in this case;

CPD 19 as amended to apply to insurance arrangements entered on or after 1^st October 2009;

PACPD 9.3 ‘Information about funding arrangements’ as it applies to the insurance arrangements in this case;

PACPD 9.3 as amended to apply to insurance arrangements entered on or after 1^st October 2009; and

CPR 44.3B ‘Limits on recovery under funding arrangements’.

Disclosure of information concerning CFAs and ATE insurance is principally regulated by CPR 44.15. It provides that 'A party who seeks to recover an additional liability must provide information about the funding arrangement to the court and to other parties as required by a rule, practice direction or court order.’

It is clear from the Claimants’ notices of funding that they have obtained an ATE policy number GA11419377 dated 23 June 2008 issued by FirstAssist Insurance Services Limited (FirstAssist). The Defendant seeks disclosure and inspection of that policy and any other ATE policies the Claimants may have obtained in relation to this claim. The Defendant stresses the fact that if there was no ATE policy there would be no action against the Defendant and that in the event of success the policy provides the only realisable hope that the Defendant has of recovering its costs.

The Defendant seeks such an order for the following reasons:

Unless the policy is disclosed the Defendant will not know the extent of the Claimants’ insurance cover in respect of any orders for costs the Defendant obtains. Although the Claimants have stated the level of the cover (£1.8 million) they have refused to clarify the conditions and exceptions on the cover. The Claimants have also refused to state whether the policy covers the 33 individuals whose claims have already been struck out or discontinued, and in respect of whom costs orders have already been made in the Defendant’s favour.

Most of the Claimants live in rural Colombia and the majority of them are (according to their solicitor) peasant farmers. If the Claimants are not covered by insurance the Defendant will have considerable difficulty enforcing any costs order against them.

The Claimants know that if they obtain an order for costs they will be able to enforce it. Unless the policy is disclosed the Defendant will not know whether and/or to what extent it will be able to enforce any order for costs. That places the parties, the Defendant says, on an unequal footing.

The method of calculating the premium under the policy remains unclear. Therefore the Defendant is unable to assess a major component of the costs it is likely to be ordered to pay if it loses the case. By contrast the Claimants are, as a result of the costs reporting order made by the Court, well aware of the costs being incurred by the Defendant.

The Defendant is thus litigating in the dark. It does not know what proportion (if any) of its costs it will recover if it wins; it is unable to make a proper assessment of the costs it is likely to be ordered to pay if it loses. The Claimants are under no such handicap.

The uncertainty prejudices the Defendant’s assessment as to how best to conduct the litigation. In particular it is prejudiced in making an informed assessment as to what steps and costs to incur in fighting the case and whether to make an application for security for costs.

FirstAssist publish the standard terms under which they offer ATE insurance on their website. They offer 3 types of ATE cover: a “Watermark” policy for “standard personal injury claims" a “Rebate” policy for insurers pursuing subrogated claims; and a “Pursuit” policy for other claims “ where the case is being run on a conditional fee agreement”.

The Defendant has asked the Claimants to confirm whether they have taken out a “Pursuit” policy. The Claimants’ solicitors replied in correspondence (see Leigh Day’s letter dated 8 March 2010 at tab 36) that “ substantial elements of our clients' insurance arrangements have been negotiated on bespoke terms!’ but have declined to give any further clarification. Leigh Day’s response suggests that the Claimants’ ATE policy is based at least in part on standard terms. The Defendant says that the likelihood must be that those standard terms are the “Pursuit” terms. This in my judgment is a reasonable assumption but equally in my judgment it is of importance in this application that this is a “bespoke” policy and not one whose terms are public but rather one in which the terms have been tailored to the Claimants’ cases, no doubt with strategic and risk factors taken into account.

From a copy of the public standard “Pursuit” terms at tab 4, it can be seen that there are a considerable number of exceptions and qualifications to the cover under a standard “Pursuit” policy. Of particular concern to the Defendant are the following:

Page 3: “Cover ceases when: .... e) as a result of material developments it becomes reasonably foreseeable that the aggregate of Adverse Costs and Expenses could exceed the Long Stop at any time during the Legal Proceedings unless We have given Our written permission to continue cover’.

Page 5. The insurance does not cover: “1. Any payment by the Insurer under this Policy which is due as a result of a discontinuance or settlement to which we have not given our prior written consent.”

Page 6. The insurance does not cover: “5.LegalProceedings made, commenced, brought or transferred outside the Territorial Limits or which are not governed by the laws of England and Wales”.

Page 6. The insurance does not cover: “11.Any payment by the Insurer under the Policy where there has been misrepresentation or material non-disclosure by the Insured or Solicitor or if the policy has been obtained by any fraudulent or dishonest means”.

Thus, the Defendant says, FirstAssist’s standard terms mean that the policy ceases automatically as soon as it becomes reasonably foreseeable that adverse costs from the whole of the proceedings could exceed the level of the cover. If those standard conditions applied, the Defendant says it would have no cover at all under the policy. The proceedings are not governed by English law and it is already clear that adverse costs could exceed the Claimants’ stated cover under the policy.

The Defendant says that the Claimants’ refusal to clarify which of the “Pursuit” terms applies is unfair and unacceptable. It leaves the Defendant uncertain as to whether it has any cover at all under the policy. Further, the Defendant says, it leaves a suspicion that the Claimants’ solicitors’ assertion in correspondence that the Claimants have coverof£1.8 million is misleading.

The Defendant’s basic legal submission is that it is in the same position as the Defendant in Henry v BBC [2006] 1 All ER 154, in which Gray J. required disclosure of the Claimant’s ATE policy and held at paragraph 23 of his judgment:

“Both the amount of the cover and the existence of material exclusions in the policy are of obvious relevance to the opposite party, who must be in a position to make informed choices as to the conduct of the litigation. ... It is said on behalf of the Claimant that exclusions such as those contained in the Temple policy are commonplace in this field. lf so, that is a further reason for candour on the part of the insured’s solicitors about the possible limits on the ability of the opposite party to recover under the policy. It is also said on behalf of the Claimant that insurers such as Temple would be unlikely to seek to avoid liability by reference to the exclusion clauses summarised above. / see no reason why this or any other Defendant should proceed on any such assumption particularly in a high cost case.”

In their letter of17 February 2010 [tab 34] Leigh Day state:

“the insurance premium is, we contend, not staged; rather, whether it is payable depends on the outcome of the proceedings. lf it does become payable, it will (as in other cases involving these insurers) be proportionate to the level of indemnity which would have been necessary (within the limit of cover) to afford the insured protection, by reference to the amount of costs your client would, in the event that it was successful have sought to recover from our clients. ”

The Defendant says that this explanation leaves the Defendant wholly uncertain as to how the premium has been or will be calculated. The Defendant argues, for example:

It is stated that the premium is proportionate to the level of indemnity which would have been necessary (within the limit of cover) to afford the insured protection. It is already apparent that with cover of, at best, £1.8 million the Claimants are underinsured. The Claimants have effectively already reached the “limit of cover’. Does the premium continue to rise as the Defendant incurs costs above the £1.8 million “limit of cover, or is the premium now effectively fixed because the Claimants have reached the limit of cover? The Defendant says that this issue would not arise if First Assist’s standard terms applied, as the cover would cease immediately if became reasonably foreseeable that adverse costs could exceed the level of cover. However it is unclear to the Defendant whether a variation of the standard terms has been negotiated.

How do First Assist / the Claimants calculate the costs that the Defendant would have sought to recover if it was successful, given that the premium will only be payable in the event that the Defendant is unsuccessful and the Defendant would not in those circumstances prepare a bill ofcosts?

The Defendant argues that the position in relation to the premium is made even more confused by Leigh Day’s letter of 11 March 2010 [tab 37] which states:

“the position is our firm’s reasonable and proper disbursements would (as in other cases involving this insurer) be taken into account in addition to the amount your client would have claimed from our client in the event that it was successful, and the premium would be calculated by reference to the aggregate of both elements.”

Thus, the Defendant says, it appears that the disbursements incurred by the Claimants play some part in how the premium is calculated. However what is not clear is:

The way in which the premium is calculated, and the relative importance in the calculation of the Claimants’ disbursements and the assessment of the Defendant’s costs.

Whether the premium will continue to increase as the Claimants incur further disbursements.

If the premium does continue to increase as the Claimants incur further disbursements, whether it will continue to rise even after the Claimants have reached the limit of whatever cover they have in place for their disbursements.

The Defendant asserts that it is therefore not only uncertain as to what the premium is, but is also uncertain as to whether it is fixed. As a result, the Defendant is unable to make a proper assessment as to its likely exposure should it lose the case. Further, if the premium increases as the Defendant’s costs increase, the Defendant says that that is something it should be told. It may well affect the Defendant’s view of the case and conduct of its defence if it knows that for every pound it spends its exposure in costs will increase.

The Defendant’s application is brought under: (a) the court’s general case management powers under CPR 3.1 and CPR 18.1, and/or (b) the general case management powers in relation to group litigation in paragraph 12 ofPD 19 B.

The Claimants rely on the fact that they have provided the information required by paragraph 19.4 of the PD to CPR 44. However the Defendant submits that:

That argument was considered directly and in detail by Coulson J. in Barr v Biffa Waste Services Ltd [2009] EWHC 1033 (TCC). He rejected the Claimants’ argument that they should not disclose their ATE policy because they had complied with paragraph 19.4. He ordered that the policy could and should be disclosed under the court’s general case management powers: see paragraphs 61- 65 of the judgment.

The introductory words to paragraph 19.4 (“Unless the court orders otherwise”) make plain that the Court can make an alternative order, and order more beyond that which would be required by paragraph 19.4.

Further, in Rogers v Merthyr Tydfil CBC [2007] 1 WLR 808 the Court of Appeal held that parties with ATE policies

The Defendant submits that this being in a group action instigated by non-resident Colombians it should be progressed economically and justly and that under the rules in CPR Part 19 the court makes unique orders and the court should not shrink from making innovative orders in relation in particular costs as they progress throughout the action including looking at the position as to whether a party can recover costs when it comes to enforcement.

The Defendant notes that the Claimants, in part, rely on a consultation paper published by the Lord Chancellor’s Department in September 1999 under the title “ Conditional fees: sharing the risks of litigation". However, in that respect the Defendant submits:

Parliamentary material should only be relied on as an aid to construction of an enactment if the conditions set out by the House of Lords in Pepper v Hart [1993] AC 593 are satisfied. They include the condition that the enactment in question is “ambiguous or obscure, or leads to an absurdity' (per Lord Browne-Wilkinson at 640C). In R v Environment Secretary, ex p Spath Home Ltd [2001] 2 AC 349, Lord Bingham stated that unless that condition “is strictly insisted upon, the real risk exists, feared by Lord Mackay of Clashfern LC ,that the legal advisers to parties engaged in disputes on statutory construction will be required to comb through Hansard in practically every case. This would clearly defeat the intention of Lord Bridge of Harwich that such cases should be rare, and the submission of counsel that such cases should be exceptional"

In this case the relevant provisions of the CPR are not obscure or ambiguous, and nor do they lead to an absurdity. The court’s general case management powers are clear. Further, the introductory words to paragraph 19.4 of the PD to CPR 44 make entirely clear that the Court can order parties to provide information about their funding arrangements in addition to that set out in the body of paragraph 19.4.

The funding of litigation has moved on considerably since 1999. The views set out in the consultation paper are now out of date. The Court of Appeal in Rogers concluded that more information should be provided to a litigant in relation to his ATE cover than the Government appears to have considered necessary in 1999. The Court of Appeal do not appear to have considered that the consultation paper was relevant.

Ms Srinivasan of the Claimants’ solicitors asserts in her witness statement that the policy is privileged. However, the Defendant argues that that assertion is unexplained and unparticularised and stresses that it does not seek disclosure of any advice that the Claimants’ lawyers may have given to FirstAssist, nor does it seek disclosure of the communications the Claimants have had with FirstAssist.

The Defendant points out that in Henry i/ BBC, Gray J. held the ATE policy was not privileged. He described that Claimants’ assertion that the policy was privileged as “utterly misconceived" (paragraph 23) and “difficult to understand" (paragraph 24).

The claim to privilege was also rejected by Coulson J. in Barr v Biffa. see paragraphs 46 to 49. Coulson J. held:

“In my judgment, the ATE policy is not covered by litigation privilege. ... The type of documents covered by litigation privilege are summarised in para 71 of the judgment of Aikens J in Winterthur. n my judgment, the ATE insurance policy in this case does not fit into any of those categories. lt is not a document containing legal advice. It is not a communication between the Claimants’ solicitors and the Claimants, or between the Claimants’ solicitors and third parties. lt is simply not caught by this description.”

The Defendant submits that Henry and Barr were correctly decided and that I should apply the ratio of those cases as persuasive authority and that the Claimants’ claim of privilege is misconceived.

Ms Srinivasan, of the Claimants’ solicitors asserts in her statement that the Claimants would be prejudiced by disclosure of the ATE policy. The Defendant says that the only prejudice she identifies (paragraph 15 of her statement) is if the content of the Claimants’ negotiations with FirstAssist were revealed. She claims:

“the Claimants would be likely to suffer significant prejudice should the content or outcome of such negotiations be disclosed (a) in so far as it could reflect legal advice as to prospect of success of their claims; and (b) additional prejudice, arising from the content and outcome of such negotiation, but which is of a nature which / am not able to disclose or further particularise without giving rise to the very prejudice against which / am seeking to protect the Claimants.”

Mr Gibson for the Defendant found it difficult to understand why disclosure of the policy would reveal details of the negotiations between the Claimants and FirstAssist. The policy, he says, is a freestanding contract and as observed by Coulson J. in Barr, the policy is not a communication between the Claimants’ solicitors and either the Claimants themselves or a third party. FirstAssist plainly do not normally treat their policy terms as being confidential, as their standard policy terms are publicly available.

The Defendant, however, assumes that the premium under the policy may have been calculated by reference to the Claimants’ assessment of their prospects of success. If that is the case, the Defendant would be content for the premium or premium rate under the policy (though not the method by which the premium is calculated) to be redacted. The Defendant assumes that the premium / premium rate is set out in a schedule to the policy.

Mr Gibson’s submission to me was that, with the possible exception of the premium / premium rate, it is difficult to understand why disclosure of the policy terms would reveal, or even give any clue, as to the advice that the Claimants’ lawyers may have given to FirstAssist. If the Claimants maintain that they have been prejudiced it is incumbent on them to explain and spell out what that prejudice is. It is simply not acceptable, he says, for them to assert in a somewhat mysterious way that they may suffer from “additional prejudice which they are not prepared to reveal.

By contrast, Mr Gibson says, the Defendant will suffer from very real and clear prejudice if the policy terms are not disclosed.

One of the reasons the Defendant requires to see the Claimants’ ATE policy is to decide whether it would be appropriate to make an application for security for costs. The Claimants’ solicitors have already stated in correspondence that such an application would be resisted.

The Defendant’s case in this respect is that as the Claimants are resident in Colombia (which is not a Brussels or Lugano contracting state) the Claimants fall within the category of Claimant against whom an order for security could be made (i.e. at least one of the conditions in CPR 25.13(1) would be satisfied). If an application for security was made the Claimants would no doubt resist it on the basis that the Defendant was protected by the ATE policy. However in determining whether the policy did provide adequate protection for the Defendant, the Court would be entitled to look at whether the terms of the cover were satisfactory, and in particular would be entitled to look at any exclusions in the cover. See:

Al-Koronky v Time Life Entertainment Group Ltd [2006] EWCA Civ 1123, at paragraphs 34 to 36; and

Barr v Biffa, where Coulson J. stated at paragraph 68: “a Claimant who has the benefit of ATE Insurance may face an application for security for costs. Although CPR 25.12 - 25.15 do not expressly deal with the topic ,the disclosure of the Policy may be necessary in order for the court to arrive at a fair conclusion both as to the principle of ordering security and, if established, the level of security to be provided.”

Mr Gibson submits that it would be wholly unsatisfactory to require the Defendant to go to the expense of making an application for security for costs simply to find out whether the Claimants’ ATE Policy provided them with adequate protection against adverse costs. The Claimants should disclose the policy to avoid the need for a further costly application. Similarly, as Coulson J. observed in Barr at paragraph 67, the policy is likely to be disclosable if either party makes an application for a costs capping order. The policy should be disclosed so that the Defendant can make a proper assessment as to whether to apply for a cost capping order.

On the 17 November 2009 the Claimants’ solicitors wrote to the Defendant enclosing a notice of funding which stated that the Claimants had entered into “further conditional fee agreements, alternative to their earlier conditional fee agreements and operative from the same dates from which the earlier conditional fee agreements are operative". Although the Claimants have been invited by the Defendant to explain why it was necessary for them to enter into further and alternative CFAs, no explanation has been given. Mr Gibson submits that this adds to the impression that the Claimants are not prepared to be candid about their funding arrangements.

In summary therefore the Defendant’s case is that: (1) There are three reported decisions of High Court judges ordering Claimants to disclose a copy of their ATE cover: (a) Sir Michael Turner in Hobson & Others v Ashton Morton Slack & Others [2006] EWHC 1134; (b)Gray J. in Henry v BBC, and (c) Coulson J. Barr v Biffa. (2) The Claimants in Barr accepted that they were obliged to argue that the approach of judges in Hobson and Henry was wrong (see paragraph 24 of the judgment in Ban). In this case the Claimants are forced to argue that all 3 cases were wrongly decided. The Defendant submits that the Court is bound by the 3 decisions to conclude that: (a) the policy is a relevant document, (b) it is not privileged, and (c) the policy should (subject to the possible redaction of the premium / premium rate) be disclosed. (3) The Claimants have provided no good reason why the policy should not be disclosed. By contrast if it is not disclosed: (a) the Defendant will not know whether it has any valuable cover under the policy, (b) the Defendant will not know whether the policy covers those Claimants whose cases have already been discontinued or struck out. It gives rise to the possibility of enforcement action being taken against them which may prove to be unnecessary and expensive. That is unfair on those Claimants (whom Leigh Day no longer represent) as well as the Defendant, (b) the Defendant does not know whether the premium has been fixed and how it is to be calculated. It is therefore unable to make a proper assessment of its exposure should it lose the case.

It may be seen from the provisions listed at paragraph 5 above in this judgment that the disclosure obligation in respect of insurance is not general: it applies only to parties who intend to seek payment of a success fee or an ATE premium as part of their costs. Hence, the rule does not create any general right for parties to be informed of their opponents’ insurance resources in order to gauge their ability to satisfy judgments or costs orders. A party funded by insurance which pre-exists the claim (such as liability insurance or before the event legal expenses insurance), or a party which decides not to claim its ATE premium, is not obliged to give its opponent any information at all about the policy - or even to declare its existence. Mr Layton on behalf of the Claimants submits that CPR 44.15 gives no support to the Defendant’s proposition that the overriding objective demands it have knowledge of the Claimants’ ability to meet costs orders made against them. If this were mandated by CPR 1.1, there would be no logical basis for it being mandated only in cases where there will be a claim for an ATE premium.

Mr Layton further points out that the only sanction for non-compliance with CPR 44.15 is that the party in default will not, on assessment, recover its ATE premium without a special order of the court: see CPR 44.3B(1)(c). This sanction also shows, the Claimants submit, that CPR 44.15 is directed simply to ensuring that opposing parties know, from the outset of a claim, if they are at risk of an augmented costs claim because a party has a CFA or ATE insurance (in the language of the rules, that the party will be seeking payment of ‘an additional liability’). This is the only purpose to which the disclosure regime is directed. It does not create a right, unique to those facing parties with ATE insurance, to disclosure of the means by which an opponent would be able to meet a judgment for costs.

In my judgment, Mr Layton is correct in these submissions. If it was necessary to look further beyond the language of the rules and practice direction themselves, which I do not think it is, these conclusions are, he says, further supported by the travaux preparatoires for the present funding regime. See ‘The Government’s conclusions following consultation on: Conditional Fees: Sharing the Risks of Litigation' which states as follows:

Mr Layton then turns to the information which, as applicable to the present case, the CPD actually requires to be disclosed in cases where an ATE premium is claimed:

the name and address of the insurer;

the policy number;

the date of the policy;

the claim or claims to which it relates (eg does it apply to any part 20 claim in the proceedings).

With effect from 1^st October 2009, CPD 19.4(3) was amended to require disclosure of further information. By virtue of transitional provisions (CPD 19.6), the amendment does not apply to the ATE policy in this case. However, the additional information that would now be required is:

a statement of the level of cover provided by the insurance; and

a statement of whether the insurance premium is staged and, if so, the points at which an increased premium is payable

The Claimants have given notice of funding in these cases in the prescribed court form (see [D/12] to [D/14]). Since the last hearing, the Claimants have also given the Defendant further information about the ATE policies: see the correspondence at [D/36] & [D/37], The Claimants have voluntarily given the additional information which the CPD would now require. As such, the Defendant has been advised that:

the limit of indemnity in respect of adverse costs orders in the Defendant’s favour is £1.8 million;

the policy also insures the Claimants’ own disbursements, up to a distinct limit of indemnity;

while the strong expectation is that, if the case goes to trial, the Claimants’ disbursements would not be less than the limit of indemnity applicable to them, in the event that there was any remaining unpaid balance on the insurance within the applicable limit of indemnity, the difference would also be available to indemnify adverse costs;

the ATE premium is not staged, in that it does not rise in increments with reference to defined stages of the proceedings;

however, it follows the well known model for premiums payable to this insurer, in that it will (where payable) be rated at the end of the case with reference to the actual costs incurred by the Defendant and the actual disbursements incurred by the Claimants: in other words by reference to the actual sums the underwriters would have been exposed to paying in the event of a negative outcome to the litigation.

Hence, the Defendant is now aware:

of the maximum fund which is realistically available to meet its costs in the event that any costs order is made in its favour; and

that the premium which will be claimed against it under s 29 of the Access to Justice Act 1999, in the event of a costs order against it, is not a one-off charge, but rather will increase along with the Defendant’s costs and the Claimants’ disbursements as the litigation continues.

Thus, the Defendant has even the enhanced information that CPD 19.4 would now require. It knows what it needs to know: that the Claimants have an insurance to which s 29 of the Access to Justice Act 1999 relates; that its maximum value (to the Defendant) is £1.8 million; and that the premium will increase as the case continues. It has all the information which it can have about the additional liability to which it is exposed.

These provisions as to the giving of information in respect of the ATE insurance, old and new, are prefaced by the statement (CPD 19.4(1)) that the party who will claim an ATE premium ‘must state’ the prescribed information ‘unless the court otherwise orders’. The Defendant argues that this shows the court has a jurisdiction to require the disclosure of additional information. Mr Layton submits and I agree with him, this is a misreading. The CPD prescribes information which must be stated unless the court otherwise orders. This allows the court to relieve a party from stating some or all of the prescribed information, not to require it to state information other than that which is prescribed. Indeed, in my judgment he is correct in submitting further that the CPD expressly restricts the scope of disclosure. Thus, CPD 19.1(1) provides (emphasis supplied):

In King v Telegraph Group [2005] 1 WLR 2282 (CA), [100], Brooke LJ emphasised that the court had no power to override this provision so as to require the amount of an additional liability (in that case a success fee) to be disclosed in advance of costs assessment proceedings. Mr Layton rightly points out that these restrictions on disclosure can in fact be seen throughout the CPR’s costs regime. For example:

a party is not required to disclose the amount of any additional liability in any costs estimate, including the mandatory estimates filed at allocation and on submission of pre-trial checklists: CPD 6.2(1)(a) & CPD6.2;

additional liabilities may never be assessed until the conclusion of proceedings, even if other costs are assessed at an interim hearing, and even if there is a split trial: CPR 44.3A(1); CPD 13.12, 14.2, 14.5 & 14.7;

where the court makes a costs capping order, the cap must exclude the amount of any additional liability: CPR 44.18(2) (p 1216).

In respect of the rules and practice direction it is the Claimants principal submission that all the provisions mentioned above constitute a complete code for disclosure of information relating to funding arrangements. The CPR balances the interests of parties with funding arrangements and the interests of those who face the claims for additional costs which result from them. The former are entitled to be treated in the same way as other parties to litigation. They are not required to disclose information which would give their opponent tactical advantage. They are not, uniquely amongst litigants, obliged to give information about their ability to meet costs orders or judgments for that matter. Neither the mechanics of their funding arrangements nor the amount of additional liability is disclosable until the costs assessment stage. It is for this reason of preserving confidentiality that additional liabilities are excluded from assessment before the end of the proceedings. An opposing party would derive obvious tactical advantage from inspection of the detail of a CFA or ATE policy. The amount of the success fee or premium would reflect the contracting parties’ assessment of the merits of the case. It would be of considerable utility to an opponent to know in what circumstances a solicitor or insurer could terminate the funding arrangement (for example if an offer above a certain level were made). The arrangements may well contain rights for solicitors, insurers and co-insureds to be consulted on whether offers should be accepted. Knowledge of the detail of those arrangements could enable an outsider to provoke conflicts of interests between the parties. Knowing the precise circumstances in which a party is or is not liable to pay his solicitor, is or is not insured, or is or is not liable to pay an insurance premium, is obviously useful to a party seeking to negotiate a settlement. And again, the precise terms which the parties have negotiated will cast light on their underlying view of the merits, for both CFAs and ATE policies are contracts which centre on risk-related contingencies and, where they are individually negotiated, the terms will inevitably reflect the parties’ perceptions and apportionments of those risks.

In my judgment those supporting submissions of Mr Layton’s in respect of this or any other piece of litigation carried on by a Claimant with the aid of a CFA and ATE are almost so obvious as not to need to be stated and they are relevant factors to be taken into account in relation to the Defendant’s submissions on procedure, privilege and prejudice. However, in relation to this application, as it is based on those rules and the practice direction, it is my view that in no way are they drafted to authorise the disclosure of the terms of an ATE insurance policy and a fortiori, one in which the individual terms have been negotiated, rather than a standard one, to take into account the particular circumstances of what is in this case an unusual claim. The very fact that the terms of the insurance were negotiated suggests that the policy terms took into account specific litigation risk factors and the views and tactics of the Claimants’ lawyers. I have no doubt whatsoever that there has to be a risk that if the Defendants were able to compare and contrast the insurers’ standard terms with such amendments and changes as have been made by the tailor-made terms they might be able to work out the Claimants’ solicitors’ advice in respect of chances of success and / or tactics if nothing else and also would have the other advantages Mr Layton refers to.

Do the legitimate interests of the opposing party, here the Defendant, in some way override this? Many of Mr Gibson’s complaints as to what the Defendant will not know or cannot do as a result of not being able to see for itself the actual terms of the Claimants’ ATE policy and form for itself a view as to the contractual effect of and proper interpretation of those terms are no doubt true as a matter of fact, but in my judgment the Defendant is not entitled to be in any better position than any other Defendant facing an impecunious Claimant merely because that Claimant has the benefit of a CFA and of ATE insurance. The existence of that combination of CFA and ATE gives the Defendant a right under the CPR which it would not otherwise have had, to know of its existence if it is to be used under the rules to extract the additional liabilities (and latterly the level of cover and whether the premium is staged) but that is as far as it goes. Mr Gibson may well be right that the result is that the Defendant does not know whether if it succeeds, its costs will be paid. This may well mean that for tactical purposes it has to assume that they will not or to assume that the Claimants’ solicitor’s statement that the cover is up to £1.8 million is correct.

Further, it seems to me that the argument based on the ‘equal footing’ or ‘level playing field’, arising out of the fact that the Claimants can see from publicly available accounts that the Defendant is good for any judgment and costs so that the Defendant should be put into the same position by the court in respect of the Claimants is wrong. The overriding objective was in my judgment not intended to suggest that the Court should exercise case management powers to require a party to disclose what financial arrangements it has in place to pay or its financial ability to pay, an order for costs. It seems to me that if that were intended by the rules of court there would have to be specific provision to that effect. Mr Layton rightly submits that the Defendant differs from the opponent of a conventionally funded party in only one respect: namely, that it may be called upon to pay enhanced costs. So, the CPR entitle it to know that it will face such a claim: that is the effect of CPR 44.15. Where there is a failure in notification, the opponent will be protected from that claim: that is the effect of CPR 44.3B. In all other respects, the opposing party will be in the same position as any other litigant. That in effect, is the level of the playing field in all litigation and that, in effect is why CPR 44.15 does not provide for the disclosure of the additional information which the Defendant seeks. The question in this case is not whether the playing field is level because the Claimants know that the Defendant will be able to pay their costs whereas the Defendant does not know if the Claimants will be able to do the same. The question is whether, that being the case, the Defendant’s position is different from that of any other Defendant.

The Defendant’s specific complaint is that it does not know whether the Claimants are ‘good for the money’: see Mr Isted’s witness statement on behalf of the Defendant, para 6 [C/9/147], In my judgment, this uncertainty is not caused by the Claimants’ ATE insurance, and so it is unsurprising to see no provision in CPR 44.15 for the disclosure the Defendant seeks. The Defendant is in the same position as any other corporation faced with a claim by private individuals of uncertain means. All that the existence of ATE arrangements adds to the case is that it gives these Claimants access to a fund, in contractually prescribed circumstances, which they would not otherwise have. But there is no more reason for the Claimants to give disclosure of the details of their insurance fund in an ATE case than there would be for them to give disclosure of the funds in their savings accounts, or the funds available from non- ATE insurers. That sort of disclosure is unavailable. See the decision of Steel J in West London Pipeline & Storage Ltd v Total UK Ltd [2008] Lloyd's Rep IR 688 (Comm).

Mr Layton explains the Defendant’s need to identify other CPR provisions as conferring jurisdiction to order disclosure (CPR 3.1, CPR 18.1, and para 12 of CPR 19 PD ‘B”) by the fact that the costs regime does not in itself give me the power to do this. He also points out that the Defendant does not refer to CPR 31 on disclosure. Of course an ATE policy would fall neither within standard disclosure nor ‘train of inquiry’ disclosure. It is not a document which is of any relevance to the substantive proceedings in the case. It would be relevant only in enforcement proceedings, or proceedings to assess costs.

The Claimants submit that the court has no power to order disclosure of documents which are not relevant documents within the compass of CPR 31, and that this too is fatal to the application. They point to the fact that in Hodgson v Imperial Tobacco [1998] 1 WLR 1056 (CA), 1076F, it was stated that a CFA had no relevance in the substantive proceedings, was therefore not discoverable, and as such there was no power to require its production. It is accepted by the Claimants that this is a pre-CPR case, but the Claimants say that it signals the correct approach to ATE policies under the CPR. They do not fall within parties’ disclosure obligations, and there is no other power to require disclosure.

On their face, in my judgment, the provisions the Defendant identifies do not endow the court with any additional jurisdiction to order disclosure:

CPR 3.1 simply states the court’s general powers of case management. None of them relates to disclosure. While there is a catch-all power to make any order necessary to further the overriding objective, there can be no resort to this power where the CPR already contains a detailed codification of both the power to order disclosure (CPR 31) and the information which parties must give about funding arrangements (CPR 44.15).

CPR 18.1 is not concerned with disclosure at all, but only with the provision of information. Moreover, the information must relate to matters which are ‘in dispute’ in the proceedings. The Claimants’ ATE arrangements are not the subject of the dispute in the proceedings, as the Defendant recognises in not contending that the policy is subject to standard disclosure.

Additionally, CPR 18.1 is glossed in an important respect by CPR 18 PD 1.2: ‘A Request should be concise and strictly confined to matters which are reasonably necessary and proportionate to enable the first party to prepare his own case or to understand the case he has to meet.’ It is obvious that an insurance policy does not fall within this description, as David Steel J held in the West London Pipeline case (above, para19).

As to para 12 of CPR 19 PD ‘B’ (the Group Litigation Practice Direction), it is simply a statement of the obvious, in that it provides that group litigation will be case managed. It throws no light on the scope of those case management powers. It does not purport to create any freestanding power to require disclosure beyond that available under CPR 31. For the very limited scope of practice directions, see Leigh v Michelin Tyre [2004] 1 WLR 846 (CA), [19]-[20],

What is said above would be enough to dispose of this application. In my judgment I have no jurisdiction to order disclosure. However, even if I was wrong about that I have come to the conclusion (conscious as I am that I am differing in this respect and in respect of this individually negotiated policy from Gray and Coulson JJ) that the Claimants’ submissions that the policy is a privileged document are right. Further, even if I was wrong about that and I have a discretion to order disclosure under the rules and practice direction, I would not exercise it in the Defendant’s favour because in my judgment to do so risks doing irreparable prejudice to the Claimants.

The claim for privilege is asserted by the Claimants’ solicitor, Ms Srinivasan, a partner in Leigh Day & Co (see Srinivasan, paras 12-13 [C/8/143]). It is supported by a statement of truth. The Claimants do not assert that their solicitor may be the judge in their own cause. Nevertheless, on principles which have been long established, a solicitor’s considered claim for privilege is entitled to considerable respect. See Westminster Airways Ltd v Kuwait Oil Co Ltd [1951] 1 KB 134 (CA), 146, per Jenkins LJ:

Likewise, post CPR, it has been held that a court should not look behind a solicitor’s solemn claim of privilege and itself inspect documents in the absence of 'credible evidence that the lawyers have either misunderstood their duty or are not to be trusted’’. National Westminster Bank PLC v Rabobank Nederland [2006] EWHC 2332 (Comm) (unreported), [60]. It is for the party seeking disclosure to identify proper grounds for questioning the solicitor’s statement. Mr Layton submits that the Defendant does not discharge this burden. The matter is dealt with in a single paragraph in its evidence (Isted, para 24 [C/9/152]). Mr Isted appears to accept that correspondence and advice leading up to the creation of the policy is privileged. Then he simply asserts that the policy itself would not be.

However, Ms Srinivasan, solicitor for the Claimants explains, that the policy in this case was individually negotiated between her firm and the insurers. The policy was produced for the purposes of litigation, and its terms necessarily reflect both the legal advice of Leigh Day, and also the views formed both by Leigh Day and the insurers as to the risks of this litigation. It seems to me that on any view, the terms of the policy would (in the words of Cotton LJ in Lyell v Kennedy (No 3) (1884) 27 Ch D 1 (CA), 26) 'give a dud to the parties’ thinking. Hence also, a solicitors’ bill of costs is privileged, as it might disclose the way in which litigation is being approached: see Chant v Brown (1852) 9 Hare 790, 68 ER 735; IBM Corp i/ Phoenix [1995] 1 All ER 413 (Ch), 424. For this reason, even if no other, this policy (and I stress, this policy) is in my judgment subject to legal advice privilege as claimed. Equally, the policy will have come into existence for the purpose of supporting litigation, as its purpose is to aid the Claimants 'to obtain legal advice or to conduct or aid in the conduct of litigation (Lord Edmund Davies in Waugh v BRB [1980] AC 521 (HL). It is therefore, in my judgment, subject to litigation privilege in any event.

It seems to me to be plain that by its nature, knowledge of the terms of an ATE policy would be of tactical advantage to the opposing party in the litigation. I have no doubt that that is why the opportunity was not taken in the CPR to make a party give information about the terms of such a policy as well as about the premium payable under it during the course of the litigation before assessment. It would be very surprising if it were not protected by litigation privilege in these circumstances. The Defendant has identified no reason for supposing that it is not. It concedes that the documents connected to the negotiation of the policy would be privileged, but simply asserts that the end product of the negotiations enjoys no protection. I agree with Mr Layton that this is not a position which makes sense.

However, the Defendant has referred to cases in which High Court judges have stated that an ATE policy was not privileged from disclosure: Henry v BBC [2006] 1 All ER 154 (QB); Hobson and Others v Ashton Morton Slack and Others [2006] EWCH 1134 and Barr v Biffa Waste[2009\ EWHC 1033 (TCC) (unreported).

Mr Layton submits that the passages relied upon in Henry ^ BBC are obiter. By the time the proceedings came before Gray J, the policy had been produced (see [24]). Hence, there was no evidence before the court asserting privilege, and nor was the issue the subject of argument. Certainly, in the course of his recitation of the background to the litigation, Gray J criticised the delay in disclosing the policy in forceful terms. That no doubt reflected the concerns that abusive claims for additional liabilities were causing in defamation cases at the time. Mr Layton gives in argument a precis of the problem specific to that area of litigation that very large ATE premiums would be claimed, as libel proceedings are both expensive and (due to the use of juries) extremely uncertain. In many libel cases, including the Henry case, the issue is whether the claimant is telling the truth. If the Claimant is not telling the truth, and a justification defence is made out, the ATE insurer may void the policy on grounds that the insured misinformed it in breach of the duty of utmost good faith. Thus, as Gray J explains ([26]), the policy is likely to be worthless despite its cost. In my judgment, the robust sentiments expressed by Gray J should be read in the context of abusive conduct of this kind. What is more, although special rules for ATE recovery in defamation cases have since been introduced (such as CPR 44.12B), they do not provide for the disclosure of policies, and nor does the pre-action protocol for defamation claims. Coulson J in the Barr case seems to recognise that the references to privilege in Gray J’s discussion of the ATE issues in Henry cannot have been intended to be analytical (see the last sentence of [46]). This is not a case where, although obiter, the conclusion expressed by the judge was reached after deliberation on a fully argued question.

In Hobson no privilege point was argued. The judge ordered the disclosure of policies for the purpose of deciding whether to make a GLO and the Claimant produced them without argument.

As to the Barr case, there too it appears that there was no formal and considered assertion of privilege by the Claimants’ solicitor: [49]. Neither the Claimants nor the insurer identified any reason for not disclosing the policy: [31]. This being so, the point appears practically to have gone by default. In the present case, by contrast, there is such an assertion of privilege, which relates to the specific facts of this case, and the circumstances in which the relevant insurance arrangements were put in place. For obvious reasons, a case on different facts (to the extent that any facts at all were put before Coulson J) cannot be determinative. Privilege is generally a mixed question of fact and law. If an ATE policy is in wholly standard terms and on a ‘one size fits all’ premium (as is often the case in, for example, fast track personal injury cases), there may be no viable claim for privilege (or in any event no practical point in asserting privilege) as every aspect of the policy will already be in the public domain.

In the Barr case Coulson J points out that there was no case in which an ATE policy had been found to be privileged (see [46]). However, the position appears to be that, save for the Barr case itself, there is no case in which the point has been argued in detail. It was for the Defendant in Barr to show that the Claimants’ assertion of privilege was misplaced, and indeed to make out the case for disclosure beyond that provided for by CPR 44.15. As Mr Layton, in my view rightly submits, on the Defendant’s analysis in respect of procedure and jurisdiction one would have thought that applications for the disclosure of ATE policies would be common for all litigants, and not only Defendants in group litigation, since they would all doubtless like to know their opponents’ funding arrangements, and in particular whether and in what circumstances such arrangements would assist them in enforcing adverse costs orders.

In my judgement in any event, Coulson J’s decision cannot dictate the outcome in this case. He did not decide that no ATE policy is privileged, and nor could he have done so. He simply held that no privilege had been made out on the facts that were before him. In this case, the facts are different. Even if they were not, the case would not bind this court and the Defendant has accepted this despite its skeleton argument suggesting the contrary. Coulson J was sitting at first instance as a judge of the TCC. The appellate jurisdiction of the Divisional Court aside, there is no principle of stare decisis within the High Court. It is a first instance court, the judges of which enjoy a co-ordinate jurisdiction. While a previous decision of the High Court will not lightly be departed from, it is not binding on the court: see Vesta v Butcher [1986] 2 All ER 488 (Comm), 507-8. Although a Master of the High Court is of inferior rank to a Justice of the High Court, when sitting as a judge within the High Court, the Master is exercising the jurisdiction of the High Court, not some lesser jurisdiction of his own: see s 19(3) of the Senior Courts Act 1981, and CPR 2.4 (White Book 2009, p 27). In appropriate cases the Master might think it more appropriate to refer the matter to a High Court judge (CPR 2 PD ‘B’ 1.2) However, this provision shows that, despite the difference in rank, the jurisdiction being exercised by Master and Judge is the same: on reference to the judge, the judge decides the point as a judge of first instance, not second.

In the present case, the Claimants maintain that the insurance arrangements are communications between the parties to them, which reflect legal advice, and which are in any event directly related to the conduct of this litigation, and which were made exclusively for that purpose. In my judgment, it cannot be said that the communications in the negotiation and drafting of this policy and the final agreed policy were not brought into existence for the dominant purpose conducting litigation and also that the same are likely to reflect legal advice given us to prospects and tactics. It seems to me that the dicta in the paragraphs in the judgment of Aikens J as he then was, in the case of Winterhur Swiss Insurance v AG (Manchester) Ltd [2006] EWCH 839 (Comm) in this case, support the view that the Claimants are entitled to claim privilege for the policy. In my judgment, the production of the policy cannot be compelled.

In Barr v Biffa Waste, the assertion of privilege having failed, production of an ATE policy was required. Mr Layton identified the ratio of this decision. It is that the ATE policy was subject to disclosure as it had been referred to in two witness statements. The judge therefore held that, absent privilege, CPR 31.14 made provision for disclosure. See [31]-[36] & [50]-[53]. However, in the present case, there is no question of CPR 31.14 applying, and the Defendant does not rely on it. Therefore, the Defendant must ultimately rely on passages in Barr which are obiter. In the course of reaching his conclusion on CPR 31.14, Coulson J held that the ATE policy was a relevant document. However, as Mr Layton points out:

In deciding whether a document is relevant for CPR 31.14 purposes, relevance must have its ordinary meaning within CPR 31 It must be relevant to the issues which the court must decide in the substantive proceedings. Coulson J did not have to consider why the ATE policy would be relevant in this sense as it appears that relevance was conceded - see [37] & [40]-[41],

For the reasons stated above, an ATE policy is not relevant in the CPR 31 sense, and in this case the Defendant does not contend that it is.

I agree with Mr Layton’s submission that Coulson J’s distinction, on this question, of the judgment of David Steel J in the West London Pipeline case is a difficult one. It seems to me that the learned judge accepts that funding from liability insurance would be irrelevant, but says that ATE insurance is different as it allows a Claimant to pursue a claim which would otherwise be impossible (see [44]). However, in fact it was Total’s argument before Steel J that TAV’s assets amounted to only £1500 and that both its ability to contest the litigation and its ability to pay any damages depended on its liability insurance so it is difficult to see how in this respect the insurance in West London was not insurance that allowed a Claimant to pursue a claim which would otherwise be impossible. Even if it was the case, this does not explain why ATE insurance is relevant within the meaning of CPR 31. Moreover (i) Claimants can and often do pursue claims without the benefit of ATE insurance; (ii) in many cases, the existence of liability insurance will be just as fundamental, or even more fundamental, than the existence of ATE insurance in determining whether litigation is viable.

One is drawn inevitably to the conclusion that if the question of whether an opponent can meet either a judgment or an adverse costs order is relevant so as to be subject to disclosure, then, this decision does not explain why a parties’ private financial or at least its insurance be it BTE ATE or liability, arrangements could not be subject to disclosure in every case. It seems to me that the learned judge did not have the benefit as I have had from both learned counsel of a full exposition of the relevant provisions of the CPR. There is discussion of CPD 19.4, but not of the many other CPR provisions which prevent disclosure of the amount of an additional liability. In para. [48] Coulson J opines that the argument that the disclosure of the amount of the premium could reflect legal advice on the chances of success on the facts of that case is a little far fetched and suggests that, in an appropriate case, he could have compelled the disclosure of the premium. This seems to suggest that relevant material, such as CPD 19.1 and Brooke LJ’s dicta in King v Telegraph Group, cannot have been referred to in any depth.

As I have said, I would only need to address this subject if I had found that I had jurisdiction to order disclosure and that the policy was not the subject of privilege. In case I am wrong in upholding their submissions on those points as I do, the Claimants submit that the application should still fail as a matter of discretion.

As to the Claimants’ objections to disclosure, I refer again to para 15 of Ms Srinivasan’s statement [C/8/144]. I fully appreciate that it is impossible for her or Mr Layton fully to articulate the respects in which the Claimants would be disadvantaged by disclosure without exposing the very matters which the Claimants consider confidential. However, in general terms the potentially very sensitive nature of ATE arrangements is set out by me above. For my part I accept that the risk in a claim like this which arises out of unusual circumstances relating to a major engineering project in a foreign country in which the security of the Claimants and of anyone involved in the litigation who has to visit the many sites of these claims is a matter of grave concern, that the terms of ATE insurance are most likely to have been individually negotiated and thus depart from the insurers standard conditions because of the Claimants’ solicitors advice on merits and prospects and on their overall litigation strategy and that to reveal them to the Defendant could inflict a severe tactical blow on the Claimants. In my judgment the Claimants have volunteered disclosure of all of the matters now required by the updated terms of CPD 19. The Defendant has all the material to which it is reasonably entitled. It has not made out any case for special disclosure. Disclosure would prejudice the Claimants. It is now for the Defendant to take a view as to whether it will indeed be able to recover up to £1.8 million in costs or not and if appropriate assume that it will not.

Further, I do not accept the argument that in an application for security for costs the Claimants would have to reveal their ATE policy terms. In the first place it is well established that the court should not exercise its discretion to order security for costs against an individual ordinarily resident outside the Brussels or Lugano Convention areas other than on grounds relating to obstacles to or the increased burden of enforcement of a subsequent order for costs in the context of the particular foreign Claimant or country concerned and that it is discriminatory to take into account the impecuniosity of an individual foreign Claimant. Nasser v United Bank of Kuwait [2002] 1 WLR 1868. In such an application therefore the court would normally only assess the security necessary for the increased costs of enforcement and not for the costs of the action. But even if one were dealing with security for costs of the action on the grounds perhaps of lack or probity on the part of the Claimant or that it would be totally impossible to enforce an order for costs, I still do not agree that I could force the Claimants to produce the terms of their ATE insurance. The position would still be that the rules do not require those terms to be revealed, that the policy is privileged and that it is production could be prejudicial. Such an application for security for costs, if the Claimants were not willing to disclose terms of the policy voluntarily, would have to proceed on the basis that the Claimants have insurance cover for the Defendant’s costs up to a level of £1.8 million. Alternatively if the Defendants could satisfy the court that there was reason to think that the Claimants’ solicitors’ statement to that effect might be inaccurate, the court could proceed on the assumption that there were no assets available for the payment of the Defendant’s costs.

Further, I do not accept the argument that on an application to cap the costs of the action, the court would be in any different position in terms of the power to order the production of the ATE policy and for the same reasons as in respect of an application for security for costs. The court would either have to accept that the Defendant’s costs were covered up to the stated maximum or that no assets existed for the payment of costs. The court’s principal concern in making such an order would, in any event, be to control any substantial risk that without such an order costs would be disproportionately incurred rather than whether the Claimants were in a position to meet any costs order, except insofar as that is relevant to consideration of any substantial imbalance between the financial position of the parties.

Therefore, for the reasons set out above I reject the Defendants application for an order that the Claimants in this case disclose their ATE insurance policy and subject to any argument to contrary when this judgment is handed down I propose to award the costs of the hearing ofthis application to the Claimants.