Out-Law / Your Daily Need-To-Know

Arroyo v BP

Out-Law Guide | 02 Jun 2010 | 5:12 pm | 5 min. read

The court had no jurisdiction to order disclosure of the claimants' ATE policy.  In any event, the policy was privileged and disclosure would be likely to prejudice the claimants in the conduct of the litigation.

Pedro Emiro Florez Arroyo and others v BP Exploration Company (Colombia) Limited: Ocensa Pipeline Group Litigation

  • HQ08X00328 

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Facts

A group of Colombian farmers is claiming compensation from BP for environmental damage allegedly caused by the construction of the Ocensa oil pipeline during the late 1990s. 

A group litigation order was granted in September 2008. At a case management conference, BP applied for an order compelling the claimants to disclose details of their after-the-event (ATE) insurance policy.

Under the Access to Justice Act 1999, a successful claimant may recover from the defendant as "additional liabilities" the premium paid for his ATE insurance and the success fee earned by his lawyer under a conditional fee arrangement.

Under rule 44.15 of the Civil Procedure Rules, "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". 

Section 19 of the Costs Practice Direction sets out what information must be provided. In the case of an ATE policy, the party must give the name of the insurer, the date of the policy and the claim to which it relates. It must also state the level of cover and whether the premiums are staged, and if so at what points an increased premium becomes payable.

The claimants complied with these requirements by serving notices of funding informing BP that the level of ATE cover was £1.8 million. But they refused to clarify the conditions and exceptions that might apply, or whether the policy covered 33 individuals whose claims had been struck out.

Disclosure

BP argued that the court had power to order disclosure of the policy under its general case management powers and/or, more specifically, its case management powers in relation to group litigation.

Relying on the High Court decision in Barr v Biffa Waste, BP argued that it was highly likely that the claimants could not have brought the action without the benefit of the ATE cover and so it had a legitimate interest in knowing whether or not it would be likely to be able to recover costs from the claimants.  

Although some standard ATE wordings from the same insurer were available online, it was clear that this was a bespoke policy. Even the standard wordings, however, included exceptions and qualifications, including one that stated the policy would cease automatically as soon as it became reasonably foreseeable that the costs of the litigation could exceed the level of cover.

On this basis, BP said it could not be confident that there would be any cover at all.

In addition, it claimed that because the method of calculating premium remained unclear, it was unable to assess the major component of the costs it might be ordered to pay. This prejudiced its assessment as to how best to conduct the litigation.

The claimants argued that they had disclosed as much as was required by the court rules. The court had no jurisdiction to order disclosure of the policy. In any event, the policy details were irrelevant to the dispute, and/or privileged from disclosure, and/or would cause irremediable prejudice to their case if disclosed.

Judgment

The senior master, sitting in the High Court, agreed with the claimants that he had no jurisdiction and refused to order disclosure. 

He concluded that the policy had no relevance to the substantive issues in dispute and so was not covered by the usual rules on disclosure. The court's case management powers did not create any freestanding power to require disclosure beyond that available under the rules.

Nor did the special disclosure obligation in CPR 44.15 create a general right to be informed of the other side's insurance arrangements.

CPR 44.15 only applied if a party intended to claim the success fee or ATE premium as part of their costs. The aim of the rule was to warn the other side that it may be at risk of an augmented costs claim, but that was as far as it went.

In this case, the claimants had satisfied their obligation to provide information. BP knew as much as it was entitled to know about the additional liability to which it might be exposed. 

The senior master rejected BP's argument that, while the claimants knew BP would be able to meet their costs, BP had no reassurance that the claimants would be able to do the same.

This, he said, merely put BP in exactly the same position as any other defendant facing a claimant of uncertain means. There was no more reason for the claimants to give disclosure of their ATE policy than for any other claimant to disclose the money in its savings account or the funds available from liability insurance.

If he was wrong on the jurisdiction point, the senior master was satisfied that this policy was subject to legal advice privilege because it had been individually negotiated and so its terms would reflect the legal advice given and the views formed by the claimant's lawyers and insurers as to the risk of the litigation. Equally, it was subject to litigation privilege because it had come into existence for the purpose of supporting litigation.

But, even if all the other arguments had failed, the senior master said that, as a matter of discretion, he would not have ordered disclosure. There was a real risk that disclosure would inflict a severe tactical blow on the claimants because the bespoke terms of the policy would reveal the advice given on the merits of the action.

Commentary

The senior master, sitting in the High Court, was not bound by the judge's decision in Barr v Biffa Waste and disagreed with him on almost every point.

In Barr v Biffa Waste, the judge held that the claimants' ATE policy in a group litigation action was disclosable and the court had jurisdiction to make the order under its case management powers. He found that the policy was relevant to the litigation because, without it, there would have been no litigation at all.

He also concluded that the policy was not privileged (except possibly as to the amount of premium) as it did not contain legal advice, and it was not a communication between the claimants' solicitors and the claimants or third parties.

The senior master in this case did, however, suggest that his decision on privilege might have been different had this not been a bespoke policy whose terms were likely to take into account specific litigation risk factors.

"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."

But until the matter is decided by a higher court, the wider question of whether the court can order disclosure of an ATE policy in certain situations remains unresolved.