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Costs information provided for mediation is “pure fact” and can be used on assessment

Confidential mediation: costs were pure facts

Costs information that was provided for the purposes of a confidential mediation could later be used in the assessment of costs, Master Haworth in the Senior Courts Costs Office has decided.

He also ruled as proportionate after-the-event (ATE) insurance premiums of £256,000 where costs were agreed at £218,500 and damages were £400,000.

In Savings Advice Ltd & Anor v EDF Energy Customers Plc [2017] EWHC B1 (Costs) [1], an unsuccessful mediation took place in May 2015. The claim settled in December 2015 when the claimants accepted EDF’s part 36 offers of £200,000 for each claimant plus costs. At that time, the only step taken in the proceedings had been service of statements of case.

The claimants each ran the case with a Pursuit ATE policy from FirstAssist Legal Expenses (now Burford Capital).

The claimant’s own disbursements were insured to a limit of £23,090. Adverse costs and expenses were covered up to £2m. The premium for the first claimant was £181,549, and for the second £74,426, reflecting FirstAssist attributing liability for adverse costs in a 75/25 ratio.

In his witness statements to the court about how the premiums were calculated, Burford’s claims and settlements manager, Philip Burbury, used information that has been supplied by the defendant for the purpose of the mediation, which was confidential, and in ‘without prejudice’ emails. The defendant said this should not be admissible.

Master Haworth ruled, however, that the figures were a matter of pure fact and could be used.

“It seems to me that ‘without prejudice privilege’ exists to protect the disclosure of admissions or concessions made in negotiations, not to protect statements of pure fact…

“It is important to separate out the obligation of confidence from privilege. If the obligation of confidence is broken, it may give rise to a remedy in other proceedings. However, in my judgment it cannot be used to suppress relevant information in an assessment relating to the costs of the substantive claim…

“The whole purpose of the mediation was to achieve a settlement. In those circumstances any costs information given in mediation is and must be admissible in order to work out the consequence of any subsequent settlement. In that sense, in my judgment, costs information in the form of statements of facts can be separated out from documents or other information that comes into the domain of either party for the purposes of negotiating a settlement of the substantive claim.”

The defendant also asked the master to rule that the premiums were disproportionate. As the ATE policies were incepted prior to 1 April 2013, Master Haworth agreed with Master Rowley’s ruling before Christmas in King v Basildon that base costs should not be aggregated with additional liabilities for the purpose of determining proportionality and that the old Lownds proportionality test should apply.

He said the defendant had provided no evidence on any alternative policies or levels of premium, meaning that under the old test, he could not say that £256,000 was disproportionate.

In case he was wrong, Master Haworth also looked at the premiums under the new proportionality test, but resisted the defendant’s urging to follow the Senior Costs Judge’s ruling in BNM, where costs and ATE were aggregated, saying he could distinguish that decision.

Master Haworth said: “In this instance I did not have the luxury of assessing on a line-by-line basis the claimants’ costs. It has been left to me simply to determine the issue of what is recoverable in respect of the ATE premiums. The parties themselves have agreed the costs and I have been provided with no evidence upon the basis of which the agreed sum of £218,500 was arrived at.

“It may be that had I dealt with the detailed assessment of the claimants’ costs, I may have concluded that the sum of £218,500 was in itself disproportionate irrespective of my findings in relation to the ATE premiums. In those circumstances it seems to me that it is difficult if not impossible for me to deal with the issue of proportionality on a piecemeal basis.

“Simply to say that costs of £218,500, agreed by the parties, coupled with a premium of £200,000 in respect of an ATE premium is globally disproportionate, is both unfair and unjust to the receiving party.

“To my mind it smacks of double jeopardy in the sense that the claimant has already agreed his costs, save for the ATE premiums which both parties in the absence of any evidence to the contrary may have considered to be entirely proportionate. That being the case, I do not intend to follow the judgment in BNM.

He went on: “To my mind this was complex commercial litigation. The fact that it settled relatively early in the course of proceedings does not allow me the luxury of using hindsight in determining whether it was appropriate for the claimants to take out the ATE policies they did.”

Master Haworth concluded that applying the new test of proportionality, the ATE premiums were not disproportionate.