England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
[2016] EWHC 3340 (Comm)

		Courtroom No. 27 Rolls Building 7 Rolls Building Fetter Lane London EC4A 1NL
		23rd January 2017

MR JUSTICE CRANSTON:

1. This is the hearing of ancillary matters following the handing down of my judgment in late December, [2016] EWHC 3340 (Comm).
2. The first issue relates to costs. For Euro-Asian Mr Swaroop QC contends that the costs should be awarded in Euro-Asian's favour on an indemnity basis. He rests his case in particular on the words of the letter of indemnity. They refer to: 'To protect, indemnify and to hold you [Euro-Asian] harmless from and against any and all damages, costs and expenses (including reasonable attorney fees) which you [Euro-Asian] may suffer by reason of the shipping documents, including the original clean and negotiable bills of lading remaining outstanding or by reason of a breach of the warranties given'. Mr Swaroop underlines in particular the phrase 'all and any'. In reply to an argument advanced by Mr Gruder QC he points to the word 'including' and its expansive effect. The upshot, he submits, is that indemnity costs should be awarded.
3. Mr Swaroop also invokes authority. He relies in particular to Littlestone v Macleish [2016] EWCA Civ 127 [2016] 1 WLR 3289 and quotes paragraph 41 of the judgment of Briggs LJ, which was agreed to by Black and Gloster LJJ. Although in that case the phraseology of the relevant provision of the contract did not include the word "indemnity", Briggs LJ said that it constituted an indemnity and it should be given effect.
4. Mr Swaroop also submits that the provisions in the CPR support his argument on the contractual right to indemnity costs. In that regard he cites the decision Chaplair Limited v Kumari [2015] EWCA Civ 798 and the passages of Arden LJ's judgment at paragraphs 34 and 35, which are supported by the short concurring judgment of Patten LJ. In Mr Swaroop's submission, that authority leads to the conclusion that the court should exercise its powers to award costs under the CPR in accordance with any contractual provisions.
5. In my view, firstly, the authorities Mr Swaroop cites are not on all fours with the current case. Littlestone v McLeish was a case where what was read as an indemnity provision did not contain what I regard as the crucial words 'reasonable attorney's fees'. It simply said, 'All costs and expenses, including legal costs, which may be incurred'. In other words, there was not the limitation as there is in our case as to the nature of attorney's fees which can be awarded. As far as the Chaplair case is concerned, on its facts the right to indemnity costs was clear.
6. In my view Mr Swaroop's submissions fail on the wording of the letter of indemnity itself. First, there is Mr Gruder's point, which I alluded to earlier, that the language does not cover the situation here, being confined to where the shipping documents have remained outstanding or by reason of a breach of the warranties given or something like this. I need reach no final conclusion about this argument because the crucial point, as I have said, is that the language expressly provides the limitation to reasonable attorney's fees. In this case indemnity costs cannot be regarded as reasonable.
7. To my mind, CPR 44.5 makes clear that where the court does assess costs payable under a contract the costs are payable under those terms unless the contract expressly provides otherwise. As a result of the phrase 'reasonable attorney's fees', I take the view that the contract does not provide for indemnity costs because they would not be reasonable. Consequently, Euro-Asian's contractual right to costs and its right under the Rules to costs are confined to costs on a standard basis.
8. Mr Swaroop next contended that indemnity costs should also flow from the Part 36 offer which Euro-Asian made in July of 2014. That offer was $15 million. As a result of my judgment Euro-Asian did somewhat better.
9. Previous CPR Rule 36.14 and current Rule 36.17 provide that the court should take into account the circumstances of the case, including the stage at which the proceedings are when the Part 36 offer is make and also the information available to the parties at the time.
10. Mr Swaroop submitted that it was quite clear that Credit Suisse knew full well what was going on. It did not have disclosure at that stage, but it would not have assisted if it had, given the case that it was advancing. That case made no commercial sense. In any event, he contended, Credit Suisse could have accepted the offer later; it was not an all or nothing situation.
11. To my mind, the refusal of Credit Suisse to accept the Part 36 offer made sense not only at the time but also subsequently. Credit Suisse was not directly involved, as I have described in the judgment, in the dealings between Abilo and Euro-Asian. At the stage when the Part 36 offer was made in mid-2014, there was no disclosure about the details of those dealings. Notwithstanding the comments of Field J at the time of the summary judgment application, Credit Suisse was remote from those dealings. Indeed it would seem for some considerable time it suspected that both Abilo and Euro-Asian were, as it were, in it together, not least after the disclosure in 2015 of the commission payments received by Mr Michailov and Mr Duman as described in the judgment.
12. To my mind, it would be unjust to conclude that Credit Suisse should have accepted the Part 36 offer at the time, or even some considerable time after it was made.
13. As far as Mr Swaroop's submissions on the failure to mediate are concerned, the points I have made in relation to the Part 36 offer have added force. Both parties, both Euro-Asian and Credit Suisse, clearly had different points of view about the reality of the Euro-Asian/Abilo dealings. In those circumstances it was not unreasonable for Credit Suisse to decline to undertake ADR.
14. Therefore, as I have said, costs are to be on a standard basis. It is common ground that that requires Credit Suisse to pay costs which are common as to its case and Abilo's case.
15. To my mind the issues which are presently reserved are best dealt with as costs in the case.
16. Given that I have decided that the costs are to be awarded on a standard basis there is no need for me to address the issue of the costs of the proceedings taken in Switzerland, which I have described in the judgment.
17. Let me turn to Mr Gruder's submission that Euro-Asian should only obtain 65 percent of its costs. In advancing that argument he relies very heavily on the conduct of Mr Michailov and Mr Duman in particular the commissions they received. As I said in the judgment, Mr Michailov and Mr Duman were not frank about these payments in the course of the litigation. Until Mr Igniska produced the commission schedule, they had not disclosed that very important information. Mr Gruder submits that I should mark my disapproval of the way they suppressed the truth by a substantial discount in the costs payable. He adds the point that, on my findings in the judgment, at least from March 2010, Euro-Asian condoned the carousel in the sense that it had knowledge of it and allowed it to run, hoping of course, to use the terminology used by the parties, that at some point the circle would be closed.
18. I can only go a certain way with Mr Gruder as regards these submissions. This was complex commercial litigation. There were many issues involved and the commission payments, while important, were only part of the picture. At the end of the day, Euro-Asian succeeded in its claim, as regards Credit Suisse in full. I was troubled by the behaviour of Mr Michailov and Mr Duman. I am also conscious of the additional work that their behaviour generated in the litigation and also at the trial itself. To my mind, there should be a discount, but that should not be as great as Mr Gruder suggests. Euro-Asian should receive 90 percent of its costs.
19. There is no need for me to deal with the issue of the CFA, which will be dealt with by the costs judge.
20. Payment on account: Mr Swaroop seeks payment of £1.25 million on account. He submits that that figure is just under 60 percent of the total amount of costs being sought, which in total are over £2.1 million. By contrast, Mr Gruder contends that the £2.1 million figure is inflated because it involves the uplift of 30 percent as a result of the CFA. In his written submissions he also makes criticisms of what he describes as a staggering 2,540-odd hours spent by Euro-Asian's solicitors on the case.
21. It seems to me that payment on account should be higher than the figure that Mr Gruder has suggested, but certainly should not be Mr Swaroop's £1.25 million. In my view, an appropriate figure for payment on account is £850,000.
22. That leaves interest. It follows from my earlier finding that interest throughout, up until judgment, should be 2 percent. Post-judgment, Mr Swaroop contended that uncertainty in the markets might mean interest rates payable of up to 8 percent in the future. To my mind, the appropriate rate is 2 percent, given what one can gather about the future financial situation, and given the evidence about the rate at which Euro Asian borrows.
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