2002/131

ROYAL COURT

(Samedi Division)

 

15^th July 2002 

 

 

 

 

 

Application by the Defendants for security for costs.

 

 

Advocate R.A. Falle and Advocate J.D. Kelleher  for the Plaintiff;

Advocate AR Binnington for the First and Second Defendants

 

judgment.

 

the COMMISSIONER:

Introduction.

1.        The Defendants seek an order for security for costs against the Plaintiff. This is the first time that any such application has been made in the action.

2.        The action was started in December 1989 but, by consent, was immediately stayed and remained so until 1995.  There also appear to have been other, subsequent, periods of relative dormancy. It was not until February 1997 that an order for reciprocal discovery was made.

3.        The present application was first foreshadowed in January this year, but it was not 26th April 2002 that the supporting affidavit of the Solicitor General, Miss Stephanie Nicolle QC, was served.  Following the service of numerous further affidavits and the exchange of skeleton arguments the application was heard by me on 25th June 2002.

4.        Crown Advocate Alan Binnington appeared on behalf of the Defendants; Advocate John Kelleher and Advocate Richard Falle on behalf of the Plaintiff.

5.        The action, is by any standards, an exceptional one.  The Plaintiff is a limited liability company incorporated in Jersey on 18th January 1989.  Its claim, in short, is that legal title to the foreshore of the coast of Jersey is vested in the Seigneurs of those Fiefs that border the sea and that the area of foreshore appurtenant to the Fief de la Fosse is now the property of the Plaintiff company as a result of having been conveyed to it pursuant to a contract passed before the Royal Court on 27th January 1989.  Although the central issue can be shortly stated, the scope of the action in terms of the sweep of historical events and documents that will require examination is very considerable and, on current estimates, is likely to occupy some three months or so at trial - which is provisionally fixed at the moment to start in February next year. The practical importance of the claim lies principally in the fact that the land in question borders St.Helier and includes some of the principal commercial harbour areas of the Island.  The Plaintiff, if successful in the action and subject to necessary consents, plans to construct an extensive marina complex on part of the land in question.  Other areas have already been developed following the exercise by the States of compulsory powers of purchase.

6.        The Defendants contend that the claim is unfounded, the foreshore of the sea around the coast of Jersey having been owned by the Crown on behalf of the Island since, at latest, 1066AD; alternatively, it is said, such Seigneurial rights as may previously have existed in respect of the foreshore had, by 1945 at latest, been extinguished by long non-user or adverse possession.  They also deny that the Plaintiff company has the necessary legal personality, capacity or power to hold a Fief in the Island of Jersey.

7.        Discovery on both sides has been substantial, but in the case of the Defendants has, according to the Solicitor General's first affidavit, involved a wholly extraordinary and vastly time-consuming trawl through the archives of the States of Jersey and the Office of the Lieutenant-Governor.  Until relatively recently the States of Jersey had no formal archive service and no centralised repository of historic records, with the consequence that documents in numerous locations had to be examined.  It is said that the exercise has been far larger than was anticipated before the discovery process got under way after February 1997, though this is disputed by the Plaintiff.

8.         The Defendants' costs to January 2002 are estimated, on a taxed costs basis, to be some £1,098,000 and from then until the end of trial some £1,290, 000.

The relevant principles

9.        Rule 4/1.(4) of the Royal Court Rules 1992 confers a wide discretion on the Court as regards security, providing simply, as it does, "Any plaintiff may be ordered to give security for costs."  The leading Jersey case on the subject is the Court of Appeal decision in A.E. Smith & Sons Limited v. L'Eau des Iles (Jersey) Limited (1999) JLR 319 CofA.  Southwell JA, giving the judgment of the Court, referred to the principles expounded by Peter Gibson L.J. in the English Court of Appeal case of Keary Developments Limited v. Tarmac Construction Limited [1995] 3 All.ER.534 at 539 to 542, and said: "For the purpose of the present application I am content to treat that statement of principles as generally suitable for adoption in Jersey law, while reserving for future consideration some of the details of this statement which may need some reconsideration in the different circumstances in Jersey".   It is unnecessary to recite those principles (which were also more recently endorsed by the Court of Appeal in England in Kufaan Publishing Limited v. Al-Warak Publishing Limited, (March 1998, unreported).  I adopt Southwell J.A.'s summary at page 322, subject only to two qualifications:

(i)        It would be quite wrong in a case of the complexity and sensitivity of the present one for me, as designated trial judge, to express any view whatever about the merits or demerits of the claim at this stage of the proceedings, other than to say that there appears to me that there is a serious issue to be tried.  Both parties agreed that this was the correct approach.

(ii)       There is a well-established line of authority in Jersey, illustrated by Davest Investments Limited v. Bryant (1982) J.J. 213, to the effect that it is not normal practice for an order for security for costs to be made against a plaintiff resident within the jurisdiction - as the Plaintiff is. It was common ground in the present case that this is so and Dr. Kelleher, not surprisingly, took this as his starting point for resisting the application. I note that Davest was cited in argument in Smith v. L'Eau des Iles, though is not mentioned in the judgment of Southwell J.A.  It may be that it was one of the matters that he had in mind when he spoke of reserving certain matters for further consideration having regard to circumstances in Jersey.  But it cannot, I think, represent anything more than an indication of what might be called 'normal' practice and certainly does not preclude the court from exercising its undoubted, wide discretion to order security where justice so requires, or - as Dr. Kelleher put it in his skeleton argument - "in exceptional circumstances".

 

The arguments

10.      The principal plank on the Defendants' case is that the Plaintiff company, while not exactly a thing of straw, does not appear to be of sufficient substance, in the context of the present case, for it to be likely to be able to meet any substantial order for costs that may be made against it at the end of the trial.  This appears to me to be a fair assessment of the situation on the basis of the available material.  The company has a paid up share capital of £100,000 (there was some doubt about this at one stage, but there turns out to have been a typographical error in the company's most recent annual return); but beyond this little is known of the state of its finances.

11.      Mr. Binnington also submitted, on basis of Miss Nicolle's affidavit evidence,  (i) that the identity of some at least of the company's shareholders was obscured by nominee holdings,  (ii) that the company had been deliberately set up so as to insulate its backers from possible personal liability, and (iii) that the Plaintiff was engaged in pursuing a commercial enterprise: a very different thing from a Seigneur seeking to uphold his claimed birthright.  The first is undoubtedly correct, as indeed is the third (though the Plaintiff contends that there is considerable public support for its development proposals and that they would be an asset to the Island).  But I am not persuaded, on the material before me, that the second is necessarily so in any different sense from that which applies to every limited liability company.

12.      Dr. Kelleher pointed to the fact that  the Plaintiff had duly satisfied an order for costs made against it in another matter in favour of the States; but the amount in question, some £20,000, is too far removed from the level of costs involved in the present proceedings to offer much comfort to the Defendants here. Mr. Falle, in his second supplemental affidavit, candidly states: "I make no representation on behalf of the Plaintiff in relation to its capacity to meet any order for costs should, in the future, any be made."

13.      Prima facie there are, therefore, powerful factors in favour of security, given the exceptional scale of the litigation and its attendant costs and the level of (possible) exposure of the Defendants should they end up with a substantial costs order in their favour. As it is, there are other important considerations of which account must be taken.

14.      The Plaintiff's objection to any order for security is two-fold, though to some extent the two grounds are related:  First that the application is made far too late in the day and has all the appearance of a merely tactical device. And secondly that the application is contrary to an undertaking or assurance previously given on behalf of the Defendants in an earlier interlocutory hearing in the Royal Court on 21st March 1995 that no application for security would be made.

15.      That earlier hearing arose out of the Plaintiff's objection to Crown Advocate William Bailhache (as he then was) continuing to represent the Defendants following the merger of his firm, Bailhache & Bailhache,  with that of Bois Labesse in September 1994, on the grounds of conflict of interest; one of the Plaintiff's particular concerns being that confidential information about its finances known to the former partners of Bois Labesse would become known more widely within the new firm.  The Defendants - unsuccessfully in the event - sought a declaration that it was entirely proper for Advocate Bailhache to continue to act.

16.      In the course of the hearing, the Solicitor General, Miss Nicolle, made certain statements on the subject of security for costs which are now relied on by the Plaintiff.  The Solicitor General's skeleton argument on that occasion, having argued that the case was not one in which the facts in issue involved sensitive information that needed to be closely guarded, continued:

"The one possible exception to this is information relating to the financial status of the Plaintiff company.  Were the Defendants to learn that the Plaintiff company was in financial difficulty, then an application for security for costs would be considered.  This was made clear to the Plaintiff's Counsel Mr. Birt in a letter dated 30.5.90, by the then Solicitor General, Mr. Terry Sowden Q.C.  But the making of such an application would not depend upon the discovery of information that is already two years old.  In any event the impecuniosity of the Plaintiff company would not be decisive of the application nor even as to the application should be made."

17.      The subject of security had in fact been canvassed by the Defendants with the Plaintiff once in 1990 and again in a fairly leisurely way in correspondence between December 1993 and October 1994.  This second exchange included a letter from Miss Nicolle to Mr. Falle dated 6th April 1994 at a time when it looked as if the long-dormant action would be revived.  In it Miss Nicolle said that the first thing that the States would do would be to apply formally for security for costs:

"Before I would even consider discussing pleadings and procedure I would wish to ensure that the company has furnished adequate security for litigation on a substantial scale".

But, by the time Defendants' application for a declaration concerning Mr. Bailhache came on for hearing on 21st March the following year, there had, evidently, been a change of heart on this point.

18.      It is common ground that in the course of the hearing the Solicitor General said something to the effect that the Defendants did not intend applying for security for costs.  Where the parties differ is as to whether she said "no intention", without qualification, or "no current intention".  Affidavit evidence was filed on both sides, including an affidavit from Advocate Richard Michel who had represented the Plaintiff at the hearing and who exhibited his notes. Miss Nicolle is adamant that she spoke only of "current intention", pointing to a manuscript note on her skeleton argument reading "no current intention to apply.  meeting 29/11/94. decision not to ask".  Mr. Michel is equally certain that the word "current " was not  used, the relevant passage in his note reading:

"No intention to ask for security for costs...........29/11/94. Meeting with P & R.   Decision taken not to seek security for costs.  Defendants wished to see the matter determined: security would only freeze the action.  Not in interests of defendants to have perpetual ? over title.  Relevant facts are maters of public record.  Financial info. is of no relevance or interest to defendants.  It will not inspire them to fight the case.  Security not in their interests."

Apart from the omission of "current", the Solicitor General did not take issue with the content of this note as fairly reflecting what she said at the time (paragraph 22 of her first affidavit). It is not disputed that the mention of a meeting on 29th November 1994 with "P&R" was a reference to a meeting with the Policy and Resources Committee.

19.      Also exhibited to an affidavit from Mr. Falle, who had also been present at the hearing, was a brief manuscript note which said he believed to have been made at the time or shortly thereafter, which includes the words "No security for costs application proposed following an (? Emergency) mtng with RRJ 29.xi.94" (The date at the top of the note "22.xiii.95 suggests that it was made the day after the hearing.  "RRJ" was, according to Mr. Falle, almost certainly a reference to Senator R.R. Jeune, then President of the Policy and Resources Committee).  Following judgment in the Plaintiff's favour on 18th April 1995, Mr. Falle wrote to the directors of the company reporting on the outcome and commenting as follows:

"Thirdly and very important, the Solicitor General sought to purchase a result in the Court by going on record to say that an application for security for costs would not now be brought.  We could not have exacted such a concession except by way of legal proceedings and even if we had lost today's Judgment that concession would have been substantial compensation;  Fourthly....."

20.      To my mind it would be wholly inappropriate for me to attempt, on the strength of affidavit evidence alone, to make any finding on a point of such refinement as whether Counsel did or did not use the word "current" in the course of a hearing that took place seven years ago.  Nor do I think it necessary for the purpose of this application to do so. The essential points for present purposes are:

(i)        With or without the disputed epithet, the statement was plainly one of intention, neither more nor less. In the normal way it is recognised that such statements, while they may raise expectations on the other side, do not guarantee that there will be no subsequent change of mind; and, given the context in which this particular statement was made, it would be quite wrong to characterise it as an "undertaking" or "solemn assurance" by, or in any other sense binding on, the Defendants.  It is not as if the Plaintiff had been actively seeking an assurance on the subject; nor is it as if the Defendants had been successful in their application on the strength of what the Solicitor General said. In view of the concern expressed by Miss Nicolle in her affidavit on this point, I should in particular make it clear that there is no question of any "undertaking" in the sense in which that term is customarily used in legal proceedings having been given by Miss Nicolle, much less any question of any such undertaking having been breached: Dr. Kelleher confirmed that no such suggestion is made.

(ii)       That said, it is plain that this was no casual remark but a carefully considered position adopted by the Defendants at that stage in the belief that it was in their bests interests to do so. There was a risk, as they saw it at that time, that an order for security for costs coupled with a stay of the action pending the provision of security might result in progress of the action being interrupted (or even, one assumes, halted altogether), and that this would have had a blighting effect on the development of reclaimed land on the foreshore known as 'West of Albert' with which the States were anxious to make progress. The Defendants wanted the issue of title resolved so as to remove the element of uncertainty that was acting - or might act - as a deterrent to prospective developers. It was not in the Defendants' interest to have a perpetual question-mark hanging over the matter of title.

(iii)      And, coming as it did at the end of a period of some fifteen months during which the Defendants had maintained the line that security for their costs was essential and would be the subject of a formal application if it could not be agreed, the Solicitor General's statement of the Defendants' intention - even if qualified by the word "current" - might understandably have created an expectation on the part of the Plaintiff that this was the last that would be heard of this particular subject.

Accordingly, this episode, while not operating as a bar to any later application for security, is plainly an important factor affecting the exercise of the Court's discretion.

21.      Mr. Binnington's response to the charge of unjustified departure from the Defendants' earlier stance, was to submit that there had been a material change of circumstances in two important respects. First, he said, the Defendants' concern about the possible blighting effect on the West of Albert development was no longer a matter of concern following the exercise by the States of compulsory powers of purchase and the elimination thereby, for all practical purposes, of the previous concerns about title.  But these powers were exercised, as I understand it, as long ago as 1998:  if the Defendants had really regarded that event as the crucial turning point as regards their ability to seek security, one would have expected an application to have been made shortly thereafter.  As it is, the point does no more than help to explain why the Defendants now take a different view as to where their interests lie.

22.      Secondly, it is said that the process of discovery has turned out to be far more extensive and burdensome than had previously been foreseen, only becoming fully evident subsequent to the hearing in March 1995, and that this has had and will continue to have a major impact on the costs of the litigation.  Only with the completion of discovery, said Mr. Binnington, had it been possible to make a reasonably accurate assessment of costs to the end of trial. Dr. Keleher, largely on the basis of the affidavit evidence of Advocate Falle (who is as familiar with the course of the litigation as anyone), disputed that this was really so, submitting that the scope of historical fact relied on by the Plaintiff - going back to the ninth century - has been known to the Defendants since July 1993 at latest and that there are numerous references in correspondence from Miss Nicolle's predecessor as Solicitor General, Mr. Terence Sowden, to the extensive research that he was undertaking.

23.      I have no doubt that it has long been apparent that litigation of this dispute - if the action had to be fought out - would require an exceptional investment of time and resources on both sides.  But whether there was a full appreciation all along, or at least, by March 1995 of what discovery would entail for the Defendants is another matter and one on which I do not begin to have the material on which to make an informed judgment.  Such things are a matter of fact and degree; and the Defendants are, in any event, much better placed to speak of them than the Plaintiff.  In the circumstances I accept unreservedly the Solicitor General's statement in her affidavit sworn on 14th June this year that she would never, in her most generous estimate, have  anticipated that discovery was going to be on the scale that it has been (paragraph 41) and that the true scope of the task was simply not known at the time of the hearing in March 1995.

24.      This being the case it is not altogether surprising that the Defendants have had further thoughts about the level of their potential costs exposure.

25.      But the fact remains that the application:

(i)        is made for the first time at a relatively late stage in the action: not perhaps 'late' in terms of time and the average case, but 'late' in the context of a case which started in December 1989, which has been on a live footing since 1995, in which (on the basis of paragraph 42 of Miss Nicolle's second affidavit) the great bulk of discovery - 20,000 pieces of paper - had been assembled as long ago as February 2000, and in which the parties are now actively engaged in preparing for trial; 'late' also in terms of the fact that the previously-perceived obstacle to an application for security was removed as long ago as 1998; and

(ii)       is a departure from the position indicated by the Defendants in March 1995 in circumstances where there has been no material change in the Plaintiff's financial circumstances (the only specific eventuality mentioned in the March 1995 hearing as likely to prompt the Defendants to reconsider their position) and represents the second about-turn on the subject of security (given their pre-March 1995 view that security was necessary).

26.      From the Court's point of view it is also unfortunate that notice of the Defendants' intention to make the present application was given without reference to the March 1995 hearing and the earlier history which, on any view, were going to be material to the exercise of the Court's discretion. As it is, it appears to have been only when Mr. Falle objected at a directions hearing on 10th January 2002 that this was contrary to what he understood to have been said at the hearing in March 1995 that the matter began to be researched, and even then it was not until 26th April 2002 that the Defendants' evidence in support of their application, in the form of Miss Nicolle's first affidavit, was eventually served.  (In saying this, I intend no criticism of Mr. Binnington personally or of Miss Nicolle, being - as I am - unaware of the process by which this application came to be made.)

27.      Mr. Binnington submitted that when all is said and done there would be no real injustice in the Plaintiff having to provide security, even at this late stage, or at least no injustice in giving security for future costs.  Plainly, he said, there are parties of substance behind the company - which appears to me to be true. The Plaintiff had, moreover, not adduced any evidence to support a plea that an order for security would in all probability stifle the claim (see, for example, Smith v. L'Eau des Iles and Kufaan v. Al-Warak as to the importance of such evidence); and, while Mr. Falle may have "expressed his delight" at the Solicitor General's statement, there was no evidence that the Plaintiff had relied on what had been said at the March 1995 hearing in any very specific respect or to any serious degree.  Dr. Kelleher, for his part, candidly accepted, in answer to my questions, that he was not arguing that an order for security would have such an effect (assuming, he implied, that the amount was within reasonable limits).  He also accepted that it was difficult to point to any great prejudice that the Plaintiff would suffer as a result of such an order beyond a degree of disruption to its financial planning and diversion of attention and resources from preparation for trial - which the application had already involved to no small degree.

28.      But, as with arguments about estoppel, it is not always easy in retrospect to put one's finger on exactly where the prejudice lies in such situations.  To some extent at least the Plaintiff will have organised its affairs on the - not unfair -assumption that it was not going to be asked to provide security.  Suddenly, the best part of 7 years later, and less than twelve months before trial, an application is made for the first time. It is not altogether surprising that the Plaintiff cries 'foul'.

Conclusion

29.      There can in my view be no question whatever of any order for security being appropriate in respect of costs already incurred by the Defendants.

30.      The only serious issue is whether some element of security should be ordered as regards future costs.  As to this, the scales are less obviously weighted in one party's favour.  But on balance they come down, in my judgment, against the making of any such order. Three factors in particular lead me to this conclusion.

31.      First, blowing 'hot and cold' on the subject of security to the extent that the Defendants have done over the course of this action, while explicable no doubt in terms of their own fluctuating perceptions of what would best serve their interests, is not compatible with the fair conduct of litigation.

32.      Secondly, the lateness of the application. Given, as previously noted, that the task of assembling the bulk of discovery documents had been accomplished by February 2000 (even if additional documents were to emerge later) and that all but a relatively small proportion of the Defendants' costs to January 2002 appear to have been incurred prior to 10th September 2000 (according to the draft bill of costs exhibited to Miss Nicolle's first affidavit), no satisfactory explanation has been given as to why this application could not have been made at least twelve months ago; as it is, it has already been significantly disruptive of the process of preparation for trial and, if granted, would be bound to involve at least some further diversion of time and resources on the part of the Plaintiff.

33.      Thirdly, it seems to me that the robust position taken in March 1995 that the Defendants wanted the issue of title decided and that it was undesirable to have an indefinite question mark hanging over it must still have some validity and is an important consideration. On this basis, coupled with what I have seen of this action so far, the case does not appear to be one of an impecunious plaintiff attempting "to use its inability to pay costs as a means of putting unfair pressure on the more prosperous defendant company"  (to use the words of Southwell J.A. in Smith v. L'Eau des Iles  at 322); though were I, at any later stage, compelled to come to a different conclusion, I might need to reconsider my ruling.

34.      The application will, therefore, be dismissed.  In the event of an order for costs in their favour, the Defendants will have to rely on such assets and other remedies as may be available to them.               

 

Authorities

A.E. Smith & Sons Limited v. L'Eau des Iles (Jersey) Limited (1999) JLR 319 CofA.

Keary Developments Limited v. Tarmac Construction Limited [1995] 3 All.ER.534 at 539 to 542.

Kufaan Publishing Limited v. Al-Warak Publishing Limited, (March 1998) Unreported Judgment of Court of Appeal of England.

Davest Investments Limited v. Bryant (1982) J.J. 213