2002/45
royal court
(Samedi Division)
25th February 2002
Before: |
J.G.P. Wheeler, Esq., Master of the Royal Court. |
Between |
Michael Adrian Riley |
Plaintiff |
|
|
|
And |
Barry Keith Pickersgill, and David Eldon Le Cornu, together practising as the firm of Pickersgill and Le Cornu. |
Defendant |
Claim by the Plaintiff to recover, as part of the costs awarded to him by the Royal Court, the sum of £23,330 in reimbursement of a legal expenses insurance premium paid by him.
Advocate M.J .Thompson for the Plaintiff.
Advocate A.D. Robinson for the Defendants.
judgment
the MASTER:
1. In June 1998, the Plaintiff brought proceedings against the Defendants by way of Order of Justice. He claimed damages for breach of contract and/or professional negligence from the Defendants, the losses arising from a guarantee which he had given in respect of a lease of premises in Peter Street, St. Helier. The Plaintiff's obligations under the guarantee had been called and he was unable to recover what he had paid out under an indemnity given to him. A more detailed summary of the facts is set out in the judgment of the Royal Court delivered on 26th July, 2001.
2. The matter came on trial before the Royal Court on 10th - 12th July, 2001, and on 26th July, the Royal Court pronounced judgment in the Plaintiff's favour. The decision is embodied in an Act of Court dated 26th July, 2001, and the Royal Court ordered the Defendants to pay damages and interest to the Plaintiff and "the costs of the action on the standard basis".
3. In June, 2000 the Plaintiff took out an insurance policy the purpose of which was to provide cover against the costs which the Plaintiff would have to pay if his claim was unsuccessful. This form of insurance is known as after the event insurance and the premium paid by the Plaintiff was £23,330.
4. In December, 2001 the Plaintiff issued a summons seeking to recover from the Defendants the insurance premium of £23,330. The summons was heard by me on 14th January, 2002, and after hearing argument I reserved my decision until today.
5. At the hearing before me written skeleton arguments were filed by both parties and there was also produced an affidavit sworn on 9th January, 2002, by the Plaintiff. I also received detailed oral submissions from both Mr. Thompson and Mr. Robinson. I am grateful to them both for their assistance in this regard. Before hearing argument on the summons itself, the question was raised as to whether it was appropriate for me to hear the summons or whether it should go before the Royal Court which had delivered judgment in the action. Having considered matters on this point of jurisdiction, I decided to hear the summons. I also agreed to hear full argument from both parties on the issues which it raised.
6. The question of costs in civil proceedings is determined primarily by the Civil Proceedings (Jersey) Law, 1956 ("the 1956 Law"). Article 2(1) of the 1956 Law states as follows:-
"Subject to the provisions of this Part of this Law and to rules of court made under the Royal Court (Jersey) Law, 1948, the costs of and incidental to all proceedings in the Royal Court shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid."
An interpretation of what is meant by "costs" is provided in Article 1 of the 1956 Law which states as follows:-
"In this Part of this Law, the expression "costs" includes recoverable costs and non-recoverable costs ("frais répétables" and "frais non- répétables")."
There is no further assistance in the statute itself as to what is meant by the expression "costs".
7. The general principles to be considered in relation to the 1956 Law have been considered by the Royal Court most recently in the case of Watkins & Another -v- Egglishaw & Others (8th January, 2002) Jersey Unreported; [2002/. The guiding principles are set out in the judgment of H. W. B. Page Esq., Commissioner, at paragraphs 8 to 15. Paragraph 8 of the judgment is in the following terms:-
"The principles that should guide the court in the exercise of its discretion in this area appear to me, therefore, to be as follows, stating them as shortly and simply as possible:
i. The court's overriding objective in considering costs is, as in everything else, to do justice between the parties.
ii. In many cases, that objective will be fulfilled by making an award of costs in favour of the 'winning' party, where a 'winner' is readily apparent. In any event, the 'follow the event' rule can still be a useful starting point.
iii. It is a mistake, however, to strain overmuch to try to label one party as the 'winner' and one as the 'loser' when the complexity or other circumstances of the litigation do not readily lend themselves to analysis in these terms.
iv. The discretion as laid down in Article 2 of the Civil Proceedings (Jersey) Law, 1956 is a wide one and ought not to be treated as fettered by any particular supposed rule or practice other than that the discretion should be exercised judicially and broadly in accordance with the guiding principles referred to in In re Elgindata (No.2) and A.E.I. -v- Phonographic Performance.
v. It is, accordingly open to the court to have regard to any and all considerations that may have any bearing on the overriding objective of doing justice. Its task is to take an overview of the cases as a whole (per Lightman J. in BCCI -v- Ali and Ors. (No.4) (1999) NLJ 1734). The new Civil Procedure Rules governing civil litigation in the English courts provide that the court "must have regard to all the circumstances" and then go on to spell out certain matters that such circumstances include, the "conduct of the parties" being one, and "whether a party has succeeded on part of his case, even if he has not been wholly successful" another (CPR paragraph 44.3); but, to a large extent, the particular matters mentioned do no more than state the obvious and, it is unnecessary to import them verbatim, in any formal way, into the practice of the Royal Court.
vi. It is implicit in this that, even though a party would otherwise be regarded as having been "successful", justice may require that costs should not automatically follow the event."
8. Article 2(1) of the 1956 Law was also considered by the Royal Court in the case of Drake -v- Gouveia & Others (2000) JLR 411. This case turned on the question of a non-party being ordered to pay the costs of a party to an action. In his judgment, the learned Bailiff considered that Article 2(1) should be construed widely enough to enable the Court to order that a non-party should pay costs in appropriate circumstances.
9. In none of the cases to which I was referred has the Royal Court or the Court of Appeal giving detailed consideration as to what it meant by the expression "costs" as referred to in the 1956 Law. In the course of his submissions, Advocate Thompson urged that the proper approach was to take that adopted by the Royal Court in both the Drake and Watkins cases. The overriding object in determining questions of costs was doing justice between the parties. He urged that in this case the proper way to achieve that overriding objective was to order that the insurance premiums be recoverable as part of the Plaintiff's costs in the action.
10. Advocate Robinson, in the course of his submissions, suggested that I was obliged to take a more narrow approach. He said firstly that I should note that the Order of the Royal Court on 26th July was a final order for costs at the conclusion of a trial and this was a fact which could not be ignored. The Act of Court of 26th July required the Defendant to pay to the Plaintiff "the costs of the action on the standard basis". The same words are used in the final sentence of the judgment of Commissioner Hamon delivered on that day. Advocate Robinson urged that my role was to interpret the order made by reference to the express words used by the Royal Court. He contrasted these with the wording used in Article 2(1) of the 1956 Law which conferred on the order payment of "the costs of and incidental to all proceedings in the Royal Court" (emphasis added). In this regard he referred me to the case of The Official Solicitor -v- Clore (1984) JJ 81 where the meaning of that expression was considered by the Court of Appeal. The relevant extract of the Court of Appeal judgment (at page 98) is in the following terms:-
"In Re Gibson(1981) 1 All E.R. 233 to which I have referred, the Vice-Chancellor discusses in great detail and with great care what is the effect of having the words "of and incidental to" in an order and he deals with this under a number of headings. Again I will not take time to read what he says; the most material headings are (2), (3) and (6) which appear on pages 238 to 240 of the report. The substance of it is that the words "incidental to" are words of extension and not restriction and are intended to widen the scope of what would otherwise be within the scope covered by "costs of the action". Where the words "incidental to" occur you extend it. Then he further says this and I think this passage is worth quoting, at the foot of page 238:-
"I think that from the setting in which this provision occurs, it is plain enough that the words 'costs reasonably incurred' refer to 'the costs of and incidental to' the proceedings in question. However reasonably incurred, costs which are neither costs 'of' the proceedings nor costs 'incidental to' them cannot be awarded under the order of costs. It is thus important to identify the proceedings. This involves not only taking the correct stage of the proceedings as it shown by Wright v. Bennett but also determining the nature of those proceedings. Only when it is seen what is being claimed can it be seen what the proceedings are to which the costs relate."
As the Court of Appeal says in the Clore case the words "incidental to" are words of extension and not restriction and are intended to widen the scope of what would otherwise be covered by the words "costs of the action".
11. I am of course bound by the decision of the Court of Appeal whose judgment I accept entirely in any event. I accept, therefore, the submission of Advocate Robinson in this regard. He went on to argue that the insurance premium could not be claimed as part of the costs of the action which expression should be properly be interpreted as meaning the costs of work done or disbursements incurred in furtherance of the action. The premium was not such an expense but was extraneous to the action stemming not from the conduct of it but from a commercial decision taken by the Plaintiff. It was not a cost of the action but rather an expense voluntarily incurred to assist in the funding of it in the event of the claim not succeeding. He went on to contend that in any event even if the words "and incidental to" had been included in the Order of 26th July, it still could not be construed in such a way as to cover this extraneous item of expenditure.
12. Alternatively to his submissions in relation to Article 2(1) of the 1956 Law, Advocate Thompson urged that I could order that the premium be recoverable in the exercise of the inherent jurisdiction of the Court. He argued that a proper application of the general principles relating to costs as described earlier meant that the Court should in the exercise of its inherent jurisdiction order that the premium be recoverable in the interests of promoting justice. He referred me to the case of Eves -v- Hambros Bank (Jersey) Limited (2000) JLR 221. He accepted, however, that the inherent jurisdiction of the Court is circumscribed by the doctrine of necessity (see page 230 of the Eves judgment). In his submissions Advocate Robinson argued that the issue of recovery of the insurance premium was not one in relation to which the Court could call in aid its inherent jurisdiction. In my opinion, that submission is correct and I do not consider that I could exercise the inherent jurisdiction of the Court to make the order requested.
13. In the course of their submissions the parties drew my attention to the background to the introduction of after the event insurance in the United Kingdom. I was referred to the decision of the Court of Appeal in the United Kingdom of 17th July, 2001 in the case of Callery -v- Gray (2001) EWCA Civ 117 in which the Lord Chief Justice, Lord Woolf, examined the history of the matter in some detail. I do not need to cite or refer in detail to this judgment but it does contain useful background information on the whole issue (see for example paragraph 14 onwards of the judgment). It does seem from a consideration of that judgment that the question of after the event insurance in the United Kingdom is inextricably involved with the whole system of conditional fee agreements and the new Civil Procedure Rules. None of these of course apply in Jersey. Recoverability of after the event insurance in the United Kingdom is governed expressly by Article 29 of the Access to Justice Act 1999 which is in the following terms:-
"Recovery of insurance premiums by way of costs
29. Where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in those proceedings, the costs payable to him may, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy."
It seems that prior to the enactment of this provision the recovery of after the event insurance premiums in the United Kingdom was not possible.
14. In the course of the hearing before me a copy of the policy itself in question was produced to me. The total cover is set out in the schedule to the policy and provides a limit of indemnity of £75,000 to cover the costs of both the Plaintiff and the Defendants. The premium paid by the Plaintiff for this cover was £23,330. I was also advised that the costs of the Plaintiff following his success in the main action had been agreed between the parties at approximately £29,500.
15. I have considered very carefully all the arguments and all the material put before me by both parties in this application. I repeat again my gratitude to both Counsel for their invaluable assistance in this regard. Having considered all the arguments put before me I have come to the conclusion that I should refuse the application for recovery of the insurance premium of £23,330 and I so order.
16. The reasons for my decision are in summary as follows:-
I consider that I must consider the application in the context of the order of the Royal Court of 26th July, 2001 which provides that the Defendant shall pay to the Plaintiff "the costs of the action". I do not consider that the after the event insurance premium can be properly regarded as a cost of the action.
The expression "the costs of the action" is narrower in meaning than that which confers upon the Royal Court by virtue of Article 2(1) of the 1956 Law the power to determine by whom and to what extent "the costs of and incidental to all proceedings" are to be paid. The decision of the Court of Appeal in The Official Solicitor -v- Clore shows clearly that the words "and incidental to" are words of extension and not restriction and are intended to widen the scope of what would otherwise be covered by "costs of the action". I cannot apply that wider test. I would say, although it is not necessary for the purposes of my decision, that in my view even if the words "of and incidental to" had appeared in the Order of 26th July, 2001, I do not consider that these would have been sufficient to enable me to order that the premium be recoverable.
Applying the principles applicable to the exercise of the inherent jurisdiction of the Court (as set out in the Eves case) means that I could not order the recovery of the premium in the exercise of that inherent jurisdiction. I do not consider that the "necessity" test would allow me to do this.
After the event insurance in the United Kingdom must be looked at in the overall context of the new Civil Procedure Rules, conditional fee agreements and statutory rights of recovery of insurance premiums. None of those provisions exist in Jersey and, in my view, would require legislation to be introduced. To acknowledge the existence of part of an overall system by ordering the recovery of after the event insurance premiums would, in my view, be wrong in principle and would go far beyond the powers available to the Court.
17. Following my decision, I heard the parties on the question of costs. Having done so, I consider that there are no grounds to justify departing from the generally accepted approach of costs following the event. I therefore ordered that the Plaintiff pay the cost of the Defendants of this application on the standard basis.
Authorities
Civil Proceedings (Jersey) Law, 1956: Articles: 1, 2.
Watkins & Anor-v-Egglishaw & Ors (8th January, 2002) Jersey Unreported; [2002/2].
Drake-v-Gouveia & Anor (2000) JLR 411.
The Official Solicitor-v-Clore (1984) JJ 81.
Callery-v-Gray & Ors (2001) EWCA Civ 117
Access to Justice Act 1999: s.29.