Jersey Unreported Judgments

[2007]JRC143

royal court

(Samedi Division)

26^th July 2007 

 

Before     :

H. W. B. Page. Esq., Commissioner, sitting alone.

 

Costs Judgment

Advocate J. P. Speck for the Plaintiff.

Advocate N. M. Santos Costa for the First Second and Fourth Defendant.

Third Defendant was not represented.

judgment

the COMMISSIONER:

1.        This judgment is concerned with the matter of costs following decisions of the full Court (Page, Commissioner with Jurats Le Breton and Morgan)

(i)        that Pell Frischmann succeeds on its claims for breach of confidence against the Second Defendant, Bow Valley Energy Limited, and is entitled to recover damages of £500,000 (five hundred thousand pounds sterling) together with interest;

(ii)       that all other claims by Pell Frischmann fail;

(iii)      that Pell Frischmann is, likewise, entitled to judgment in the sum of £500,000 and interest against the First Defendant, Bow Valley Iran Limited and against the Fourth Defendant, Bow Valley International (Jersey) Limited and against the Third Defendant, PT Bakrie Interinvestindo; and

(iv)      that Pell Frischmann is entitled to recover interest on the award of £500,000 at the rate of Base Rate plus 1% from 1^st July 1997 in the case of the Second Defendant and the Third Defendant and from dates as yet to be agreed (or, in the absence of agreement, determined) in the case of the First and Fourth Defendants.

2.        The parties' respective submissions on costs, by Advocate Speck on behalf of Pell Frischmann and by Advocate Santos Costa, were made in part in writing and in part orally at a hearing on Wednesday 11^th July.

3.        In the case of Watkins v Egglishaw [2002] JLR 1, I endeavoured to summarise what I understood to be the guiding principles applicable in the Royal Court in the matter of costs as follows:-

"(a)    The Court's overriding objective in considering costs is, as in everything else, to do justice between the parties.

(b)     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.

(c)     It is a mistake, however, to strain overmuch to try to label one party as the "winner" and one the "loser" when the complexity or other circumstances of the litigation do not readily lend themselves to analysis in these terms.

(d)     The discretion as laid down in art. 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.

(e)     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 case as a whole (Bank of Credit & Commerce International. v. Ali (No. 4), per Lightman J.).  The new Civil Procedure Rules governing 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 all the parties" being one and "whether a party has succeeded on part of his case, even if he has not been wholly successful" [on] another (Civil Procedure Rules, para. 44.3(4)).  To a large extent, however, 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.

(f)      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."  

4.        The basis for point (c) in this summary was the observations of Lord Woolf, M.R. in A.E.I (Lord Woolf M.R. and Mummery and Mantell L.JJ.) concerning the third of the principles enunciated by Nourse L.J. in In re Elgindata (No. 2), that is, that the general rule that costs should follow the event

"does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or a part of his costs".

Commenting on the effect of the new Civil Procedure Rules and this passage in particular, Lord Woolf said

"From April 26^th, 1999 the "follow the event principle" will still play a significant role, but will be a starting point from which a court can readily depart. This is also the position prior to the new Rules coming into force.  The most significant change of emphasis of the new Rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this, the new Rules are reflecting a change of practice which has already started.  It is now clear that too robust an application of the "follow the event principle" encourages litigants to increase the costs of litigation, since it discourages litigants form being selective as to the points they take.  If you recover all your costs as long as you win, you are encouraged to leave no stone unturned in your efforts to do so..................

The "well established practice" on which Nourse L.J. based his third principle is, as I have already indicated, less generally followed than it has been in the past and it is no longer necessary for a party to have acted unreasonably to be deprived of his costs of a particular issue on which he has failed. ...........

The chairman's approach [in A.E.I.] places far too great a significance, in a case where there are a number of issues, in trying to find a party who can be described as the overall winner and then attaching importance to that label."

5.        Mummery L.J. agreed:

"The chairman of the tribunal took the wrong approach. He proceeded on the basis of a self-imposed fetter on the discretion.  He was influenced by the perceived need to find a winner and a loser in a case where the final determination of the tribunal was somewhere between the respective positions adopted by the parties."

6.        So far as taking an "overview" is concerned, I also noted (Watkins v. Egglishaw, at paragraph 15) the observations of Robert Walker J. (as he then was, now Lord Walker of Gestingthorpe) in United Wire Ltd. v. Screen Repair Services (Scotland) Ltd. as to the desirability of adopting a reasonably robust approach and of avoiding, if possible, complicated costs orders that may result in complex and expensive taxation.

7.        Since Watkins v. Egglishaw, the applicable guidelines in matter of costs have been the subject of a number of further decisions of the Court of Appeal in England, including two to which my particular attention was drawn.  The first, Lilian Day v. Philip Day [2006] EWCA Civ 415, is a decision of a court consisting of Ward L.J. and Sir Martin Nourse in the course of which Ward L.J., with whom Sir Martin Nourse agreed, said (at paragraphs 16 and 17):

"We must ask ourselves whether the primary rule applies in this case - the general rule, that is, that the unsuccessful party will ordinarily be ordered to pay the costs of the successful party unless the court thinks otherwise.  The question is, which if any, of these parties did enjoy success in this litigation?  We were referred to a judgment of Lightman J in Bank of Credit and Commerce International SA v. Ali (No. 3) [1999] NLJ 1734 Vol. 149 where he said:  "For the purposes of the CPR, success is not a technical term but a result in real life, and the question as to who has succeeded is a matter for the exercise of common sense.

I would go further and say that in a case like this, the question of who is the unsuccessful party can easily be determined by deciding who has to write the cheque at the end of the case:......".

8.        In the second, and most recent, case, Straker v. Tudor Rose [2007] EWCA Civ 368, Waller L.J., giving the leading judgment (with which Tuckey and Jacob L.JJ. agreed), said (at paragraph 12)

"Having regard to the general rule, the first task must be to decide who is the successful party" and (at paragraph 13) "Where, particularly in a commercial context, the claim is for money, in deciding who is the successful party, I agree with Longmore L.J. when he said in Barnes v. Time Talk (UK) Ltd. [2003] EWCA Civ 402 para. 28 that "the most important thing is to identify the party who is to pay the other".

(No report of Barnes v. Time Talk itself was before the court on the present hearing).

9.        In neither of these cases, Lilian Day and Straker, do Lord Woolf's observations in A.E.I. appear to have been cited, and I venture to suggest that, had they been, it is unlikely that the importance attached to labelling one party as "successful" and the other as "unsuccessful" would have been quite the same: nor, in all, probability, would the equation of "writing the cheque" with "losing" the litigation have been stated in quite such stark terms.  Many cases, no doubt, readily lend themselves to such a classification, but many - including many cases of a commercial nature - do not.   If, on the other hand, these more recent decisions do, indeed, represent a retrenchment from the line adopted by the Court of Appeal in A..E I.  I would respectfully suggest that, so far as the practice of the Royal Court is concerned, the approach described by Lord Woolf is to be preferred.

10.      Mr. Speck invites me to start from the premise that his client Pell Frischmann is clearly the successful party, in as much as it is Bow Valley that now has to write the cheque at the end of the trial of this case.  And if the fact that the litigation has resulted in a money judgment in Pell Frischmann's favour is the measure of overall success, then of course Pell Frischmann is the "successful" party.  But to speak of Pell Frischmann as the "winner" in anything other than this limited sense would be perverse. 

11.      Pell Frischmann's success on its confidential information claim was but one component of a far wider case. Opening his client's case on the first day of the trial Mr. Speck said this:

"Sir, this is a case of commercial fraud, commercial fraud of the very worst kind.  It is a case where Pell Frischmann spent time, effort and money establishing, through it considerable expertise, [a] relationship with the Iranian state-owned oil company NIOC.  Over a period of about two years this culminated in Pell Frischmann acquiring the right to finalise with NIOC a plan to develop an oil field in the Persian Gulf called Balal.  Almost two years after the plaintiff took those first steps, Bow Valley and Bakrie were introduced to it.  They bound themselves to confidentiality and exclusivity, which they abused to the point of intentionally souring Pell Frischmann's relationship with NIOC, sabotaged Pell Frischmann's reputation and filched the contract, the information that Pell Frischmann created and its relationship with its client NIOC."

Closing Pell Frischmann's case on Day 33 Mr. Speck referred back to that description, repeating it more or less verbatim.  The misuse of Pell Frischmann's confidential information was, of course, part and parcel of this overall grievance.  But the dominant theme, from beginning to end - in Pell Frischmann's pleadings, its written and oral submissions and in Dr. Frischmann's evidence - was that Bow Valley and Bakrie had conspired to steal the contract from Pell Frischmann (although, as we have seen in this Court's judgment, when it came to claiming monetary compensation, Pell Frischmann shied away from alleging that, but for the conduct of Bow Valley and Bakrie, Pell Frischmann would have won the contract itself).

12.      This theme had a profound effect on the course, scope, tenor and duration of the whole litigation.  For example:-

(i)        The desire to expose Bow Valley's and Bakrie's conduct for the conspiracy that it was (allegedly), was, quite clearly, the reason for the cursory nature of Pell Frischmann's skeleton argument as exchanged with Bow Valley before the trial began and for Mr. Speck's insistence that there should not be any exchange of witness statements prior to the start of the trial. The intention, quite plainly was to keep as much of Pell Frischmann's powder dry as possible until the trial itself was underway.  The result was that Mr. Speck's opening of the case ran to over five days and much evidence that might conveniently have been made the subject of a prior exchange of affidavits or statements was given live in its totality.  (In the absence of any order to the contrary, Mr. Speck was, of course, entitled to proceed in this way; but in the current context of the appropriate orders to be made as regards costs, these considerations are not without relevance.)

(ii)       The trial lasted 35 days in total, the transcript of which ran to over 5,000 pages.  There was something of the order of 60 lever-arch files of documents (many of which, in the event, were barely touched on) and 17 witnesses. Pell Frischmann's Closing Written Submissions were over 800 pages in length, Bow Valley's some 230.

(iii)      Although conspiracy was said to be the cause of action that most closely fitted Bow Valley and Bakrie's conduct, a considerable catalogue of other claims was also pleaded and pursued: deceit, breach of contract, breach of confidence, unlawful interference with business relations, procuring breaches of contract, malicious falsehood. With the exception of the claim for breach of confidence (or "misuse of confidential information"), all of these, together with the conspiracy allegation, failed.

(iv)      The primary relief claimed was for the amount that Pell Frischmann would have received under the proposed buy-out agreement had it been signed (some US$7.5-10 million), alternatively an account of profits made by Bow Valley from the Balal Contract (alleged to have been at least US$1.5 million, together with 20% of the proceeds of an Initial Public Offering by Bow Valley in September 1997 amounting in value to some C$3.1 million) and/or compensation for wasted expenditure.  But the actual award of £500,000 in Pell Frischmann's favour was, in the overall context of things, not only modest in amount but also reflected success on no more than one limited component of the litigation.

(v)       The allegations of fraudulent intent, dishonesty and conspiracy to injure on the part of Bow Valley and Bakrie were re-iterated relentlessly throughout the proceedings, in the oral and written submissions on behalf of Pell Frischmann, in the evidence of Dr. Frischmann himself and in the cross-examination of Bow Valley witnesses.

(vi)      There can be little doubt that if Pell Frischmann had limited itself to the claim for misuse of confidential information on which it was ultimately successful, the scale of the litigation would have been radically different.    

13.      On this last point, Mr. Costa suggested that, had that happened, the whole issue could have been disposed of in three days - five at most. Mr. Speck submitted, in effect, that this was an absurd proposition; that all Pell Frischmann's heads of claim had their foundation in the same matrix of facts and that that the history of the parties' relationship would still have had to be investigated; that much of the Pell Frischmann's conspiracy case was inextricably bound up with the issue of confidential information and that many of the points taken by Bow Valley in defence were, likewise, of as much relevance to the one  claim as to the others.  And, if a scissors and paste exercise were to be carried out, excising only that evidence and argument advanced in the course of the trial that could not possibly be said to be relevant to the confidential information claim, it might well be that it would produce a result less favourable to Bow Valley than the one that I propose to order.  But to approach the matter on that basis would, as Mr. Costa suggests, be quite wrong.  The fact of the matter is that Pell Frischmann mounted the more elaborate case that it did, and it is hardly surprising that Bow Valley felt obliged to defend it at a level commensurate with the seriousness of the allegations made.  The old quip "Cet animal est tres mechant. Quand on l'attaque, il se defend" comes to mind.  Bow Valley understandably was concerned to protect it reputation in the Canadian oil industry, and the individuals concerned likewise had a legitimate concern to defend their own honour.  Had the claim been confined to the confidential information element, I have no doubt that Mr. Costa is right in his submission that the scale of the litigation and Bow Valley's approach to defending it would have been completely different and of a an altogether more modest order: five days is probably a bit optimistic, but is not far off the mark.  And, as Kay L.J. remarked in the (English) case of Painting v. University of Oxford [2005] EWCA Civ 161: "There are two additional points which seem to me to have called for the affording of considerable weight by the Recorder, whereas the transcript does not suggest that he afforded them any weight at all. The first is the strong likelihood that, but for exaggeration, the claim would have been settled at an early stage and with modest costs".  In the present case, too, there must be a strong probability that a claim by Pell Frischmann limited to the matter of the use of confidential information and promptly pursued would have been compromised long ago.

14.      The second point to which Kay L.J. was referring in the passage cited above was the fact that at no stage did the plaintiff

"manifest any willingness to negotiate or to put forward a counter-proposal to the [defendant's] Part 36 payment.  No one can compel a claimant to take such steps. However, to contest and lose an issue of exaggeration without having made ever a counter-proposal is a matter of some significance in this kind of litigation.  It must not be assumed that beating a Pt 36 payment is conclusive.  It is a factor and will often be conclusive, but one has to have regard to all the circumstances of the case."

Longmore L.J., agreeing, added that the failure of the plaintiff to respond to the offers made by the defendant

"would not have mattered in CPR days but, to my mind, that now matters very much.  Negotiation is supposed to be a two-way street, and a claimant who makes no attempt to negotiate can expect, and should expect, the courts to take that into account when making the appropriate order as to costs."

15.      These observation are relied on by Mr. Costa in the present case because, as I have now been shown, Bow Valley made three successive offers to settle the litigation. The first, contained in a letter from Crill Canavan to Mourant dated 15th July 2005, was an offer "to account to your clients for 100% of the profits that they have or will in the future receive under the terms of the Balal Service Contract" together with Pell Frischmann's taxed costs up until the date of Bow Valley's Answer on 13^th April 2004.  This was rejected by Mourant on the basis that Pell Frischmann's claims were not confined to loss of profits and that it was unreasonable to expect them to elect between an account of profits and other alternative claims for damages or other forms of compensation before the extent of any profit made by Bow Valley had been fully investigated (it being Bow Valley's contention that it had, in the event, not made any profit at all on the project).  The second offer, in October the same year, was "to settle all litigation issues on the basis of a payment of US$1.25 million inclusive of all your client's costs"; this was not accepted.  The third took the form of a payment into court of £387,500 in November 2005: again this was not accepted.  In the light of award actually made, of £500,000 together with interest at Base Rate plus 1% from 28^th July 1997, Pell Frischmann is entitled to say that it has beaten each of these offers and Mr. Costa does not suggest otherwise (the account of profits offer was, in any event, never one that neatly fitted into the general scheme of costs-protective measures).  But what he does say, on the strength of Painting v. University of Oxford, is that this trio of offers did represent a real attempt to compromise this litigation back in 2005 and to do so, at least in the case of the second and third offers, at a level which, in order of magnitude terms, was not so very far from the eventual award; and that this, therefore, is a factor that this court should take into account in deciding on the extent to which Pell Frischmann should be entitled to recover any costs.

16.      But it appears that there is, in fact, no unanimity at Court of Appeal level in England as to whether it is or is not appropriate for a court to have regard to offers that fall short of the ultimate award when exercising its discretion on costs: see, for example, the observations of Chadwick L.J. in Johnsey Estates v. Secretary of State for the Environment [2001] EWCA Civ 535 at paragraph 32 as to the need for a court to "resist invitations to speculate whether offers to settle litigation which were not in fact made might or might not have been accepted if they had been made" and, most recently, remarks to similar effect by Waller L.J. in Straker v. Tudor Rose [2007] EWCA Civ 368 at para 36, with which the other members of the court, Tuckey and Jacob L.JJ. concurred.

17.      It is, however, unnecessary for me to resolve these differences of practice in the English courts: as Birt, Deputy Bailiff pointed out in Luce v. Manning [2004] JLR 64, "In England, under the old Rules of the Supreme Court, the court was obliged to award a plaintiff, who accepted a payment-in, his costs up to the date of acceptance. In Jersey, there is a discretion."  Similarly, there must be a discretion whether or not to allow a plaintiff who "beats" a payment-in his costs, and on that basis it would appear to be open to a judge sitting in this court to take account of the sort of considerations mentioned by Kay and Longmore L.JJ. in Painting if it were thought appropriate to do so. That said, it is important also to note the caveat expressed by the learned Deputy Bailiff:

"Nevertheless, it is important, if the underlying purpose of payments in is to be met, that the parties should know where they stand and that the normal consequences as to costs should generally follow......There is good sense in these general rules as they exert pressure on both sides to be reasonable when deciding respectively whether to make or accept a payment-in.  In my judgment, there must be some good reason to depart from the normal policy".

18.      In the present case the dominant factor affecting my discretion is that already discussed: the disproportion between the nature and extent of plaintiff's main claims and the nature and extent of the judgment obtained at the end of the trial. Mr. Speck and Mr. Costa were agreed that, in the event of costs being apportioned between the two sides, it would be impracticable for me to attempt to do so by reference to a detailed analysis of the time spent on the confidential information claim as against time spent on other issues, and that the only practical approach would be for me to make an overall apportionment on a percentage basis.  To my mind, the just apportionment of costs in this case, in principle, would be that Pell Frischmann should recover 20% of its costs, representing its success on the confidential information component, and that Bow Valley should be able to recover 80% of its costs, representing its success in defeating all the other elements of the claim.  All in all, I do not consider that it is appropriate to reduce Pell Frischmann's 20% recovery any further as a result of Bow Valley's various offers of settlement and Pell Frischmann's failure to respond with counter-offers of some kind. This may seem to be an inadequate reward to Bow Valley for what, I accept, were genuine attempts to find a solution short of trial, but taking everything into consideration, I consider the 20:80 apportionment to be fair, subject to one remaining qualification to which I now come. 

19.      If costs are to be apportioned between the parties, then, says Mr. Speck, Bow Valley should in any event be required to bear the costs associated with three specific issues involving expert evidence: the matter of Iranian law raised by Bow Valley by way of double-actionability defence to Pell Frischmann's tort claims;  the matter of international petroleum industry practice; and discovery and the expert accountants' evidence concerning the quantification of Pell Frischmann's loss of profits claim.   On the first of these, I agree with Mr. Speck: it is not just that the issue would have been resolved in Pell Frischmann's favour had that been necessary, but that the whole exercise was an unequal contest and more or less doomed to failure.  It is right, therefore, that Bow Valley should bear the costs of that issue. In the other two cases, I am not persuaded that it is appropriate to make any equivalent order.

20.      That, however, is not the end of the matter: there remains Mr. Costa's submission that Bow Valley should be entitled to recover its costs on an indemnity basis.

21.      The leading Jersey authority is Dixon, Richardson & Reeb Investments Limited v. Jefferson Seal Limited [1998] JLR 47, a decision of the Court of Appeal (Collins, Harman and Southwell JJ.A.). Collins J.A. (with whom the other two members of the Court agreed) took as his starting point the observations of Brandon L.J. and Ormerod L.J. in Preston v. Preston [1982] Fam. 17 to the effect that an award of costs on an indemnity (or "common fund") basis required some "special or unusual feature" or "a particular reason for departing from normal practice". He then referred to two later English decisions which afforded what he described as "powerful additional guidelines as to the manner in which as a matter of principle the exercise of the discretion in question is to be approached".

22.      The first was a decision of Mance J. in Cepheus Shipping Corp. v. Guardian Royal Exchange Assur. PLC [1995] Lloyd's Rep. 647 in which he cited a passage from the judgment of Kerr L.J. in Disney v. Plummer (16 November 1987, Unreported), as follows:

"I do not accept....that indemnity costs are only appropriate if there is some deception or underhand conduct on the part of the losing party, but not if litigation is merely fought bitterly or even unreasonably.  In the latter type of case judges can still exercise their discretion under O.62 r.3(4)(c)".

He also cited a passage from the judgment of Chadwick J. in Marie Claire S.A. v. Harlstone Hosiery Ltd. [1993] F.S.R. 692 where he said

".......the court sets its face against ordering indemnity costs, no matter that the action has been hard fought and has wholly succeeded in rebutting allegations which are found not to have had any basis..........Something closer to an abuse of process of the court is required".

Mance J, then continued:

"In Macmillan v. Bishopsgate (unreported, 1994) Mr. Justice Millett referred to Mr. Justice Chadwick's dictum and to the Court of Appeal's reasoning and decision in Disney v. Plummer and concluded that the two were not inconsistent. The wholly unreasonable 'crusade' mounted by the plaintiff in the latter case in his view certainly bordered on an actual abuse of the process of the Court. He added:

"The power to order taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose.  Litigants who conduct their cases in bad faith, or as a personal vendetta, or in an improper or oppressive manner, or who cause costs to be incurred irrationally or out of all proportion to what is at stake, may also expect to be ordered to pay costs on an indemnity basis if they lose, and to have part of their costs disallowed if they win. Nor are these necessarily the only situations where the jurisdiction may be exercised; the discretion is not to be fenced or circumscribed beyond the requirement that taxation on an indemnity basis must be 'appropriate'" ".

23.      The second authority mentioned by Collins JA (in Jefferson Seal), was that of Munkenbeck & Marshall v. McAlpine [1995], 40 Con. L.R. 30, in which the (English) Court of Appeal approved the observations of Millett J. (as he then was) as set out above.

24.      My attention has also been drawn to three further English authorities. In the first, Petrotrade Inc. v. Texaco Ltd [2002] 1WLR 947 (decided in May 2000, but only later reported as a note to the decision of Ferris J. in John v. Price Waterhouse [2002] 1WLR 953), the claimants cross-appealed against the judge's refusal to award enhanced interest and costs on an indemnity basis after the defendants had failed to beat an offer to settle which the claimants had made pursuant to CPR Pt 36. Commenting on the nature and purpose of indemnity costs, Lord Woolf M.R. (with whom Clarke and Latham L.JJ. agreed) said

"62. However, it would be wrong to regard the rule [that is, rule 36.21 concerning 'Part 36 offers', the equivalent of the old payment of money into court] as producing penal consequences. An order for indemnity costs does not enable a claimant to receive more costs than he has incurred ......

63. The ability of the court to award costs on an indemnity basis and interest at an enhanced rate should not be regarded as penal because orders for costs, even made on an indemnity basis, never actually compensate a claimant for having to come to court to bring proceedings. The very process of being involved in court proceedings inevitably has an impact on a claimant, whether he is a private individual or a multinational corporation. A claimant would be better off had he not become involved in proceedings. Part of the culture of the CPR is to encourage parties to avoid proceedings unless it is unreasonable for them to do otherwise.  In the case of an individual, proceedings necessarily involve inconvenience and frequently involve anxiety and distress. In the case of a corporation, corporation senior officials and other staff inevitably will be diverted from their normal duties as a consequence of the proceedings. The disruption this causes to a corporation is not recoverable under an order for costs.

64. The power to order indemnity costs or higher rate interest is a means of achieving a fairer result for a claimant............. "

Lord Woolf's observations were made in the context of a discussion about the effect of a Part 36 offer and were expressed in terms of fairness to a plaintiff. But they are of equal relevance to a situation such as the present, where a defendant has successfully defeated the main claim against him.

25.      The second case drawn to my attention is another Court of Appeal decision. In the case of Reid Minty v. Taylor [2001] EWCA Civ 1723, [2002] 1WLR 2800, (Ward, May and Kay L.JJ.), May L.J. cited with approval (and a little more fully than I have done) the words of Lord Woolf in Petrotrade, adding

"20. So there we find that an award of costs on an indemnity basis is not intended to be penal and that regard must be had to what in the circumstances is fair and reasonable.

21. - 26..........

27. In my judgment, the judge here was wrong to constrain himself in the way he did.  He was, I think, implicitly guided by pre-CPR authorities which are not apt for the new procedural code in this respect. Under the CPR, it is not, it my view, correct that costs are only awarded on an indemnity basis if there has been some sort of moral lack of probity or conduct deserving moral condemnation on the part of the paying party. The court has a wide discretion under r 44.3 which is not constrained, in my judgment, by the authorities decided under the rules which preceded the introduction of the CPR. The discretion has to be exercised judicially, in all the circumstances, having regard to the matters referred to in r. 44.3(4) and 44.3(5). The discretion as to the amount of costs referred to in rule 44.3(1)(b) includes a discretion to decide whether some or all of the costs awarded should be on a standard or indemnity basis.  Rule 44.4 describes the way in which an assessment on each basis is to operate, but does not prescribe the circumstances in which orders on one or other basis is to be made. 

28.  As the very word "standard" implies, this will be the normal basis of assessment where the circumstances do not justify an award on an indemnity basis. If costs are awarded on an indemnity basis, in many cases there will be some implicit expression of disapproval of the way in which the litigation has been conducted, but I do not think that this will necessarily be so in every case.  What is, however, relevant to the present appeal is that litigation can readily be conducted in a way which is unreasonable and which justifies an award of costs on an indemnity basis, where the conduct could not properly be regarded as lacking moral probity or deserving moral condemnation.

29. - 31 ..........

32. There will be many cases in which, although the defendant asserts a strong case throughout and eventually wins, the court will not regard the claimant's conduct of the litigation as unreasonable and will not be persuaded to award the defendant indemnity costs. There may be others where the conduct of a losing claimant will be regarded in all the circumstances as meriting an order in favour of the defendant of indemnity costs......"

26.      At the risk of oversimplifying matters, the result of these English authorities may be said to be this: that the circumstances in which an award of indemnity costs may, as a matter of discretion, be ordered are less restrictive than they used to be; there must, ex hypothesi, still be something to take the case out of the ordinary, but the range of potentially relevant considerations, as described by Millett J. (later Lord Millett) in Macmillan v Bishopsgate, is considerable and need not involve any finding of a lack of moral probity; the test, in a word, is unreasonableness; the purpose of such an award is to achieve a fairer result for the party in whose favour it is made than would be the case if he were only able to recover costs on the standard basis; in the end it is a question of what would be fair and reasonable in all the circumstances.

27.      Finally, Mr. Costa sought to support his application by reference to the extensive list of considerations enumerated by Tomlinson J. at paragraph 25 of his decision of Three Rivers District Council v. Bank of England [2006] EWHC 816.  That was, on any view, a wholly exceptional case and an unusual one in that the discontinuing plaintiff had already volunteered to pay costs on an indemnity basis.  For the most part the factors listed by the judge reflect the principles to be derived from the other English authorities referred to above (and from one or two others, to which I was not taken in the present case); but in other respects they tend merely to reflect the specific circumstances of that particular litigation.  The reference, at point (6), to the aggressive pursuit of allegations of dishonesty as a factor is, however, one that has no small relevance in the present case.

28.      In this jurisdiction, the Court of Appeal in Jefferson Seal (in 1998) was plainly minded to follow the practice of the English courts as reflected in the cases referred to by Collins, J.A.; and, while Jersey has not adopted anything equivalent to the English Civil Procedure Rules which feature strongly in the post-1998 cases, I can think of no reason why the general approach adopted in those cases should not be followed in the Royal Court and every reason why they should be.  

29.      Turning to the present case, a number of factors take it out of the run-of-the-mill and point strongly in favour of an award of indemnity costs in Bow Valley's favour.

30.      First, as discussed earlier, there is the scale of the unsuccessful conspiracy case (and other allegations of intent to harm and malicious falsehood) mounted against Bow Valley by comparison with the portion of the proceedings on which Pell Frischmann actually succeeded and the actual award made: the resources deployed by Pell Frischmann were very considerable and the result was litigation in which costs on both sides were driven by Pell Frischmann to levels out of all proportion to the only viable point of grievance.  Secondly, there is not just the nature of the case against Bow Valley - extensive allegations of fraud and deceit - in relation to original events (including accusations of the fabrication of documents designed to convey a false air of innocence) - but also the fact that it was repeatedly asserted that the conspiracy was one that was being perpetuated in the litigation itself in order to defeat the ends of justice.  Thirdly, there is the intensity, not to say vehemence on occasion, with which these allegations were pursued against both Bow Valley and Bakrie corporately and against individuals, coupled with wilful blindness, on the part of Pell Frischmann, to its own shortcomings and to the stark truth that it had no one to blame but itself for the loss of the Balal Contract.  Fourthly, there is the fact that the proceedings were suddenly launched some six and a half years after the material events without any intervening complaint or claim ever having been made, let alone any formal letter before action or other attempt to reach an accommodation without recourse to litigation, circumstances for which, as the court found, no really satisfactory explanation was ever forthcoming.  And fifthly, it is only right to have regard to the substantial practical burdens entailed in Bow Valley having to fight a case of this kind in a foreign jurisdiction and for individual witnesses - some of whom were no longer employed by Bow Valley - to have to come and defend their personal reputations, years after the events in question.

31.      This is not, overall, a case of litigation brought and pursued in bad faith or involving a lack of probity as such, but rather one that was the product of a wholesale loss of judgment on the part of Pell Frischmann combined with an irrational conviction of having been wronged on a scale wholly disproportionate to the reality; a readiness to see conspiracy at every turn, when a dispassionate assessment of what happened would have led to the recognition that allegations of conspiracy, malicious falsehood and the like were  unsustainable. The result was litigation pursued, for the greater part, on a scale and in a manner that was wholly unreasonable and oppressive and it is difficult to see why Bow Valley should be left carrying a substantial portion of the costs of defending it.

32.      I accept, as Mr. Speck submitted, that Pell Frischmann has not sought any untoward publicity for the litigation (distinguishing the position in Three Rivers), though Bow Valley's name is well known in the in oil industry and it is improbable that that industry has been unaware of the litigation.  I also accept that Bow Valley's own conduct of its defence has been not been wholly beyond reproach.  The suggestion at one point in the trial that part of the remuneration paid by Pell Frischmann to its Iranian agents and advisers might have been used or intended for use as bribes, and that this was known to Pell Frischmann, was quite wrong given Bow Valley's earlier express disavowal of any intention of pursuing such an allegation; the accusation, though serious, was, however, relatively fleeting.  Several hours of the trial were, however, wasted by Bow Valley in an unsatisfactory attempt to demonstrate bad faith on the part of Dr. Frischmann in his dealings with Mr. Mohandes. And the late suggestion that Pell Frischmann had dishonestly exaggerated the extent to which it had, itself, incurred costs in connection with the project, ended on a somewhat inconclusive note.  On the other hand, Bow Valley's allegations of a lack of good faith and fair dealing on the part of Pell Frischmann in its dealings with Bow Valley (largely in relation to its readiness to conclude deals with Bakrie and with Monument to the exclusion or substantial exclusion of Bow Valley) were made, not unreasonably, by way of riposte to Pell Frischmann's own allegations.  I also accept that Bow Valley's initial discovery was deficient; but there were what appeared to the court to be significant shortcomings and gaps on Pell Frischmann's side, too. 

33.      I have taken due account of these points. However, in the context of the case as a whole, they amount in aggregate to a comparatively modest charge-sheet by comparison with the sustained assault by Pell Frischmann on Bow Valley; an assault that was, incidentally, met throughout the proceedings with restraint and dignity by the Bow Valley witnesses whose integrity was at issue.  

34.      There is a case for allowing Bow Valley to recover the total amount of its awarded costs (that is 80% of its costs other than those of the Iranian law issue) on an indemnity basis and for a while it seemed to me that that would be the appropriate order.  On balance, however, the fair order to my mind is that that basis should apply only from 1^st March 2006 by which point Pell Frischmann had been given every reasonable opportunity to trawl through Bow Valley's records (of which it had by then had very substantial disclosure) and also through the personal diaries of Mr. Blair and Mr. Cummings (including certain passages previously redacted).  By then, at the very latest, it should have been clear that there were, in truth, no "smoking guns" or - to use Mr. Speck's expression - "dynamite documents" and that the conspiracy case was unrealistic.

35.      In making the award that I do I am also satisfied that, while Bow Valley's costs are substantial (put by Mr. Costa at some £1.3 million), they are almost certainly considerably less than those of Pell Frischmann: there is, therefore, little risk that an award on an indemnity basis for the period indicated is going to expose Pell Frischmann to liability on a scale disproportionate to the justice of the case.

36.      For these reasons, the award that I make as regards costs is as follows:-

The Plaintiff's costs of the action

37.      The First, Second and Fourth Defendants (that is, the Bow Valley Defendants) are to pay 100% of the Plaintiff's costs of the Iranian law/double actionability issue on the standard basis.

38.      The First, Second, and Fourth Defendants and the Third Defendant (Bakrie) are to pay 20% of the remainder of the Plaintiff's costs of the action on the standard basis.

The costs of the  action of the First, Second and Fourth Defendants

39.      Such Defendants are to bear their own costs of the Iranian law/double actionability issue.

40.      The Plaintiff is to pay 80% of all other costs of such Defendants

(i)        on the standard basis up until and the end of February 2006;

(ii)       on the indemnity basis thereafter.

Post-judgment costs

41.      The Fourth Defendant is to pay the costs of and in connection with the question whether judgment should also be entered against the Fourth Defendant.

42.      The First, Second and Fourth Defendants are to pay 50% of the Plaintiff's costs of the issue as to the assessment of interest to be awarded on the sum of £500,000 (which has been adjudged to be recoverable by the Plaintiff), on the standard basis.

43.      The Plaintiff is to pay 50% of the costs of the First, Second and Third Defendants on the question of the appropriate orders to be made as regards the costs of the action, on the standard basis.

Miscellaneous

44.      Liberty to all parties to apply (i) for the purposes of clarifying or implementing the above orders, and (ii) making such orders as may be appropriate in relation to monies currently lodged in Court by the Plaintiff as security for costs.

Authorities

Watkins v Egglishaw [2002] JLR 1.

In re Elgindata (No. 2).

Civil Proceedings (Jersey) Law 1956

A.E.I. Rediffusion Music Ltd v. Phonographic Performance Ltd [1999] 1W.L.R. 1507 [1999] 1 All E.R. 299.

Bank of Credit & Commerce International. v Ali (No.4).

Civil Procedure Rules. 

United Wire Ltd. v. Screen Repair Services (Scotland) Ltd.

Lilian Day v. Philip Day [2006] EWCA Civ 415.

Straker v. Tudor Rose [2007] EWCA Civ 368.

Painting v. University of Oxford [2005] EWCA Civ 161.

Johnsey Estates v. Secretary of State for the Environment [2001] EWCA Civ 535 at para 32.

Luce v. Manning [2004] JLR 64.

Dixon, Richardson & Reeb Investments Limited v. Jefferson Seal Limited [1998] JLR 47.

Preston v. Preston [1982] Fam. 17.

Cepheus Shipping Corp. v. Guardian Royal Exchange Assur. PLC [1995] Lloyd's Rep. 647.

Disney v. Plummer (16 November 1987, Unreported).

Marie Claire S.A. v. Harlstone Hosiery Ltd. [1993] F.S.R. 692.

Dixon -v- Jefferson Seal Ltd [1998] JLR N11a Court of Appeal.

Munkenbeck & Marshall v. McAlpine (1995), 40 Con. L.R. 30.

Petrotrade Inc. v. Texaco Ltd [2002] 1WLR 947.

John -v- Price Waterhouse [2002]1 WLR 953.

Reid Minty v. Taylor [2001] EWCA Civ 1723, [2002] 1WLR 2800.

Three Rivers District Council v. Bank of England [2006] EWHC 816.