Jersey Unreported Judgments

Companies: costs judgment

[2012]JRC030

Royal Court

(Samedi)

7 February 2012

IN THE MATTER OF 3B HOLDINGS LIMITED

AND IN THE MATTER OF ARRTICLE 155 OF THE COMPANIES (JERSEY0 LAW 1991 (AS AMENDED)

Roger William Bisson was present in person.

Glenvil William Bisson was present in person.

Bissons Limited was represented by Roger William Bisson as a director.

Advocate D. P. Le Maistre for the First, Second and Third Defendants.

judgment

the commissioner:

1.        The Representors and the Second and Third Respondents both applied for costs arising out of the representation of the Representors which was dismissed for the reasons set out in the Court's judgment of 23^rd January, 2012, (JRC021).  I will use the same definitions as in that judgment, which will need to be read in conjunction with this short judgment on costs. 

2.        In the representation, the Representors sought, unsuccessfully, to have the joint liquidators removed from office.  The joint liquidators therefore seek their costs from the Representors, jointly and severally on the indemnity basis.  The Representors, in turn, seek their costs from the joint liquidators personally and jointly and severally on the standard basis.  I will take first the joint liquidators' application. 

3.        I have had regard to the general principles laid down in Watkins and another-v-Egglishaw and Others [2002] JLR 1, namely that the overriding objective in considering costs is to do justice between the parties and that objective was fulfilled by making an order for costs in favour of the winning party, where a winner was readily apparent.  It was, however, a mistake to try to label one party as the winner when the complexity or other circumstances of the litigation did not lend themselves to such an analysis.  Mr Le Maistre submitted that it was readily apparent from the Court's judgment that the joint liquidators were the winners.  Costs should, therefore, follow the event.  In terms of indemnity costs, he referred me to Pell Frischmann Engineering Limited-v-Bow Valley Iran Limited & Others [2007] JLR 479 where Page, Commissioner, said this:-

"...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 ... 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."  [emphasis added]

4.        Whatever views one may take of the appeals by the Representors to the Commissioners and their application for judicial review, the fact of the matter is that by the Autumn of 2010, the issue of GST had been settled on the basis proposed by the Representors.  3B had approximately £53,000 in cash (and no other assets) and was being wound up by professional liquidators who would be charging for their services.  It was manifestly in the interest of the general body of creditors for the company to be wound up then (if not earlier) so that a dividend to the unsecured creditors could be paid.  However, the Representors embarked upon the application to remove the joint liquidators despite the best efforts of Mr Pirie to dissuade them from doing so and clear warnings as to the consequences.  Quoting from parts of his letter to Roger Bisson of 5^th October, 2010:-

"Thank you for your letter of 1st October enclosing a draft Representation.  I have given careful consideration to both documents, and have discussed them with the Joint Liquidators. 

...

I have to say that in my opinion it is therefore very unlikely indeed that the Royal Court will feel that it is in the best interests of the creditors and shareholders of 3B for the liquidators to be changed at such a late stage, given the very significant costs that will be incurred in any new liquidator/s acquainting themselves with all that has gone before.  The duties of the Joint Liquidators are to the creditors and shareholders of the company as well as to the Court, so because they believe that a change of liquidators will be contrary to the best interests of the shareholders and creditors as a whole they will oppose your Representation.  

The Joint Liquidators' position is that in the event that you issue the Representation and they are forced to incur costs opposing it, then in the event of its dismissal - which I believe is by far the most likely outcome - they will seek an Order that the Representors pay their costs and that this will be on a full indemnity basis on the ground that the Representation is without merit, is vexatious, or otherwise amounts to abuse of the process of the Court. 

I anticipate that if you are to proceed to issue the Representation the Royal Court will order that all parties interested in the liquidation be convened as parties and be given the opportunity to be heard, that is all of the creditors and shareholders as well as the Joint Liquidators.  Whilst I cannot speak for them and this firm does not act for any of them in this matter, I anticipate that any other creditors and shareholders who incur costs in opposing the Representation would also seek Orders that their costs be paid by the Representors.  I note that you seek an order in prayer 3 in respect of the risk of costs, but please be in no doubt that the Representors will be taking by far the greater risk on costs if they decide to issue the Representation. 

...

With regard to the numbered items set out on the first page of your letter:-

...

...

3.        The Joint Liquidators are not prepared to resign as they do not accept the allegations made against them and they believe it is contrary to the best interests of the creditors and the shareholders for there to be a change of liquidators at such a late stage. 

4.        It follows from the answer to 3 above that the Joint Liquidators are not prepared to agree to the appointment of another liquidator. 

...

...

I trust that in the light of the above you will have the good sense not to proceed with your Representation, but if you do so then I confirm, as requested, that I am instructed to oppose it on behalf of the Joint Liquidators and in the event that it is dismissed then to seek an order for costs against the Representors, jointly and severally, on a full indemnity basis. 

..."

5.        Furthermore, Mr Pirie requested to meet with Roger Bisson, which he did on 12^th October, 2010, and procured an affidavit from Adrian Rabet addressing the central concern of the Representors (see paragraph 48 of the judgment) and this to no avail.  

6.        As Mr Le Maistre points out, the Court rejected the central allegation of the Representors, namely that the Comptroller had fraudulently attempted to recover from Bissons Limited GST due by 3B and that the joint liquidators either colluded with the Comptroller in that fraud or were sympathetic to it, finding that there were no grounds for the removal of the joint liquidators. 

7.        I agree with Mr Le Maistre that there are some similarities between the facts of this case and the facts of the Pell Frischmann case.  In that case, the plaintiff made large-scale conspiracy allegations, together with allegations of intent to harm and malicious falsehood and, as a result, costs were driven well out of proportion.  The Commissioner, in his costs judgment in that case, noted (at paragraph 29) the intensity and vehemence of the allegations against the corporate entities and individuals, coupled with the wilful blindness of the plaintiff of its own shortcomings, and the fact that it had only itself to blame for its loss.  At paragraph 30 the Commissioner noted that the litigation was not brought or pursued in bad faith but was, rather, a wholesale loss of judgment on the part of the plaintiff, 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 would have led to a recognition that the allegations of conspiracy, malicious falsehood, etc. were unsustainable.  

8.        The Commissioner in that case considered that it was difficult to see why the defendant should be left carrying a substantial portion of the costs of defending the claims and allegations.  In addition, the Court noted at paragraph 29 of its judgment that the individual witnesses had had to come to Jersey to defend their personal reputations, years after the events in question.  Indemnity costs were awarded against the plaintiff. 

9.        The respondents were not legally represented but there was no reason that I am aware of preventing such representation.  They relied on Roger Bisson, who had legal training (see paragraph 5 of the judgment) but even allowing for this, Mr Le Maistre submitted that their conduct throughout the case had been plainly unreasonable.  Amongst other things, he said they attempted (unsuccessfully) to convene both the Comptroller and Begbies Traynor; they made numerous applications for disclosure and specific discovery; they argued (unsuccessfully) that 3B ought to be separately represented; they argued (unsuccessfully) that the Joint Liquidators had waived privilege (by instructing the same counsel as retained by 3B) and they (unsuccessfully) sought an adjournment of the trial on the eve of trial.  All of these matters have caused the joint liquidators to incur additional significant costs. 

10.      Furthermore, he said they had sought the removal of the joint liquidators with the motivation of the protection of their own interests and not with the interests of the general body of creditors in mind (see paragraph 113 of the judgment) and had brought the application to remove the joint liquidators without being able to put forward any replacement and in the knowledge that in view of the cash position of 3B there was no prospect of any replacement being found.  Mr Le Maistre submitted that they had offered no sensible proposals as to how matters could be progressed in the event that they were successful in their application. 

11.      Roger Bisson took me through a lengthy chronology to demonstrate how aggrieved the Representors were by the whole process.  This is not a case, he said, in which the joint liquidators could be labelled as the winners.  There were a complex web of relationships and "external forces were clearly having an effect on the behaviour of every person involved in the case".  He reiterated his complaints about discovery and complained of the heavy burden placed upon the Representors by the process which they felt had become a high stakes poker game.  In his view, the Representors had been even-handed throughout and had wanted to settle at every opportunity.  They were, of course, the protagonists in the matter and I saw no evidence of any attempt on their part to extract themselves from the proceedings after they had been commenced. 

12.      Glenvil Bisson told me that in his view the Representors had been handicapped by his son's lack of courtroom experience.  He also complained of the number of hats he was wearing, namely as landlord, as a creditor and as (through Bissons Limited) a third party contractor.  I found these assertions surprising.  Glenvil Bisson is a very experienced businessman and a man of substance; there was no impediment to his obtaining legal representation and the Court, at paragraph 73 of its judgment, expressed regret that he had not done so.  He informed me that the Representors had no choice but to issue the representation.  I do not accept that.  They did indeed have a choice and that was to cooperate with the joint liquidators in finalising the winding up of 3B. 

13.      I have taken into account all the submissions made by the Representors but I have no doubt that for the reasons put forward by Mr Le Maistre, the conduct of the Representors has been quite out of the ordinary and unreasonable.  Furthermore, and independently of that assessment, to the extent that the joint liquidators have had recourse to the funds of 3B to defend these proceedings, it would be inequitable for the general body of creditors to suffer financially from the Representors' unreasonable conduct.  Therefore I conclude that the Representors should pay the costs of the proceedings on the indemnity basis. 

14.      Two further points arise.  Firstly Mr Le Maistre sought an order that the Representors should pay the professional fees of the joint liquidators but did not produce any authority to support such an order.  Article 2(1) of the Civil Proceedings (Jersey) Law 1956 empowers the Court to make an order for "the costs of and incidental to all proceedings" and I am not prepared to go beyond that without being addressed on the authorities.  Under the order I will make as set out below it will be a matter for the Judicial Greffier to determine on taxation the extent to which the joint liquidators can claim for their professional fees or time but to the extent that their fees on this matter have been properly charged to 3B (see paragraph 52 of the Judgement) then it seems to me that 3B would be entitled to claim those costs as being of and incidental to the representation.  For that reason and in the interests of the general body of the creditors it is fair in my view that the benefit of the costs order should extend to 3B. 

15.      Secondly Mr Le Maistre sought an order that costs should be ordered from as early as 1^st June, 2009, when the intentions of the Comptroller in relation to the GST had been made clear to the Representors.  He put forward a number of alternative dates but in my view, I can only order costs to be payable of and incidental to these proceedings.  That would be from the first date upon which the Representors formally notified the joint liquidators of their intention to bring the representation, namely by their letter of 14^th September, 2010. 

16.      I therefore order the Representors jointly and severally to pay the costs of the First, Second and Third respondents of and incidental to the representation on the indemnity basis.  It follows that the application of the Representors for costs is dismissed. 

Authorities

Bisson-v-3B Holdings Limited [2012] JRC 021.

Watkins and another-v-Egglishaw and Others [2002] JLR 1.

Pell Frischmann Engineering Limited-v-Bow Valley Iran Limited & Others [2007] JLR 479.

Civil Proceedings (Jersey) Law 1956.