Before : |
D. R. N. Hunt, Q.C., Commissioner, and Jurats Fisher and Olsen. |
IN THE MATTER OF AN APPLICATION PURSUANT TO ARTICLE 155 OF THE COMPANIES (JERSEY) LAW 1991
AND IN THE MATTER OF ANTHONY INVESTMENTS (ESPLANADE) LIMITED (THE COMPANY) AND JCN INVESTMENTS (JERSEY) LIMITED AND EVREUX HOLDINGS LIMITED.
Advocate S. J. Young for the Representor.
Advocate F. B. Robertson for the Trustees.
Advocate M. P. Renouf for Simon and Aida Neal.
Advocates R. O. B. Gardner and A. D. Robinson for the Liquidators.
judgment
the commissioner:
1. On 12th November, 2013, the Court delivered its reasoned judgment for having made on 9th October an order for the winding up of (using the same abbreviations as in the judgment), AI(E), EHL and JCN ("the three Companies"). This is the Court's ruling on the various applications for costs made following the delivery of our judgment. As with previous rulings in this matter and as with the judgment itself, this ruling is presently private and available only to the parties to the three Representations, and to the Liquidators. The parties and the Liquidators were represented by the same advocates as at the main hearing in October.
2. The applications for costs were, in summary, as follows.
(i) The Representors applied for:-
(a) their costs of and incidental to:-
(1) the Intervenors' application; and
(2) the Article 155 application
to be costs in the liquidations on an indemnity basis, to be taxed if not agreed; and
(b) their costs of and incidental to the Intervenors' written submissions after the hearing to be paid to the Companies by the Intervenors on an indemnity basis, to be taxed if not agreed.
(ii) The Trustee applied for its costs of and incidental to the Article 155 application to be costs in the liquidations on an indemnity basis, to be taxed if not agreed.
(iii) The Intervenors applied for their costs:-
(a) of their application to intervene;
(b) of the Article 155 application; and
(c) in respect of their letter to the Court of 11 October,
to be costs in the liquidations, to be taxed if not agreed.
(iv) The Liquidators applied for their fees and expenses of and incidental to the Representations and in relation to insolvency advice to the Companies prior to the winding-up to be expenses of the winding-up.
It was common ground between the parties that the question of the costs associated with the Intervenors' application for an extension of time to seek leave to appeal against the interim orders of the Royal Court dated 20th September, 2013, was not for decision on this occasion.
3. It was not in dispute between the advocates that the relevant principles were as set out in para.7 of the judgment of Mr Commissioner Page in Watkins v Egglishaw [2002] JLR 1, which reads:
"The principles that should guide the court in the court in the exercise of its discretion in this area appear to me, therefore, to be as follows, stating them as shortly and as simply as possible:
(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 as 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 Ltd. (No.2) [1992] 1 W.L.R. 1397 and A.E.I. v. Phonographic Performance [1999] 1 WLR 1507.
(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 Intl. v. Ali (No. 4) (1999), 149 New L.J. 1734, per Lightman J.). 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 onto 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" 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."
In terms of Mr Commissioner Page's factor 8, an important circumstance is that this litigation arose out of an application to wind up the three Companies.
4. I now take each application in turn.
5. The Representors' main application, for their costs of and incidental to the Intervenors' application and the Article 155 application itself to be costs in the liquidations on an indemnity basis (to be taxed if not agreed), was not opposed by either the Trustee or the Liquidators; indeed the Liquidators agreed to such an order. The Intervenors' principal objection was to the Representors' claim for indemnity costs; Advocate Hanson contended that the Representors should get their costs only on the standard basis. However he also argued that:-
(i) that the Representors' opposition to the Intervenors' application was so excessive as to be unreasonable, so that they should not be entitled to recover their costs of such opposition; and
(ii) that in the context of the Article 155 application, the Court should take account of the fact that the Representors abandoned the deadlock ground.
6. Taking first the matter of the intervention, Advocate Young submitted that the Court should adopt a holistic approach and consider both the application to intervene and the outcome of the intervention as a single whole, rather than try to deal those two elements separately. Thus, although the Representors' opposition to Simon and Aida's application to intervene did not find favour with Court, when it came to the substantive Art.155 application the approach which the Intervenors' espoused failed. I agree with that submission; it would be unrealistic to decouple the application to intervene from the outcome of the substantive application. I also reject the Intervenors' complaint that the degree of the Representors' opposition to the application to intervene was excessive and such that the Representors should be deprived of their costs in this respect.
7. Turning to the substantive application, Advocate Young indicated during the intervention application that the Representors did not intend to pursue the deadlock point when it came to the Art.155 application. In those circumstances it would be wrong, in my view, to make any deduction in costs (which in any event would be very small indeed) for the fact that the Representors initially pursued this additional ground.
8. In short, the Representors succeeded in getting what they came to this Court to get, namely a winding-up order in relation to all three Companies on just and equitable grounds and they did so in the face of opposition from both the Trustee and the Intervenors. In my judgment they should therefore be entitled, as the successful party, to their costs as costs in the liquidation.
9. In support of his request that such costs should be on an indemnity basis, Advocate Young relied on two particular matters. Firstly he pointed out that the directors would be entitled to an indemnity from the Companies in respect of the costs which they had incurred on the Companies' behalf and the most practical method of giving effect to that indemnity would be to award indemnity costs. Secondly he categorised the Intervenors' approach (but not, of course, that of the Trustee) as self-serving and intended only to advantage themselves as creditors.
10. In support of the Intervenors' submission that indemnity costs were inappropriate Advocate Hanson directed the Court's attention to para.3 of the headnote in Marett v Marett [2008] JLR 384, which reads:-
"An indemnity costs order could be made if it were justified by some special or unusual feature, e.g. culpability, abuse of process such as deceit, underhanded or unreasonable behaviour, abuse of court procedures or the submission of voluminous and unnecessary evidence. In the present case, in which the husband and the applicant conceded at the last minute that the husband did indeed have an interest in MHL and the development of Field 1218, against a background of denial and dilatory and incomplete disclosure, there was sufficient basis for the Royal Court's conclusion that the husband and the applicant had played procedural games against the wife. It would not have been irrational or perverse for the court to have concluded that there had been some form of concealment and possibly collusion between the brothers as to the husband's interests in MHL and the development. There had therefore been unreasonable behaviour or an abuse of process, i.e. a special or unusual feature which justified the award of indemnity costs."
11. I agree with Advocate Hanson's submission that the Representors should not get their costs on an indemnity basis, for the following reasons.
(i) I accept that the Representors are entitled to the indemnity from the Companies which Advocate Young outlined. But it does not follow that an award of indemnity costs would necessarily give the Representors all that they had expended on the Companies' behalf. Accordingly the Representors might still be left in the position of having to enforce their indemnity against the Companies.
(ii) As Advocate Hanson pointed out, whereas costs in the liquidation would take precedence over debts owed to unsecured creditors, any additional sums due to the Representors under their indemnity from the Companies would rank as unsecured debts. It is obviously right that the Representors' costs on the standard basis should enjoy such precedence but I see no reason why any additional costs to which the Representors might be entitled under their indemnity should be equally privileged. On the contrary, I consider that any such additional costs should rank pari passu with other unsecured debts. I recognise that if the proceeds of sale of the Property are sufficient to pay off all the Companies' creditors, this will prove to be a distinction without a difference but only time will tell if this proves to be the case.
(iii) In my view there is in this case no special or unusual feature such as those mentioned in the Marett case to which the Representors can point as justifying an award of indemnity costs. I reject Advocate Young's submission that the principles in Marett are not immediately referable to the present case. Obviously the application of those principles must take account of the nature of the proceedings but that is no reason to ignore the guidance in Marett.
12. The Representors' other application, which was for their costs in relation to the post-hearing correspondence, was again not resisted by the Trustee or the Liquidators. It was, however, resisted by the Intervenors, who submitted that they should not have to pay the Representors' costs in this regard at all. There is, of course, an obvious overlap here with the Intervenors' own applications. Again Advocate Hanson submitted in the alternative that the Representors should not be entitled to indemnity costs.
13. The Court has already had occasion to criticise the Intervenors' response to the draft of the judgment which we handed down two days ago. In my view the same criticism applies to Advocate Hanson's letter of 11th October (referred to at para.48 of our judgment), with the one exception of the matter of default interest, which occupied only two paragraphs of a 14 paragraph letter and which would not have affected our decision in any event. In all other respects this letter represented an unacceptable attempt to re-open the decision which the Court had reached the previous day. In those circumstances it is clear to me that the Representors should be entitled to their costs from the Intervenors associated with that letter. As for Advocate Hanson's letter of 14th October (referred to at para.49 of our judgment), this raised matters which should have been dealt with at the hearing. Again, therefore, it is clear to me that the Representors should be entitled to their costs from the Intervenors associated with that further letter.
14. However for essentially the same reasons as I have already set out in relation to the Representors' main costs application, I accept Advocate Hanson's submission that such costs should be on the standard, and not the indemnity, basis.
15. Accordingly by reference to para.3 of Advocate Young's Skeleton Argument, I make orders as sought in the first sentence of para.3(1), in the first sentence of para.3(2) and in para.3(3), save that in each instance costs will be on the standard basis.
16. The Trustee's application was resisted by both the Representors and the Liquidators. The Intervenors limited their challenge to contending that any costs should be on the standard rather than the indemnity basis.
17. I have no doubt that the Trustee should be allowed its costs as cost in the liquidation, for the following reasons:-
(i) The Trustee was convened to appear by the Royal Court's orders of 20th September and 4th October, 2013.
(ii) It was important in the interests of justice that the Court should hear from a party who opposed the Representors' Art.155 application.
(iii) The Trustee was best placed to represent the interests of the beneficiaries of the Trust as a whole and/or as creditors of the Companies, as opposed to the interest of any particular beneficiary or creditor.
(iv) The Trustee was, by virtue of Mr Powell being both a director of the Trustee and a director of the three Companies, uniquely well placed to put before the Court any relevant material to challenge the evidence relied upon by the Representors.
I recognise that since the Trustee's opposition to the Art.155 application was unsuccessful the Trustee was in a sense the losing party. But the four factors which I have just outlined make it inappropriate, in my view, to saddle the Trustee with the usual consequences of that categorisation. Justice requires, in my view, that the Trustee should be able to recover his costs.
18. As, however, with the Representors, I do not accept that such costs should be on the indemnity basis. Advocate Robertson's argument in favour of indemnity costs mirrored that of Advocate Young for the Representors. Thus Advocate Robertson likewise relied on the indemnity as to its costs to which the Trustee would, he said, be entitled under the Trust deed. But for essentially the same reasons as I have already given in respect of the Representors' applications, I do not consider that there are any special factors in this case to justify costs on the indemnity basis.
19. I therefore accede to the Trustee's application, save that the Trustee's costs will be on the standard, not the indemnity, basis.
20. The Intervenors' applications were resisted by the Representors and the Liquidators. The Trustee made no comment on the Intervenors' applications.
21. In the light of what I have already said in this judgment, in particular in the context of the Representors' applications, I can deal with the Intervenors' applications more briefly.
22. So far as the intervention and the Art.155 application are concerned, adopting the holistic approach which I have indicated previously, the Intervenors were the losing party. Although Simon and Aida prevailed on the Court to allow them to take part in the Art.155 application, their submissions on that application did not prevail. As the Court mentioned in our judgment of 12th November, in reality Advocate Hanson did little more than adopt the broad thrust of the submissions that the Trustee had already made. Indeed to the extent that Advocate Hanson went further than the Trustee by explaining in more detail the terms upon which the Intervenors would be prepared for the Court to grant a stay of the Art.155 application, his submissions served only to confirm that a stay was not a viable alternative. I take Advocate Hanson's points that it was reasonable for him to have allowed the Trustee to have made the running and that it would have been unreasonable for him to have regurgitated the Trustee's submissions; I make no criticism whatsoever of the Intervenors in this regard. But the fact remains that overall their contribution added little to what the Trustee had already said.
23. More importantly for costs purposes, none of the four factors which I have listed in the context of the Trustee's application, which collectively outweighed the fact that the Trustee was in a sense the losing party, applies to the Intervenors. In those circumstances I see no reason why the usual rule that the losing party must, at the very least, expect to bear his own costs should not apply. I therefore refuse the Intervenors' application for the costs of their intervention and of the substantive Art.155 hearing to be costs in the liquidation. The Intervenors must bear their costs themselves.
24. I have already dealt with the issue of costs arising from the post hearing correspondence. For the reasons I have already given, I refuse the Intervenors' application that their costs in relation to Advocate Hanson's letter of 11th October be costs in the liquidation.
25. In summary, the Intervenors' costs applications fail in their entirety.
26. This was limited to the fees and expenses which the Liquidators said that they had incurred in assisting the Companies prior to the Court's order of 9th October. The Representors did not object to the Liquidators' application, on the basis that these fees and expenses had been incurred at the behest of the directors of the Companies. The Trustee objected to the application on the basis that the two Trustee directors of the Companies had no knowledge of any such instructions to the Liquidators prior to the Court's order. The Intervenors also objected. Firstly Advocate Hanson submitted that the sums claimed by the Liquidators could not in principle be costs of the liquidation. Secondly, building on the Trustee's objection, Advocate Hanson submitted that in the circumstances described by Advocate Robertson it would be wrong for the Court to make the order sought by the Liquidators at this juncture; such an order would prevent a subsequent challenge to the legitimacy of this expenditure and would leave the creditors able to challenge only the quantum of such expenditure. He contended that instead the answer was to give the Liquidators liberty to apply to the Court after they had provided details of the fees and expense in question, and to explain the basis upon which they argued that their instructions came from the Companies.
27. In my judgment the objections voiced by both the Trustee and the Intervenors have considerable force. I therefore decline to make any order on the Liquidators' application at this stage but I give them liberty to restore their application hereafter. It is, of course, for the Liquidators to decide how to respond to the objections articulated by Advocate Robertson and Advocate Hanson. All I need to say is that if the details which they provide for the purposes of any further hearing prove to be inadequate, the likelihood is that they will have to take the consequences.
28. I invite all counsel to prepare a draft order giving effect to this ruling for the Court's approval.
Authorities