Jersey Unreported Judgments

Companies - costs judgment

[2015]JRC045

Royal Court

(Samedi)

24 February 2015

Advocate M. H. Temple for the Representor.

Advocate N. M. Sanders for the Respondent.

judgment

the commissioner:

1.        I now have to consider the question of costs following my decision of 13^th October, 2014, ("the October judgment"). 

Background

2.        The background is set out in the October judgment.  In briefest outline, the representor ("Range") and the respondent ("Black Gold") are shareholders in a company called New Age Alzarooni 2 Limited ("the Company").  They and the Company entered into a shareholders' agreement concerning the affairs of the Company.  A dispute subsequently arose as to the level of information provided to Range about the affairs of the Company and its underlying investment.  The shareholders' agreement contained an arbitration provision and the dispute was duly referred to arbitration in London. 

3.        On 22^nd May, 2014, the arbitration tribunal made an award which essentially found in favour of Range.  It ordered Black Gold and the Company to procure the provision of certain information about the affairs of the Company and its underlying investment to Range.  It also made an award of costs to the effect that Black Gold should pay a total of just over US$2.5m to Range ("the costs award").  The costs award carried interest at 5% compounded annually if not paid within 30 days. 

4.        On 19^th June, 2014, Black Gold and the Company filed a challenge to the arbitration award in the English High Court pursuant to Section 68 of the Arbitration Act 1996 ("the Section 68 application") and that challenge was fixed for hearing in December 2014. 

5.        On 15^th August, 2014, Range issued a Representation in this Court seeking enforcement of the costs award.  The hearing of that Representation was fixed for 27^th October. 

6.        On 2^nd September, Black Gold applied for the hearing of the Representation to be adjourned until the outcome of the Section 68 application and any appeal therefrom.  That was the matter which came before me on 1^st October and was the subject of the October judgment ("the adjournment application"). 

7.        In that judgment, I agreed to adjourn the Representation subject to the following:-

(i)        The adjournment was only to be until the outcome of the Section 68 application at first instance was known.  I did not agree to the adjournment continuing until the outcome of any appeal from the first instance decision. 

(ii)       Grant of the adjournment was conditional upon Black Gold paying the sum of US$2.65m in to Court. 

8.        That payment was duly made and the adjourned hearing was fixed for 9^th February, 2015. 

9.        The question of the costs of the adjournment application came back before me at the request of Black Gold on 18^th December.  Black Gold argued that it was entitled to the costs of the adjournment application on the basis that it had succeeded, whilst Range argued that the question of costs should be left over until the outcome of the Section 68 application was known.  Judgment was expected on that application the very next day.  I agreed with the submission of Range and accordingly adjourned the costs application until 9^th February, to be heard at the same time as the substantive hearing of the Representation. 

10.      Cooke J duly issued his judgment in the Section 68 application on 19^th December.  He dismissed the application and made an order for indemnity costs against Black Gold. 

11.      Since then, the sum due to Range in respect of the costs award has been paid from the monies paid into Court.  The substantive relief sought by the Representation has therefore been achieved and those proceedings have effectively come to an end. 

12.      The only outstanding matter relates to the issue of costs.  That was due to be argued orally on 9^th February but, with the agreement of the parties, I have considered the matter on the papers having had the benefit of skeleton arguments from both sides. 

The contentions

13.      On behalf of Black Gold, Advocate Sanders submitted as follows:-

(i)        The Representation proceedings as a whole were premature.  They were issued after the Section 68 application had been commenced.  There was no real risk that Black Gold would not or could not pay the amount due under the award and this was shown by the fact that the required sum was paid into Court and subsequently paid out to Range following the conclusion of the Section 68 application.  Furthermore, there was no prejudice in any delay because the costs award carried interest.  It followed that Black Gold should be awarded its costs in connection with the Representation as a whole because it was premature and unnecessary. 

(ii)       If the Court did not agree with that submission, Black Gold should in any event be awarded the costs of the adjournment application.  It had been successful in that application and Range should have agreed to it, particularly given the short delay before the hearing of the Section 68 application and the offer to provide security by way of a guarantee from Black Gold's parent company. 

14.      On behalf of Range, Advocate Temple submitted as follows:-

(i)        His primary submission was that I should look at the Representation proceedings as a whole and award Range all of its costs in relation to those proceedings (including the adjournment application).  Range had been wholly successful in those proceedings, in that the costs award and interest had now been paid in full.  Furthermore, costs should be awarded on the indemnity basis given the lack of merit in the Section 68 application.  He pointed out that Cooke J had referred to that application as "groundless and misconceived" at para 9 of his judgment and had made other strong criticisms which were referred to in Range's skeleton argument.  It was noteworthy, he submitted, that the judge had made an award of indemnity costs against Black Gold in the Section 68 application. 

(ii)       If I was against him on that primary submission, Advocate Temple submitted that, save for the adjournment application, Range should receive its costs on the indemnity basis in respect of the remainder of the Representation proceedings, including in particular the hearing of 18^th December where Black Gold had unsuccessfully sought to proceed with its costs application and had failed.  As to the adjournment application, he submitted that this was in effect a "score draw" in that, although the adjournment had been granted, it was on the basis of payment into Court of the full sum (including interest) and this had not been offered by Black Gold before the hearing.  Furthermore, Black Gold had not been wholly successful because it had sought an adjournment until after any appeal brought in the Section 68 proceedings, whereas the Court had rejected this part of the application by insisting that the adjourned hearing be fixed for shortly after the expected date of judgment at first instance in the Section 68 application.  He argued that the correct award in respect of the adjournment application would be costs in the cause, although he accepted that this would ultimately have the same effect as his primary submission, in that Range would be awarded costs in respect of the all the proceedings in the Representation. 

Decision

15.      The principles to be applied in relation to costs are well established.  A convenient summary is to be found in Watkins v Egglishaw [2002] JLR 1, subsequently approved in Flynn v Reid [2012] (2) JLR 226. 

16.      In my judgment the costs of the adjournment application should be considered separately.  It was the most important single hearing in the matter and it involved a discrete issue, namely whether the Representation proceedings should await the outcome of the Section 68 application.  I shall return to the costs of the adjournment application in a moment. 

17.      As to the costs of the rest of the Representation proceedings, I consider that Range has been successful and should be awarded its costs.  This will therefore include the hearing of 18^th December, which Black Gold lost.  I have carefully considered Advocate Sanders' point that the Representation was issued after the institution of the Section 68 application and was unnecessary.  But the fact remains that Range had the benefit of an arbitration award with which Black Gold had not complied.  I do not consider it unreasonable for Range to have instituted enforcement proceedings in such circumstances.  There was no offer of any security on the part of Black Gold at that stage. 

18.      I note that costs were awarded on the indemnity basis in the Section 68 application but I do not think that the costs of the Jersey proceedings should be on the indemnity basis.  I have read the whole of the judgment of Cooke J.  I note the criticisms of the Section 68 application in that judgment, but I do not read them as suggesting any bad faith or delaying tactics on the part of Black Gold; they simply reflect the fact that the judge found that, by and large, Black Gold was seeking to raise points which could and should have been raised with the arbitrators.  Where the points had been raised, the judge considered that they did not meet the test for interference by the court.  Accordingly, subject to the costs in connection with the adjournment application, I award Range its costs of all the Representation proceedings on the standard basis. 

19.      As to the adjournment application, the starting point is that Black Gold was successful.  One begins therefore from the position that an award of costs in its favour is likely to be appropriate.  Advocate Temple argues that it was more of a draw, on the basis that the Court did not grant the full request sought by Black Gold in that it did not grant an adjournment until the conclusion of any appeal against the first instance decision in the Section 68 application.  Furthermore, the Court had only granted the adjournment on condition that the full amount of the costs award plus a provision for interest be paid into Court whereas this had not been offered previously by Black Gold.  In addition the adjournment had to be considered in the context of the proceedings as a whole.  The Section 68 application had failed and therefore the adjournment had not ultimately been justified. 

20.      I have considered these points but they are not sufficient to lead me to conclude that Black Gold should not be awarded its costs in relation to the adjournment application.  Whether the adjournment was granted until completion of any appeal or simply until conclusion of the first instance proceedings is a comparatively minor point.  As to the payment into Court, Black Gold had offered a guarantee on the part of its parent.  Range does not appear to have engaged with the issue of security.  It could easily have come back to suggest that the guarantee was not sufficient but that payment into Court might have been.  It did not do that; it simply rejected the application for an adjournment out of hand.  I also take into account that the adjournment was for a comparatively short period and that interest was accruing on the costs award.  Ultimately, I consider that Range should have agreed to the adjournment and it must take the consequences of having unsuccessfully opposed that aspect of the proceedings. 

21.      In summary, I order Range to pay Black Gold the costs of and incidental to the adjournment application on the standard basis and I order Black Gold to pay the costs of Range of and incidental to the Representation as a whole (apart from the adjournment application) on the standard basis.  I cannot tell how the balance of this order will work out and I therefore do not order any interim payment. 

22.      As to the costs of this costs hearing, I consider that each party has been successful only in part, and accordingly I think the fair course is to make no order as to costs. 

Authorities

Arbitration Act 1996.

Watkins v Egglishaw [2002] JLR 1.

Flynn v Reid [2012] (2) JLR 226.