Jersey Unreported Judgments

Costs - relating to the first defendant's application for costs on indemnity basis/statutes of a partnership as a litigant in person.

[2015]JRC099

PETTY DEBTS COURT IN THE ISLAND OF JERSEY

12 May 2015

Before     :		Advocate Matthew John Thompson, Relief Magistrate.
Between	Optical Services (Jersey) Limited		First Plaintiff
	Ian Kenny		Second Plaintiff
	Julie Kenny		Third Plaintiff
And	Carey Olsen		First Defendant
	Christopher Duncan Philipott		Second Defendant
	Robin Leeuwenburg		Third Defendant

The Second and Third Plaintiffs appeared in person and on behalf of the First Plaintiff.

Advocate I. C. Jones for the Defendants.

CONTENTS OF THE JUDGMENT

		Paras
1.	Introduction	1-3
2.	The position of the second and third defendants	4
3.	The representation of the first defendants	5-6
4.	Should the first defendant be awarded its costs	7-12
5.	Standard costs or indemnity costs	13-22
6.	What costs can the first defendant recover	23

judgment

the master:

Introduction

1.        This judgment represents my decision in respect of the first defendant's application for costs on an indemnity basis, such costs to be taxed if not agreed, following on from my judgment dated 29^th October, 2014, reported at Optical Services and Ors-v-Carey Olsen and Ors [2014] JRC 208A ("the preliminary issue judgment").  The preliminary issue judgment determined in the defendants' favour a preliminary issue as to whether or not the duty of care owed by a lawyer to his client could be extended to a third party and or whether the duties as enshrined in the Jersey Law Society Code of Conduct were duties of care owed to the plaintiffs. 

2.        For the reasons set out in the preliminary issue judgment I ruled against the plaintiffs that any duty of care was owed to them by the defendants as advisers to the plaintiffs' opponent in certain proceedings.  I also ruled that a breach of the Jersey Law Society Code of Conduct, (assuming without deciding the point that such a breach of duty had occurred), did not give rise to any claim that the plaintiffs could bring against the defendants. 

3.        At paragraphs 17 to 29 of the judgment I also addressed the plaintiffs' argument that there was a lacuna which need to be filed because the plaintiffs were unable to recover their costs either from the plaintiffs in what I described in the preliminary issue judgment as the eviction proceedings or from the defendants personally on a wasted costs basis.  At paragraph 25 of the preliminary issue judgment I noted in particular that the interpretation I considered should be placed on Article 3 of the Civil Proceedings (Jersey) Law 1956 was different to a view expressed by the second plaintiff to a greffier of the Petty Debts Court and the greffier's reply.  In this judgment I shall refer to this as the 'lacuna issue'.  In the preliminary issue judgment I determined both the lacuna issue and the issue of whether a duty of care was owed.  The plaintiffs' claim was therefore dismissed against the defendants and it is on this basis that an application for costs is now made. 

4.        In respect of the application for costs there are three separate issues to consider:-

(i)        Should costs be awarded in the defendants' favour;

(ii)       If so, should costs be on the standard basis or the indemnity basis;

(iii)      If costs are awarded in the defendants' favour whether on the standard or indemnity basis, what costs can the defendants claim?

The position of the second and third defendants

5.        Before proceeding further, it is right to record that the application for costs is only made by the first defendant.  In affidavits filed by the second and third defendants for this application, both accepted that they did not pay or agree to pay any money to the first defendant in relation to these proceedings and they have not instructed any separate legal representation.  Accordingly, they have not incurred any costs.  The claim for costs is therefore limited to that of the first defendant. 

The representation of the first defendant

6.        I start by reference to noting that in this matter, that all three defendants including the first defendant, were represented in court by Advocate Jones, who is a senior associate employed by the first defendant.  I address in more detail in relation to the third issue required to be decided the effect of this on the costs claimed by the first defendant. 

7.        However, at this stage, it is right to observe that where advocates or solicitors are pursued in court proceedings, generally it is the practice for a firm of advocates or solicitors not to represent themselves but to seek separate representation.  The rationale for this is that an advocate who is a partner or an employee of a law firm that is being pursued may find him or herself in a position of conflict.  That conflict may manifest itself in terms of a conflict between an advocate's duty to the court and a duty to the client.  The conflict might also be between the duty to give independent advice and an advocate having a financial interest in the outcome of the litigation.  In this case I did not take objection to Advocate Jones appearing for the first defendant because the issue that arose was a pure question of law where the first defendant wished to argue that no duty of care arose.  It did not require any evidence to be adduced where a conflict might also arise between an advocate appearing in court and advancing evidence by that advocates' firm; if the application would have been unsuccessful the financial consequences would also have been clear namely there was a likelihood of the defendants having to pay costs because of an unsuccessful application.  I have set out these matters because in future, where law firms are pursued for breach of duty or face a counterclaim to actions for unpaid fees based on allegations of breach of duty, the current general practice of the law firm seeking independent representation is one that should still be followed. 

Should the first defendant be awarded its costs

8.        The first issue I have to consider is where the first defendant should be awarded its costs at all. 

9.        The power to award costs in the Petty Debts Court is set out in Article 3(1) of the Civil Proceedings (Jersey) Law 1956, the relevant part of which provides as follows:-

"Power of Petty Debts Court to award costs

(1)       On the hearing of an action in the Petty Debts Court, the Court shall have power in its discretion to make such order as to costs -

(a)       where judgment is given for the plaintiff, to be paid by the defendant to the plaintiff;

(b)       where the defendant is discharged (déchargé or renvoyé) from the action, to be paid by the plaintiff to the defendant,

as it thinks just and reasonable:

Provided that, on any application for an order for the periodical payment of money, or for the revocation, revival, alteration or variation of such an order, or for the enforcement of such an order, the Court may, whatever adjudication it makes, order either party to pay the whole or any part of the other's costs."

10.      The basis upon which the Petty Debts Court awards costs is to follow the approach of the Royal Court.  A convenient summary of the Royal Court's approach is found in Flynn v Reid [2012] 2 JLR 226 at paragraph 13 where the Court of Appeal set out and approved the decision of Page, Commissioner in Watkins v Egglishaw [2002] JLR 1.  The relevant extract is as follows:-

"7.      The principles that should guide the court in the exercise of its discretion in this area appear to me, therefore, to be as follows, stating them as shortly and simply as possible:-

(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 (No.2) (5) and A.E.I. v. Phonographic Performance (1).

(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) (3), 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 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" 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."

11.      In this case Advocate Jones contends that the first defendant was clearly successful and in this case a winner is readily apparent and so costs should follow the event. 

12.      Mr Kenny complained that for costs to follow the event was unfair because the effect of such an order would mean that the plaintiffs would have to pay costs to the defendants; yet it was the defendants' conduct which led to the present dispute because it was the defendants who issued proceedings in what I described in the preliminary issue judgment as the eviction proceedings in the wrong court.  He pointed out that although the defendants in the present proceedings reserved their position as to whether the Petty Debts Court was right to dismiss the proceedings for want of jurisdiction, the decision of the Assistant Magistrate on 2^nd October, 2011, to decline jurisdiction had never been challenged and was consistent with the criticisms the plaintiffs in the present proceedings made of the defendants.  

13.      In my judgment, I consider the fair result requires me to draw a distinction between then lacuna issue and the duty of care issue.  In respect of the lacuna issue, having exchanged emails with a Greffier of the Petty Debts Court, referred to paragraph 7 and 8 of the preliminary issue judgment, the plaintiffs proceeded on the assumption that the response received from the Greffier meant that costs would not be awarded in their favour.  While I ultimately disagreed with the effect of the Petty Debts Court declining jurisdiction and what costs orders might then be made, I also understand why the plaintiffs did not then ask for costs.  It therefore took my judgment to clarify the position.  In those circumstances, I do not think it appropriate to make a costs order against the plaintiffs in respect of the lacuna issue where I have expressed a different view to that expressed in the exchange of emails to which I have referred.  In respect of this issue therefore I consider that each party should bear their own costs. 

14.      However, in respect of the duty of care issue I agree with Advocate Jones that the first defendant (and the other defendants) were the clear winners on the duty of care issue.  The arguments they advanced prevailed in their entirety.  The fact that the plaintiffs will consequently will end up paying the defendants' costs even though the plaintiffs say the defendants issued the eviction proceedings in the wrong court is not a factor to persuade me to exercise my discretion to deprive the first defendant of its costs.  It was a matter for the plaintiffs whether they chose to pursue the defendants or not.  They did not have to do so.  By a letter dated 20^th March, 2014, significantly in advance of the hearing before me, the defendants clearly set out that no duty of care was owed and that a claim for breach of the Law Society Code of Conduct did not give rise to a claim that could be pursued before the Petty Debts Court.  The plaintiffs were therefore clearly on notice of the arguments the defendants were going to advance, which arguments ultimately prevailed, and yet the plaintiffs chose to continue with their claim.  They were also aware of the risk of a costs order against them if they lost.  They must therefore face the consequences of a costs order. 

15.      I appreciate that from the plaintiffs' perspective this appears to leave them with an unjust result because they are now having to pay the costs of the defendants when they did not recover their costs in the eviction proceedings.  This regrettable situation has come about however because the plaintiffs chose to pursue Messr. Carey Olsen.  This choice is not a direct consequence of no costs order being made in the plaintiffs favour in the eviction proceedings.  Rather it is a result of an independent voluntary act by the plaintiffs to seek to recover costs from an entity which was not a party to the previous proceedings.  What the plaintiffs should have done is to have asked the Petty Debts Court to issue a ruling on costs and, if the defendants disagreed with that ruling, to appeal the same to the Royal Court.  That was the remedy available to the plaintiffs to protect their position.  By taking a different option, and one which was wrong in law, the plaintiffs have brought this unhappy state of affairs upon themselves. 

Standard costs or indemnity costs

16.      The first defendant further seeks indemnity costs.  In C v P-S [2010] JLR 645 the Court of Appeal at paragraph 12 of its decision stated succinctly as follows in relation to awarding indemnity costs:-

"We therefore approach the costs contentions on the understanding that in order for an indemnity award to be made there must be something to take the case out of the ordinary and a degree of unreasonableness (of which abuse of process is but an example) but recognizing that there is an "infinite variety" of circumstances where it may be right and proper for the court to make such an award."

17.      Advocate Jones contended that the first defendant should be awarded costs on the indemnity basis because of what had occurred at a mediation which took place on 18^th February, 2014.  The concerns he expressed were set out at paragraphs 46.2 to 46.5 of his skeleton argument. 

18.      In particular he asserted that the mediation was understood by all parties to have taken place on the basis that it was without prejudice save as to costs and accordingly what took place at the mediation was relevant to the issue of costs and could be referred to. 

19.      During the hearing, I refused to allow this submission to be developed.  This was because I did not and do not accept that mediations that take place in the Petty Debts Court are on a without prejudice save as to costs basis.  I express this view because my principal responsibility as relief magistrate is to conduct mediations in the Petty Debts Court which covers all claims below £10,000 that are disputed.  I took over this role from Master Wheeler in April 2014.  The mediations that I have conducted, and I believe Master Wheeler conducted before me, were always on a without prejudice basis.  In other words what is said in any mediation is confidential at the time the mediation takes place and remains confidential.  It cannot be referred to in any subsequent proceedings.  The parties are therefore free to and are encouraged to make any statements, proposals or concessions they wish to make in the knowledge that if any such step does not lead to a settlement then the rights of that party to pursue or defend a claim through the Petty Debts Court are fully preserved.  This is an important principle as well as being key to allowing the parties the best chance of an opportunity to resolve their differences.  If what was said in the course of mediation could be referred to at a later costs hearing, the credibility of the mediation process in the Petty Debts Court will be seriously if not fatally damaged.  I was not and am not willing to accept a submission that attempts to undermine a key part of the mediation process. 

20.      I have also seen no evidence to suggest that the mediation in the present dispute was conducted on any different basis.  I was not therefore prepared to allow a skeleton argument to be referred to give evidence of what occurred at the mediation.  Accordingly I discounted what occurred at the mediation as a basis for the application for ordering indemnity costs. 

21.      I should make it clear that following a mediation a party that wishes to make an offer, either in open correspondence or on a without prejudice save as to costs basis, is always free to do so.  If such an offer is made and is not accepted, and the party making the offer is then successful at trial or at any subsequent hearing, the court can have regard to any offer that was made.  However, any such offer does not mean that the confidentiality of the mediation process itself is disturbed. 

22.      The other basis of the application for indemnity costs advanced by Advocate Jones was that, by the letter dated 20^th March, 2014 referred to above a Calderbank offer was made.  The penultimate paragraph stated as follows:-

"In conclusion we would like you to consider the wisdom of continuing to pursue the claim.  The defendants are no longer prepared to waive the costs they have incurred in their entirety.  However, in the event you would like to withdraw the claim the defendants would be prepared to reach a compromise as to their outstanding costs, which would significantly limit any liability as to costs which you, your company, your wife might have in this regard.  It is of course a matter for you as to whether or not you chose to take up this offer."

23.      It does not appear from the papers produced to me that any offer as to what costs the first defendant might be prepared to accept was ever put to the plaintiffs.   The letter of 20^th March, 2014, was made the day after the defendants filed their answer.  Previously I was informed by Advocate Jones that the defendants had been prepared to settle the claim on the basis of each side bearing their own costs.  With hindsight, given the significant costs that have now been incurred, it is regrettable that their offer of drop hands was not repeated at this stage.  In making this observation it was of course a matter for the defendants as to whether they wished to make such an offer.  However, the failure to do so and the seeking of costs of recovering an answer increased the likelihood of the matter progressing to a hearing.  I have set this out to put in context the argument now advanced by Advocate Jones namely that if the plaintiffs had accepted the offer advanced on 20^th March, 2015, then the costs that were incurred since that date would not have been incurred and significant costs would have been saved. 

24.      In considering whether or not there is something unusual to take the case out of the ordinary or degree of unreasonableness, I have also taken into account the fact that the second plaintiff wrote to Mr Mallett on 5^th October, 2013, expressing his views as to whether or not a wasted costs order could be made against the third defendant as set out at paragraph 7 and 8 of the preliminary issue judgment.  This meant that the plaintiffs did not seek any claim for costs because they believed there was a lacuna in the law, an issue which I addressed at paragraphs 17 to 29 of the preliminary issue judgment. 

25.      I have referred to this issue because in exercising my discretion as to the basis upon which to award costs, the overriding objective as noted in Watkins v Egglishaw and approved in Flynn v Reid is to do justice between the parties.  In my judgment it would be a step too far to award indemnity costs having regard to the reasons why the present proceedings were commenced by the plaintiffs.  In my judgment this is a case that was hard fought and where the plaintiffs failed.  However, they brought their claim out of a sense of frustration and grievance even if they were mistaken in doing so.  I do not therefore consider that hard fought litigation albeit mistaken is sufficient to take the case out of the ordinary and I am not satisfied that there is a degree of unreasonableness which justifies indemnity costs.  As Mr Kenny simply put it, indemnity costs is the court in some way expressing displeasure in respect of a party's conduct.  In my judgment there is no displeasure necessary for me to express in respect of a case that ultimately failed but was fairly argued.  In the exercise of the discretion vested in me, the fair result is therefore to award costs on the standard basis for the duty of care issue. 

What costs can the first defendant recover?

26.      I now turn to consider the most difficult aspect of the application for costs.  This part of the application arises because when the defendants made an initial application for costs, when I gave my decision dismissing the plaintiffs' claim, I asked what costs the first defendant had incurred given that it was represented by Advocate Jones as an employee.  In respect of this part of the argument, the plaintiffs did not play any part and did not put forward submissions as they were willing to abide by the Court's decision.  It is right that I should also record therefore that the plaintiffs were not provided with any relevant financial records of the first defendant which I ordered to be produced because the plaintiffs were not willing to give an undertaking to keep such information confidential and because the plaintiffs were willing to abide by whatever decision I reached. 

27.      The contentions advised by Advocate Jones on behalf of the first defendant were in summary that the position in Jersey should be the same as that in England as set out in the case of London Scottish Benefits Society v Chorley [1884] 12 Q.B.D. 452; 13 Q.B.D. 872 as considered by the English Court of Appeal in Markinson v Trim [2002] EWCA Civ 1273.  As part of this contention Advocate Jones advanced that Carey Olsen were not a litigant in person. 

28.      The starting point to consider this submission is practice direction PD05/6 issued by the Petty Debts Court which deals with orders for costs.  Paragraph 5 of the practice direction provides as follows:-

"Subject to paragraph 1 hereof and unless the Court otherwise orders, where the Court makes an order for costs in favour of a litigant in person then the provisions set out in Rule 12/6 of the Royal Court Rules, 2004, shall apply to the taxation of those costs."

29.      The provisions of Rule 12/6 of the Royal Court Rules 2004 ("the Rules"), as amended, referred to in paragraph 5 of the Petty Debts Court practice direction read as follows:-

"Litigants in person

(1)       Subject to this Rule, on a taxation of the costs of a litigant in person, there shall be allowed such costs as would have been allowed if the work and disbursements to which the costs relate had been done or made by an advocate on the litigant's behalf.

(2)       The amount of costs allowed where a litigant in person does any item of work for his or her case or part thereof shall be -

(a)       if the work thereby causes the litigant pecuniary loss, either -

(i)        the amount that the litigant can prove he or she has lost for time reasonably spent on doing the work, or

(ii)       up to two-thirds of the sum which in the opinion of the Greffier would have been allowed in respect of that item if the litigant had been represented by an advocate,

whichever is the lower; or

(b)       if the work does not cause the litigant pecuniary loss, at such rate per hour as determined by the Greffier in respect of the time reasonably spent by the litigant (or, in the case of a body corporate, a director of the litigant) on the work within a range or band specified in practice directions issued in accordance with Rule 12/14.[72]

(3)       A body corporate that has lodged a declaration in accordance with Rule 4/2A(2) or a requirement of the Court under that Rule may not claim as a pecuniary loss under paragraph (2) any payment to the authorized director for appearing and representing the body corporate pursuant to the declaration]

(4)       Disbursements shall be allowed to the extent that they are actually and reasonably incurred and are reasonable in amount.

(5)       A litigant who is allowed costs in respect of attending Court to conduct his or her own case shall not be entitled to a witness allowance in addition."

I refer to these provisions later in this judgment. 

30.      Advocate Jones firstly referred me to the case of The London Scottish Benefits Society v Chorley [1884] 13 QBD 872 and the following passages:-

"Brett, M.R. An action was brought against solicitors, who defended in person, and who were ultimately held to be entitled to judgment with costs. They claimed to have their costs taxed as if they had been acting for a client, that is, a different person. The question is whether this view can be maintained. It was contended for the plaintiffs that there is no difference as regards the right to costs between a solicitor and an ordinary person; and for the defendants it was contended that the costs of a solicitor, who is party to a suit, ought substantially to be taxed as if he had been acting for a different person. I think neither contention correct. I cannot think that any privilege of a solicitor exists. I am wholly unable to agree to any argument standing upon that footing. I should have thought that a person wrongfully brought into litigation ought to be indemnified against the expenses to which he is unjustly put; but there cannot be a perfect indemnity, because it is impossible to determine how much of the costs is incurred through his own over-anxiety. When an ordinary party to a suit appears for himself, he is not indemnified for loss of time; but when he appears by solicitor, he is entitled to recover for the time expended by the solicitor in the conduct of the suit. When an ordinary litigant appears in person, he is paid only for costs out of pocket. He cannot himself take every step, and very often employs a solicitor to assist him: the remuneration to the solicitor is money paid out of pocket. He has to pay the fees of the court, that is money paid out of pocket; but for loss of time the law will not indemnify him. When, however, we come to the case of a solicitor, the question must be viewed from a different aspect. There are things which a solicitor can do for himself, but also he can employ another solicitor to do them for him; and it would be unadvisable to lay down that he shall not be entitled to ordinary costs if he appears in person, because in that case he would always employ another solicitor. If a solicitor does by his clerk that which might be done by another solicitor, it is a loss of money, and not simply a loss of time, because it is work done by a person who is paid for doing it. It is true, however, to say that the costs of a solicitor appearing in person must be taxed differently from those of an ordinary *876 litigant appearing by a solicitor. The unsuccessful adversary of a solicitor appearing in person cannot be charged for what does not exist, he cannot be charged for the solicitor consulting himself, or instructing himself, or attending upon himself. The true rule seems to be that when a solicitor brings or defends an action in person, he is entitled to the same costs as an ordinary litigant appearing by a solicitor, subject to this restriction, that no costs which are really unnecessary can be recovered. Of this kind are the costs of instructions and attendances. None of the text-books have laid down a different rule from that which I have enunciated, and a uniform practice has not prevailed amongst the masters. This is an appeal from the decision of the Queen's Bench Division reported in 12 Q B D 452; the judgments are there reported, and it seems to me that the head-note of the report accurately expresses the law: it states nearly the same principle that I have laid down. The judgment of the Queen's Bench Division was substantially right, and the principle involved in it is accurately stated in the head-note of the report in the Law Reports. The taxation perhaps was not conducted upon a proper principle; the defendants' bill of costs must go back to the master to be reconsidered, and the items therein charged must be allowed according to the principle laid down in this judgment. We will reserve the question as to costs.

"BOWEN, L.J.

I agree with the reasoning and with the decision of the Master of the Rolls. A great principle, which underlies the administration of the English law, is that the courts are open to everyone, and that no complaint can be entertained of trouble and anxiety caused by an action begun maliciously and without reasonable or probable cause; but as a guard and protection against unjust litigation costs are rendered recoverable from an unsuccessful opponent. Costs are the creation of statute. The first enactment is the Statute of Gloucester, 6 Edw. 1, c. 1 , which gave the costs of the "writ purchased." There is a passage in Lord Coke's Commentary, 2 Inst. 288, which it is worth while to examine, as it affords a key to the true view of the law of costs. That passage is as follows: "Here is express mention made but of the costs of his writ, but it extendeth to all the legal cost of *877 the suit, but not to the costs and expenses of his travel and loss of time, and therefore 'costages' cometh of the verb 'conster,' and that again of the verb 'constare,' for these 'costages' must 'constare' to the court to be legal costs and expenses." What does Lord Coke mean by these words? His meaning seems to be that only legal costs which the Court can measure are to be allowed, and that such legal costs are to be treated as expenses necessarily arising from the litigation and necessarily caused by the course which it takes. Professional skill and labour are recognised and can be measured by the law; private expenditure of labour and trouble by a layman cannot be measured. It depends on the zeal, the assiduity, or the nervousness of the individual. Professional skill, when it is bestowed, is accordingly allowed for in taxing a bill of costs; and it would be absurd to permit a solicitor to charge for the same work when it is done by another solicitor, and not to permit him to charge for it when it is done by his own clerk. The question before us does not depend on the privileges of a solicitor. My judgment is the same as that of the Master of the Rolls; the costs claimed, subject to the exceptions which have been mentioned, ought to be allowed, because there is an expenditure of professional skill and labour. Is the rule which we lay down in conflict with the existing practice? I think that it is not; and it is some corroboration of our view that in Dixon's Lush's Practice, 3rd ed., p. 896, the rule is laid down in similar terms to those in which we state it; it is there said that "an attorney regularly qualified is allowed to make the same charges for business done when he sues or defends in person, as when he acts as attorney for another." The late Lord Justice Lush was a very great master of practice, and his view as to the costs payable to a solicitor who appears in person and is successful is the same as ours.

FRY, L.J.

I am of the same opinion. This is not a question as to a solicitor's privilege. I think that the conclusion at which we have arrived will be beneficial to the public, because if the rule were otherwise a solicitor who is party to an action would always employ another solicitor, and whenever he is successful he would recover full costs; whereas under the rule of practice *878 laid down by us, a solicitor who sues or defends in person will be entitled, if he is successful, to full costs, subject to certain deductions, of which his unsuccessful opponent will get the benefit. (Emphasis added)

31.      The material parts of Markinson v Trim and its analysis of The London Scottish case are contained at paragraphs 9 to 15:-

"The principle to be derived from the London Scottish Benefit Society case

9. The principle for which the London Scottish Benefit Society case has long been treated as authority is that set out in the headnote of the report of that case in the Divisional Court, at (1884) 12 QBD 452 :

"Where an action is brought against a solicitor who defends it in person and obtains judgment, he is entitled upon taxation to the same costs as if he had employed a solicitor, except in respect of items which the fact of his acting directly renders unnecessary."

The principle was confirmed, on appeal, by this Court - see (1884) 13 QBD 872, 876. It was incorporated, in substantially those terms, into the County Court Rules, 1903-1908, as Order LIII, rule 25 - and, as such, was applied by this Court in H Tolputt & Co Limited v Mole [1911] 1 KB 837 . It was treated as "well established" by this Court in Buckland v Watts [1970] 1 QB 27, 35G-H, 37F .

10. In London Scottish Benefit Society v Chorley, Crawford and Chester the defendants Crawford and Chester were solicitors. They were sued, as such, for money had and received to the use of the plaintiff society. They conducted their own defence, were successful and obtained an order that the plaintiff pay their costs. The Divisional Court held that, on taxation, they were entitled to be reimbursed for the time and skill which they had expended in defending the claim. It was in that context that the principle for which the case has become established authority was enunciated. The first question raised by the appellant on this appeal is whether the principle applies where (a) the defendant, although a solicitor, does not expend his own time and skill in defending the claim - because the defence is undertaken by one of his partners or by others within the firm of which he is member - and (b) the claim in the action is not a claim which is, or could be, brought against that firm - that is to say, it is not a claim in respect of anything done by the defendant while a partner or employee of that firm.

11. In order to resolve that question it is necessary to analyse the reasoning - both in the Divisional Court and in this Court - which underlies the decision in the London Scottish Benefit Society case. There are, I think, six elements in that reasoning. First, that a person wrongfully brought into litigation ought to be indemnified against the expense to which he is unjustly put - see the observation of Sir William Brett, Master of the Rolls, (1884) 13 QBD 872 , at page 875. Second, the need is for indemnity, not punishment or reward - see the reference in the judgment of Mr Justice Denman, (1884) 12 QBD 452 , at page 455, to the general rule, laid down by Baron Bramwell in Harold v Smith (1860) 5 Hurlestone & Norman 381 , that costs are allowed only by way of indemnity, in the sense that a party cannot be allowed to recover by way of costs expenditure which he has not incurred. As Baron Bramwell put it in the earlier case, ibid at page 385: "Costs as between party and party are given by the law as an indemnity to the person entitled to them: they are not imposed as a punishment on the party who pays them, nor given as a bonus to the party who receives them.". Third, application of those two principles leads to the conclusion that a person can recover the cost of employing a solicitor to assist him in the litigation - see per Sir William Brett, Master of the Rolls, at (1884) 13 QBD 872 , at page 875, and per Lord Justice Bowen, ibid at page 877. Fourth, an ordinary litigant - that is to say, a litigant who is not a solicitor - cannot recover, as costs, compensation for the expenditure of his own time and trouble. That is because "it is impossible to determine how much of the cost is incurred through his own over anxiety" - per Sir William Brett, Master of the Rolls, at (1884) 13 QBD 872 , at page 875; or, as it was put by Lord Justice Bowen, ibid at page 877, because "... private expenditure of labour and trouble by a layman cannot be measured. It depends on the zeal, the assiduity and the nervousness of the individual.". Fifth, those considerations are of no weight where the litigant is himself a solicitor. "Professional skill and labour are recognised and can be measured by the law." - per Lord Justice Bowen, ibid at page 877. And, sixth, a rule of practice which enables a litigant who is a solicitor to recover, as costs, compensation for his own time and trouble is beneficial, because it is likely to lead to a reduction in the amount which the unsuccessful opponent will pay under an order for costs: "if the rule were otherwise a solicitor who is party to an action would always employ another solicitor, and whenever he is successful he would recover full costs; whereas under the rule of practice laid down by us, a solicitor who sues or defends in person will be entitled, if he is successful, to full costs, subject to certain deductions [costs of taking instructions from, and attendances upon, himself], of which his unsuccessful opponent will get the benefit." - per Lord Justice Fry, ibid at pages 877-8, and see, also, the observations of Sir William Brett, Master of the Rolls, ibid at page 875, and, in the Divisional Court, Mr Justice Manisty and Mr Justice Watkin Williams at (1884) 12 QBD 452 , at pages 457 and 460.

12. The scope of principle is not in doubt in the simple case where the solicitor "acts for himself". The point is made by Mr Justice Denman, at (1884) 12 QBD 452 , 455, that:

"The solicitor's time is valuable: he applied his skill to the suit or action in which he is obliged to spend his time and exercise his skill in consequence of the wrongful act of his opponent; and therefore it is not an unreasonable view that the word "costs", in the sense of an "indemnity", should be held fairly to include a reasonable professional remuneration for that work which, if he did not do it himself, would have had to be done by another solicitor and paid for by his unsuccessful opponent."

The same point was put in much the same terms by Mr Justice Manisty, ibid at page 457:

"Time is money to a solicitor; and why should he not be as much entitled to his proper costs, if he affords the time and skill which he brings to bear upon the business where he is a party to the action as he is where he is not a party."

13. Nor is there any doubt that the principle extends to costs attributable to work done for the solicitor by his clerk. Indeed, it may be thought that that case is a fortiori within the indemnity principle. It was accepted by this Court in the London Scottish Benefit Society case that:

"If a solicitor does by his clerk that which might be done by another solicitor, it is a loss of money, and not simply a loss of time, because it is work done by a person who is paid for doing it."

per Sir William Brett, Master of the Rolls, at (1884) 13 QBD 872, 875 ; and, to the same effect, the observation of Lord Justice Bowen, ibid at page 877, that:

"... it would be absurd to permit a solicitor to charge for the same work when it is done by another solicitor, and not to permit him to charge for it when it is done by his own clerk."

Does the principle extend to the firm's costs?

14. If a solicitor can charge for his own time, and for the time of those he employs (who may include an assistant solicitor), should the position be different if some or all of the work is carried out by one or more of his partners, or by employees of the firm. For my part, I can see no reason why it should be. The time of one partner is of value to another partner, because each partner contributes to the profits of the firm. The time of employees of the firm has to be paid for out of the profits in which each partner is interested. To adopt and adapt the observation of Lord Justice Bowen which I have just set out, I would think it absurd to permit a solicitor to charge for work in the litigation when done (a) by another solicitor (or a solicitor in another firm), or (b) by his clerk (or an employed solicitor in his own sole practice) or (c) by himself; but not to permit him to charge for the same work when done (d) by employees of the firm of which he is a partner or (e) by one or more of his partners. The reasoning which led this Court to the conclusion which it reached in the London Scottish Benefit Society case must lead to the same conclusion in a case where the solicitor litigant carries on his practice as a solicitor in partnership. The successful litigant is entitled to an indemnity; there is no difficulty in measuring the cost of legal professional time and skill; and there is likely to be some saving of costs if the work is done within his own firm rather than if he is encouraged, in practice, to instruct another firm.

15. Support for the view that the reasoning which led this Court to the conclusion which it reached in the London Scottish Benefit Society case must lead to the same conclusion in a case where the work is done by the partner of the solicitor litigant can be found in the decision of Mr Justice Stirling, some three years later, in Bidder v Bridges (1887) WN 208 . It appears from the short report in the Weekly Notes that the dispute between the plaintiff and the defendant related to their respective titles to land; it was not a dispute which involved the defendant in a professional capacity as a solicitor. Nevertheless, the defence was conducted on his behalf by the firm of which he was a partner: "the action was entirely managed by one of his partners with the assistance of managing clerks." The defendant succeeded in his defence to the action and was awarded his costs. The plaintiff took objection to the costs charged in relation to the perusal of the defendant's title deeds by his partner and members of his firm. Mr Justice Stirling upheld the master's decision to overrule the objection. He said this, ibid at page 209:

"The rule was laid down in London Scottish Benefit Society v Chorley (13 QBD 872-875) , and the principle upon which the Court of Appeal went in that case was, that when a solicitor appeared in person, he was not to charge for things which did not exist - he could not attend upon himself. But the Court of Appeal recognised to the full extent, that a solicitor might employ the services of other people - his clerk, and be paid, not for his loss of time, but for the loss of money he would have earned. Was a solicitor's partner in a different position? The partner attended upon various parties at various places, and certain things had been done by him. All this fell within the principle laid down in that case, and these costs ought to be allowed."

Mr Justice Simon Brown expressed a similar view (albeit obiter) in R v Stafford Stone and Eccleshall Magistrate's Court, ex parte Robinson [1988] 1 All ER 430, at page 432h-j :"

"From one line of cases it is perfectly plain that over a great many years a solicitor who successfully defends himself in civil litigation on taxation may properly recover his own profit costs, and that is the case whether or not the work is done by partners or clerks within the firm or done by the solicitor himself. That is established by London Scottish Benefit Society v Chorley (1884) 13 QBD 872 , ..."

32.      The issue I have to decide is whether these principles should be followed in Jersey.  As a starting point, I agree, as observed by Denman J. in The London Scottish case (page 469 of Markinson), that a lawyer's time including an advocate's time is valuable.  Time is still one of the bases in contentious matters used by a Jersey advocate or solicitor to charge fees.  However, as the Law Society Code of Conduct notes at section 5 in relation to terms of engagement, the level of fees may be affected by the complexity and novelty of the matter, the specialist legal knowledge required, the value of the matter, the amount of documentation, the urgency of the matter, the importance of the matter to the client and the time to be expended.  The Law Society Code of Conduct also recognizes that in many cases what is charged is a fixed fee.  Legal practices may also offer discounts to the charge out rate usually applied for a particular lawyer.  Legal practices may also agree budgets with clients to perform certain work for a particular fee.  All these mean that the amount of the bill may be lower or higher than the time spent working on the matter 

33.      How individual lawyers within a law firm spend their time in my judgment goes to looking at the profitability of that law firm.  However, it is only one factor.  As I have listed above fees may be charged on a different basis.  It therefore does not always follow that simply because a lawyer has recorded time in respect of a particular matter that all that time is recoverable. 

34.      I am also sufficiently familiar with the practice of law firms based on my past experience to be aware that not all time spent by a lawyer whether the lawyer is a partner or an employee leads to income for the firm.  The business of running a modern law firm is complex.  A proportion of any lawyer's time is spent on running the practice.  That may involve client relations, promoting the firm, looking to obtain new work, managing other employees, or complying with the firm's internal procedures including issuing and collecting bills.  To the extent that the London Scottish Benefits Society case and Markinson v Trim suggest that time is money, in this day and age I do not agree.  Time may be money but it does not necessarily equate to actual pecuniary loss.  Rather time is invested in the business of a legal practice in many different ways with the aim of producing an income and a profit.  

35.      This means that a law firm, like any other business pursued through the courts, has a choice; either to appear itself or to instruct and pay an independent lawyer to do so.  The latter approach will lead to the business having to pay fees to the law firm or individual lawyer retained under the contract with that lawyer.  The former approach means that the particular business has taken a decision to appear itself.  The business is therefore choosing to spend part of the time available to it to run its business, to appear in court rather than spend actual money out of the cash received by it, thus reducing its income and profit.  The position of a lawyer is no different from any other person who is pursued. 

36.      I do not therefore agree that such a choice means that a lawyer pursued in the Courts will always retain another lawyer to act.  Ultimately the lawyer pursued (subject to the limitations of professional conduct referred to above) has to make a choice as to whether he or she wishes to represent themselves or to retain a lawyer on a paid basis to do so.  It should be remembered that if a lawyer is retained on a paid basis, if costs are recovered, the full rates of the lawyer are not recoverable and so the law firm client will always have to make some payment to the lawyer.  Whether a law firm chooses to do so is a commercial decision for each business where a variety of factors, some financial, will come into play.  If the decision is to appear personally, one set of rules applies in terms of recovery of costs; if an independent lawyer is retained on a paid basis, a different set of rules apply. 

37.      It also follows from the above reasoning, that I am not persuaded that lawyers should be treated any differently from any other profession or business which brings or faces a claim in the courts.  The judgment a lawyer has to make, subject to constraints of professional conduct rules, is no different from the position of any other litigant.  The fact that lawyer has the skills to appear in person in my judgment does not mean that a lawyer should be treated differently from any other litigant in respect of what costs can be recovered.  The choice the lawyer faces remains the same as for anyone else, namely does the lawyer want to spend his or her own time dealing with the matter or does the lawyer wish to retain any independent adviser and pay money out of income earned to do so. 

38.      The fact that a lawyer has professional skills and to argue a case, subject to professional conduct limitations, in my judgment does not alter the fundamental choice that the lawyer is making.  To decide otherwise and to follow the English approach would mean that lawyers were a special case.  They and only they could recover all their fees whereas anyone else appearing for themselves is subject to Rule 12/6 of the Rules.  Although the current and previous rules in England do treat practicing solicitors differently from litigants in person, Rule12/6 does not.  I am not therefore bound to follow th English approach.  With respect to the English Court of Appeal I therefore disagree with the English approach and am not persuaded that it is an approach that should be followed in Jersey.  I also consider that the existence of special skills, that a lawyer appearing in person might use, simply means that a lawyer acting in person will not necessarily face the same challenges or fall into the traps that litigants in person sometimes do.  In other words, the lawyer may be able to progress a matter more efficiently which itself may lead that lawyer to decide to act rather than pay someone else to do so. 

39.      I consider that the approach in England has come about because The London Scottish case was based on the assumption that litigants in person will not be indemnified for the time spent by the litigant conducting litigation.  However, that is not l the position under Rule 12/6.  If a litigant can show that the time he spent in relation to the case has caused actual pecuniary loss then he can recover the lower of the time reasonably spent doing the work or two thirds of the cost which an advocate would have incurred.  If pecuniary loss is not established then an hourly rate is recoverable as some form of compensation for the litigant in person. 

40.      The fact that an assessment of such a loss may not be easy at times does not matter.  Ordinary litigants are now entitled to recover their costs.  One of the basis set out in The London Scottish and Markinson v Trim cases, namely that ordinary litigants are not compensated for their time and no longer applies and is therefore not a justification to treat lawyers differently from other litigants.  I have already addressed above the other foundation for the decision namely that if lawyers could not recover the time spent they would inevitably instruct outside lawyers which is a view I do not accept. 

41.      I also regard a partnership as appearing through either one of its partners or as an employee as falling within the definition of a litigant in person.  I am not aware of any Jersey or English authority on this point despite asking for the same to be considered.  I have reached this view by reference to what is said in Markinson v Trim at page 473 (e) to (h) about a partnership.  While this is in the context of the English Court of Appeal considering that lawyers can recover their time in full for their own professional skill, a view with which I disagree, I do adopt the following analysis of a partnership:-

"at the risk of stating the obvious, a partnership has no legal persona distinct from the aggregate of those who are partners-see section 1(1) of the Partnership Act 1890 (53 & 54 Vict c 39): "Partnership is the relation which subsists between persons carrying on a business in common with a view of profit." It is important to keep in mind-and the failure to do so is a flaw which underlies much of the appellant's argument-that, although a partner can contract with his other partners, he cannot contract with the partnership of which he is a member."  In Lindley & Banks on Partnership Law 18th Edition 2002 paragraph 3 - 04 in a passage attributed to the author of the first edition the point is put in these words: "In point of law a partner may be the debtor or the creditor of his co-partners that he cannot be either debtor or creditor of a firm of which he is himself a member."

42.      For the first defendant to retain its own employee to appear for the firm would be the firm contracting with itself to direct its employee to represent it.  Accordingly, as Carey Olsen cannot contract with itself to retain Advocate Jones, (and to be fair to it did not contend that it had done so) I consider that the correct analysis is that Carey Olsen was appearing in person through Advocate Jones as its agent.  The position would be no different if one of the partners had appeared.  He or she would be there in their own capacity and for their fellow partners as their agent.  He or she would and could not however be a lawyer retained to represent that partnership.

43.      In Allscot Limited v A C Mauger and Sons Limited [2012 JCA 103, prior to a change to Rule 12/6 of the Rules the Court of Appeal that a company was not a litigant in person.  In Allscot, the Court of Appeal confirmed the observations it had made in Leeds United Football Club v Admatch [2009] JLR 186, that a company was not a litigant in person, because to do so would be to ignore the corporate personality of the company, and a company was not a natural person.  Beloff J A as President stated at paragraph 27 "a litigant in person is someone who appears without representation at all, not simply someone who appears without a lawyer.  The words "in person" must be given weight."  He also agreed with Bennett J.A., that a litigant in person was a natural person. 

44.      The difficulty I face is that I am not aware of any authority which is considered whether or not a partnership is a natural person and a litigant in person I therefore return to first principles.  A partnership is different from a company because it is a collection of natural persons carrying on business together.  The partnership is bound by the acts of those natural persons.  If a sole practitioner is a natural person, why is a group of natural persons any different?  In my view there is no difference.  I also consider that a partnership is without representation where it has not contracted with someone to represent it.  Sending one partner or an employee to appear, merely because they happen to be advocates, is still in my judgment the partnership appearing itself rather than through someone retained on its behalf. 

45.      I also do not agree that a partner appearing for his partnership or an employee so authorised is in the same position as a lawyer retained under a contract for services.  Firstly, there is no contract.  Secondly, the confidentiality of discussions between the partner and fellow partners is governed solely by litigation privilege where the confidentiality of communications between the retained lawyer and the law firm client is governed both by litigation privilege and legal advice privilege.  The position is not the same. 

46.      For all these reasons I therefore conclude that Carey Olsen appeared as a litigant in person and the basis upon which they can recover costs is that set out in Rule 12/6(2)(a) namely:-

(i)        if Carey Olsen can prove actual pecuniary loss the lower of:-

(a)       the amount it can prove it has lost for the time spent during the work, or

(b)       up to ⅔ of the sum which, in the opinion of the Greffier would have been allowed if the litigant had been represented by an advocate;

(ii)       if no pecuniary loss is proved, the amount recoverable is the amount the Greffier shall determine. 

47.      I now turn to consider what amount is it that the first defendant has proved it has lost for the time reasonably spent on doing the work.  To consider this I ordered the first defendant to provide me certain financial information relating to the time spent on this matter, the chargeable time recorded by Advocate Jones and another employee for the current year and the previous years, how they have used their non-chargeable time generally and information about the profitability of the dispute resolution and litigation group of Carey Olsen.  I requested all this information ultimately to form a view if actual pecuniary loss has been established and to what value should be placed on the time spent by the first defendant in defending the plaintiffs' claim and whether the sum is likely lower or higher than ⅔ of the sum that would be allowed on a taxation. 

48.      The conclusion I have reached in relation to this is as follows.  I am satisfied that up to 30^th June, 2014, (which is the financial year end for the first defendant), that actual pecuniary loss has been established to enable the first defendant to recover reasonable time spent during this financial year.  However, for the period after 30^th June, 2014, the first defendant is required to provide further information to satisfy me that actual pecuniary loss has been suffered for the current financial year.  As the information provided by Carey Olsen is private, I do not in this judgment set out my reasons for reaching this conclusion, which reasons have been provided to the defendants to this dispute only, as the plaintiff agreed to accept the Court's decision without seeing the information provided. 

Authorities

Optical Services (Jersey) Ltd & Ors v Carey Olsen & Ors [2014] JRC 208A.

Civil Proceedings (Jersey) Law 1956.

Flynn v Reid [2012] 2 JLR 226.

Watkins v Egglishaw [2002] JLR 1.

C v P-S [2010] JLR 645.

London Scottish Benefits Society v Chorley [1884] 12 Q.B.D. 452.

Markinson v Trim [2002] EWCA Civ 1273.

Royal Court Rules 2004.

The London Scottish Benefits Society v Chorley [1884] 13 QBD 872.

Allscot Limited v A C Mauger and Sons Limited [2012] JCA 103.

Leeds United Football Club v Admatch [2009] JLR 186.