Jersey Unreported Judgments

Costs - application by the Plaintiff for an order for full indemnity costs.

[2018]JRC044

Royal Court

(Samedi)

22 February 2018

Advocate I. C. Jones for the Plaintiff.

Advocate O. A. Blakeley for the.Defendant.

judgment

the deputy bailiff:

1.       This is an application by Calligo Limited ("Calligo") for an order for full indemnity costs from Professional Business Systems CI Limited ("PBS") arising out of the judgment of this Court delivered on 2^nd October, 2017, (Calligo Limited-v-Professional Business Systems CI Ltd [2017] JRC 159). 

2.       There is no doubt that Calligo is the clear winner in its dispute with PBS and indeed PBS has already conceded that I should make an award of costs on the standard basis and indeed order and appropriate figure by way of interim payment of those costs.  On 19^th January, 2018, I ordered that PBS should pay Calligo's costs of and incidental to those proceedings and made an order for an interim payment on account of costs in the sum of £50,000 to be paid within 21 days of that date.  The only question before me that remains, therefore, is as to whether PBS should pay Calligo's costs on either the standard or full indemnity? 

3.       The law on the circumstances as to when full indemnity costs should be ordered is clear.  In Hong Kong Foods Limited and Gibbons -v-Robin Hood Curry and Ors [2017] JRC116 Sir Michael Birt, Commissioner, said this at paragraphs 9 and 10 of his judgment:- 

"9. The principles in relation to indemnity costs are well established.  A convenient summary is to be found in the decision of the Court of Appeal in C -v- P-S [2010] JLR 645 where Beloff JA said this at para 11:- 

 "... we do not accept that it is appropriate to impose such a restrictive approach on the discretion of the court to make an award of costs on the indemnity basis.  The question will always be - is there something in the conduct of the action by one of the parties or the circumstances of the case which takes the case out of the norm in a way which justifies an order for indemnity costs, recognising there will usually be some degree of unreasonableness?  We do not consider that there is a need for the claiming party to show a lack of moral probity or conduct deserving of moral condemnation, or malicious or vexatious conduct."

10. The Court of Appeal specifically approved the observation of Page, Commissioner in Pell Frischmann Engineering Limited -v- Bow Valley Iran Limited [2007] JLR 479 where the Commissioner said at para 25:-

 "25.  At the risk of over simplifying matters, the result of these English authorities may be said to be this: that the circumstances in which an award of indemnity costs may, as a matter of discretion, be ordered are less restrictive than they used to be; there must, ex hypothesi, still be something to take the case out of the ordinary, but the range of potentially relevant considerations ... 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."

4.       What then is the basis upon which Calligo asserts that the costs should be awarded on a full indemnity basis as opposed to the more usual standard basis?  What is the thing in the conduct of one of the parties or the circumstances which takes the case out of the norm "recognising there will usually be some degree of unreasonableness". 

5.       Mr Jones for Calligo asserts two grounds which he says individually to justify for an order for indemnity costs and taken together certainly should do. 

6.       The first ground is the way in which PBS engaged, or rather failed to engage in Calligo's attempts to settle the case out of court or indeed respond to a without prejudice save as to costs offer to settle in the sum of £63,000 which in the event Calligo comfortably exceeded.  Calligo complains that there was no engagement whatsoever from PBS, the offer was in effect ignored, meetings held but no instructions were given to Advocate Blakeley.  This was an unreasonable conduct and approach and should attract an order for indemnity costs.  It is no longer necessary to point to moral or rather immoral conduct or consider indemnity costs as punitive in nature.  All that needs to be shown is a high level of unreasonableness and a complete failure to engage with overtures to settle at that high level.  Calligo continued to try to settle and offers were repeated but there was no response at all.  All that PBS has indicated but at one stage it would be prepared to go on a "drop hands basis".  There should be a consequence for failure to engage, and that should be full indemnity costs. 

7.       In response to that, Advocate Blakeley says that a failure to engage in this way was not unreasonable in general or in the circumstances of this case.  It was PBS's case that there was never any contract between it and Calligo and it had felt duped.  This was not a matter that was so certain that, for example, Calligo could have succeeded in a summary judgment. 

8.       I observe that in Hong Kong Foods (cited above) at paragraph 11(v) of his judgment, the learned Commissioner said:-

"(v) As to the Calderbank offers, the fact that the Plaintiffs refused offers which were better than the result which they achieved is of course a powerful argument in favour of awarding costs against them.  But it does not necessarily lead to an award of indemnity costs unless the refusal can be categorised as acting unreasonably.  I am not persuaded that the necessary level of unreasonable behaviour was reached ...."

9.       There is no doubt that PBS, in terms of its negotiating stance, was uncompromising and that Calligo was anxious to settle.  However that of itself does not, so it seems to me, necessarily take the matter into the realms of indemnity costs as opposed to costs of a standard basis.  PBS did, so it appears, indicate that it was prepared to walk away on a drop hands basis.  No matter what Calligo thought of the value of that offer it did represent an offer, by PBS, to take on a part of the costs burden that had arisen as a result of Caligo's proceedings.  That may not, in the context of what was ultimately achieved by Calligo, be seen as a sensible appraisal of the risks but it does not in the context of this action of itself take matters into the realm of indemnity costs. 

10.    The second basis upon which Mr Jones argues that PBS's position takes this matter outside of the normal course of litigation is its failure to adduce as sufficient evidence or to make a serious attempt to establish one of the major points in its defence, namely that its IT spend was in the region of £350 per month and therefore it was far less likely that they would have agreed to a significant increase to spend with Calligo.  This, so Mr Jones acknowledged, would have been a powerful point to argue against Calligo's claim had PBS come anywhere near to establishing it.  The fact that they did not do so, however, meant that they never realistically thought that they could establish that assertion before the courts and therefore to put Calligo to the expense of dealing with it constituted a high level of unreasonableness.  Whilst Calligo's IT director, Mr Perello, maintained that the cost was only £350 per month he was not able to assist the Court on how he reached that calculation, the documents filed did not support it and indeed there was no substantial evidence given about it.  No disclosure had been made in the ordinary course of events about the IT spend and it was left to Calligo to make an application for specific discovery. 

11.    On PBS's part Advocate Blakeley argued that this is simply a matter of a party not fully coming up to proof on a particular aspect of a case and it is not in any sense conduct that is out of the norm.

12.    It is correct that PBS failed to come close to establishing that its IT spend was £350 per month and indeed the Court said in its judgment that it found the evidence underpinning that figure "unsatisfactory".  It must have been clear to PBS that it was not on reflection going to be able to establish that figure even had it ever believed it could have done.  Calligo in this application characterises PBS's defence as "contrived". 

13.    I agree that it was unreasonable for PBS to continue to assert a defence from the moment it realised that it did not have the evidence to support it.  However allowing for the fact that there is often some unreasonableness within the conduct of the parties to litigation, perhaps often the losing party, is this level of unreasonableness such that it tips the balance into an award for indemnity costs? 

14.    In my view it does not.  This was at the end of the day a defence that was not vindicated by the evidence and although I take the view that its assertion and continuation, was questionable I do not take the view that this moves the matter into the area of indemnity costs. 

15.    Having decided that on neither of Calligo's two grounds is an order for indemnity costs justified should I nonetheless consider it justified on a cumulative basis?  Again I do not think so.  I must say that I have come close to making an order for indemnity costs, particularly in the area of allegation relating to PBS's IT spend, but I do not on balance think that the level of unreasonableness is such that I should order indemnity costs. 

16.    Accordingly I order that PBS pay Calligo's costs of and incidental to its claim on the standard basis to be taxed if not agreed. 

17.    I do not think that it was unreasonable for Calligo to seek the orders that it has, even though I have not found in its favour in this instance, and I also note that I have already ordered a payment of costs on an interim basis which exceeded the amount offered in that regard by PBS.  In my judgment Calligo should also have its costs of this costs argument on a standard basis to be taxed if not agreed.  It forms part of the overall litigation. 

Authorities

Calligo Limited-v-Professional Business Systems CI Ltd [2017] JRC 159

Hong Kong Foods Limited and Gibbons -v-Robin Hood Curry and Ors [2017] JRC116