Jersey Unreported Judgments

Costs - reasons.

[2020]JRC198

Royal Court

(Samedi)

30 September 2020

Before     :

Advocate Adam Justin Clarke, Esq., Judicial Greffier.

 

Advocate J. W. Angus for the Plaintiffs.

Advocate M. W. Cook for the First Defendant.

Advocate R. O. B. Gardner for the Second Defendant.

contents

		Paras
1.	Introduction	1
2.	Background	2-8
3.	Plaintiffs' Submissions	9-15
4.	Second Defendant's Submissions	16-23
5.	The Company's Submissions	24-26
6.	Plaintiffs' Reply	27-30
7.	Law on Costs	31-37
8.	Decision	37-45

the judicial greffier:

Introduction

1.        This judgment contains my written reasons on the issue of costs following the judgment in Financial Technology Ventures II (Q), L.P. and Ors v ETFS Capital Limited and Anor [2020] JRC032 ("the Hearing").  At the conclusion of that judgment ("the Hearing Judgment"), I invited the parties to make written submissions on the issue of costs, failing which costs would be in the cause.

Background

2.        Following directions issued by the court on the 15^th October, 2019, the parties were ordered to seek to agree, inter alia:-

(i)        A list of agreed facts and issues; and

(ii)       The use of electronic discovery in accordance with Practice Direction RC17/08.

3.        The parties were unable to reach agreement on either the list of facts and issues or on appropriate search terms, dates and custodians to be utilised in discharging their respective electronic discovery obligations. 

4.        As a result of that disagreement, the plaintiffs issued a summons seeking the following orders:-

(i)        the list of issues attached as Schedule 1 to the summons should be treated as agreed between the parties in accordance with paragraph 1 of the Act of Court dated 15^th October, 2019;

(ii)       the list of agreed facts attached as Schedule 2 to the summons should be treated as agreed between the parties in accordance with paragraph 1 of the Act of Court dated 15^th October, 2019;

(iii)      that the discovery protocol attached at Schedule 3 to the summons shall govern the obligations and approaches to be adopted by each of the plaintiffs, the first defendant and the second defendant with respect to the use of electronic discovery; and

(iv)      the costs of the summons should be paid by the first and second defendant on the indemnity basis or on such basis as the court deems appropriate.

5.        At the Hearing I was clear that I did not feel that it was appropriate for the court to make orders imposing "agreed lists" on parties where there was evidently no agreement in place.  As such items (a) and (b) of the summons were not ordered. 

6.        The majority of the submissions at the Hearing focused on the electronic discovery protocols annexed to the summons.  Moreover, the vast majority of the time spent on this topic was invested in submissions regarding the appropriate discovery of the defendants.  I described the contents of the protocols at paragraph 30 of the Hearing Judgment as follows:-

"30.    In anticipation of the hearing, the plaintiffs filed draft electronic discovery protocol documents for both their proposed electronic discovery and that of the defendants.  The documents contained several parts by reference to events which had occurred during the parties' commercial relationship.  Each commenced with a rubric which included an introduction, an explanation of the application of the search terms chosen, a section on the test to be applied as to the relevancy of the documents to be reviewed and disclosed, a comment on the application of privilege and a statement on the manner in which the produced documents were to be formatted for presentation.  In the draft protocol created for the defendants, there was an additional section in regard to the distinction to be drawn between Mr. Tuckwell and the defendant company."

7.        At the Hearing, the court received extremely detailed submissions from both the plaintiffs and the second defendant ("Mr Tuckwell") on the contents of the protocols which I described at paragraph 32 of the Hearing Judgment:-

"32.    Following on from the general submissions made by Advocate Williams, Advocate Angus, also for the plaintiffs, then took the Court through the discovery protocols in considerable detail.  The Court heard submissions on each of the 15 topics identified by the plaintiffs for the defendants' electronic discovery.  Each of the topics was itself subdivided into three further sections: the appropriate keywords to be searched, the salient time periods for which searches needed to be undertaken and also the names of any other custodians whose electronic databases need to be reviewed.  In response, Advocate Gardner likewise took the Court through Mr. Tuckwell's objections and counter-proposals in respect of the defendants' electronic discovery.  For the sake of completeness, it would be right to address the submissions on all of the listed headings and I do that below.  I also wish to record that each party (at the request of the Court) filed, after the hearing, updated versions of their respective preferred discovery protocols to assist the Court in reaching a decision on these detailed issues."

8.        Having made my decisions on the appropriate orders for electronic discovery, I invited the parties to file written submissions on costs.  I have received and have considered written submissions from all three parties, including the plaintiffs' brief submission in reply.

Plaintiffs' Submissions

9.        The plaintiffs argued that they ought to be characterised as the "winning" party as they had been substantially successful on the majority of the points of detail in the particular search terms for discovery and the date ranges to be applied.  Specifically, they argued that they had succeeded on key areas of the issues in dispute, namely that:-

(i)        searches would be undertaken and discovery would be given in respect to documents held by relevant Company custodians;

(ii)       the Company was the proper party to carry out a review of the documents in its possession custody or power rather than allow Mr Tuckwell's lawyer to undertake the task; and

(iii)      discovery would be undertaken in all aspects where Mr Tuckwell's intention or motivations behind his pleaded case are relevant even where the facts of Mr Tuckwell's actions have been admitted.  

10.      The plaintiffs asserted that they were forced into issuing the summons because of the parties' inability to reach agreement on the topics of issues, facts and the scope of electronic discovery. They criticised Mr Tuckwell's suggestion that the summons had been premature as, right up to the Hearing, the correspondence from Mr Tuckwell had been devoted to adverse comment on the scope of the plaintiffs' proposed electronic discovery for the defendants. In the view of the plaintiffs, if the summons had not been issued, the issues would never have been resolved consensually.

11.      The court was directed to a number of references in the correspondence from Mr Tuckwell which the plaintiffs argued showed that his position had been unreasonable.  In particular, the plaintiffs accused Mr Tuckwell of being unreasonable in his position on the discovery obligations of the Company.  He was deemed "inflexible and tardy" in his general approach to electronic discovery, setting unreasonably narrow parameters for his own discovery, and failing to "engage constructively with the plaintiffs' stated grounds for broader discovery nor with the suggested search terms".  In addition, the court's attention was drawn to several examples where Mr Tuckwell had described the plaintiffs' request for discovery to be little more than "fishing trips".

12.      The plaintiffs submitted that there had been three main issues of dispute at the Hearing.  These were:-

(i)        whether discovery should be given of electronic discovery documents held by the Company custodians (other than Mr Tuckwell);

(ii)       which of the Company or Mr Tuckwell ought to carry out the review of Mr Tuckwell's emails on the Company's server; and

(iii)      whether the defendants were required to give discovery with respect to issues where Mr Tuckwell had admitted the simple facts of his (mis)conduct.

13.      In the view of the plaintiffs, the court had substantially favoured their position on these three issues.  It was submitted that on a close analysis of the numerous topics within the second defendant's discovery protocol, it was clear that the plaintiffs had been fully or partially successful on considerably more topics than those where the court had not agreed with them. 

14.      In regard to the topics where the court found in favour of the defendants, the plaintiffs asserted that there could be no criticism of raising the issues in the first place given the stalemate that the parties had reached.  Moreover, there was little or no time spent on these topics at or in the build up to the Hearing and therefore little or no costs had been incurred in dealing with them at the Hearing. 

15.      In summary, the plaintiffs submitted that, whether viewed on an "issue by issue" basis or in the round, their arguments had substantially prevailed and it followed that the court ought to order that Mr Tuckwell should pay their costs of and incidental to the Hearing. 

Second Defendant's Submissions

16.      Advocate Gardner, for Mr Tuckwell, asserted that the correct order for the court to give was one that awarded costs in the cause.

17.      He submitted that the Hearing was not a discovery-only hearing but rather one at which the plaintiffs' summons was heard: a summons that also requested orders in regard to "agreed issues and facts".  Given that the first two limbs of the summons had been rejected by the court, it was not possible (irrespective of how the court chose to analyse the outcome of the discovery issues) to reasonably declare the plaintiffs as clear "winners" at the Hearing. 

18.      Moreover, on the issue of the discovery, the order ultimately issued by the court was significantly different from that first sought by the plaintiffs and still substantially changed from that sought by the plaintiffs at the Hearing.  Advocate Gardner asserted that Mr Tuckwell had incurred considerable costs in dealing with the matters which had been conceded by the plaintiffs prior to the Hearing and these matters could not be ignored when considering where the obligation on costs should lie. 

19.      Advocate Gardner went on to assert that, on their analysis of the outcome of the electronic discovery element of the Hearing, it was Mr Tuckwell who had succeeded on the most significant and overriding issue of principle; namely that discovery ought to be proportionate and focused on the pleaded issues.  He argued that the plaintiffs had been unsuccessful on their proposed discovery orders that:-

(i)        discovery be conducted by reference to the plaintiffs' list of issues;

(ii)       over 70 search terms be applied over the full period from 2006 to the present; and

(iii)      discovery of all topics, search terms and date ranges be applied to the electronic documents.

20.      The court was also asked to consider the impact of the final orders on the number of "hits" created by the search criteria.  Advocate Gardner submitted that when the plaintiffs' proposed discovery protocol of the 31^st October, 2019 was applied, it had produced 320,000 unique hits on Mr Tuckwell's electronic documents alone.  Subsequent versions of the protocol from the plaintiffs (the latter being produced the day before the Hearing) produced approximately 105,000 and 66,000 respectively.  By comparison, the protocol ordered by the court produced approximately 35,000 unique hits in respect to Mr Tuckwell's electronic documents. This constituted a significant reduction and was not supportive of the plaintiffs' claim that they had been successful.

21.      Advocate Gardner reminded the court that the plaintiffs had not been successful in respect of the topics of privilege in the rubric to the protocol, the lists of facts and issues (a topic upon which, contrary to the suggestion of the plaintiffs, Mr Tuckwell had spent considerable time and costs) and the inclusion of the "family emails".

22.      Moreover, it was submitted that the plaintiffs had likewise been far less successful than they asserted in respect to the topics, date ranges and search terms in the final protocol.  On the topics which the plaintiffs claimed complete success, Advocate Gardner submitted that this position ignored the dismissal or withdrawal of the additional Company custodians in all of the topics.  He also reminded the court of its decision in respect to the topics of "the Company's change of business model", "Disputes between FTV and Mr Tuckwell" and the manner in which the plaintiffs had subsumed some search terms into other topics.  These were all evidence that the plaintiffs were overstating the degree of their success at the Hearing.  On the topics where the court had found against the plaintiffs, Advocate Gardner criticised the plaintiffs for unreasonably portraying their failings at the Hearing as being de minimis and unworthy of note.

23.      In general, Advocate Gardner felt that the true analysis of the outcome of the Hearing was that neither party was the true "winner" and that the appropriate order should be costs in the cause to reflect the same, albeit that he reserved the position that should the court favour one side over the other then it ought to be his clients who should be the recipient of a favourable costs award for the reasons he had advanced. 

The Company's Submissions

24.      The Company had sought to take a neutral stance throughout the proceedings.  By letter dated 4^th March, 2020, Advocate Cook reiterated that stance and asserted that the issue of costs was one between the active parties to the dispute.  

25.      Advocate Cook submitted that the court had agreed with the Company's submissions on the issue of privilege and relevance in the rubric to the draft protocol. 

26.      On a final point, Advocate Cook noted that whilst the Company would be content with costs in the cause, were the court to order that one party were to pay all or some of the costs of the other, the Company would seek an equivalent order. 

Plaintiffs' Reply

27.      In response to a suggestion of Mr Tuckwell that the plaintiffs had been unsuccessful, and had backtracked on a number of their positions Advocate Angus submitted that his clients ought not to be criticised or punished for being willing to compromise.  Compromise was necessary to limit the areas of dispute and had Mr Tuckwell been prepared to make reasonable proposals for discovery at the beginning of the process, it would not have been necessary for the plaintiffs to produce such detailed and prescriptive protocols.  

28.      It was submitted that Mr Tuckwell was downplaying the substantial differences between his initial proposals and what was ultimately ordered by the court.  In the view of the plaintiffs, Mr Tuckwell's initial discovery proposals would have elicited just under 2,000 unique hits (a figure representing just over 2.5% of the 70,000 total documents located by the searches ordered by the court).  In essence, the plaintiffs argued that the number of documents located in application of the final order was considerably closer to their position than it was to Mr Tuckwell.  This in turn led to the evitable conclusion that the plaintiffs had been the more successful parties at the Hearing. 

29.      Advocate Angus rejected the suggestion that the Hearing was not a discovery hearing.  He stated that the focus of the Hearing was clearly discovery, a point evidenced by the amount of time spent in the Hearing Judgment on that topic.  In addition, it was not unreasonable to have raised these issues as they naturally informed the discovery process.  The plaintiffs provided a draft list of issues and facts on the 10^th October, 2019 to give the parties the opportunity to agree the same.  Agreement could not be reached but Advocate Angus submitted that the subsequent correspondence was limited and therefore the costs incurred would or should be de minimis in comparison to the costs incurred on discovery. 

30.      Finally, the plaintiffs defended the inclusion of the comments on privilege that were contained in the rubric to the discovery protocols and which the court removed.  Advocate Angus submitted that this was not a matter on which his clients were "unsuccessful" as their inclusion was intended only to avoid subsequent debate.  The plaintiffs wanted to be sure that the usual rules on privilege between the Company and the shareholders would be upheld - something that the defendants had not confirmed prior to the Hearing.  Only at the Hearing did the Company confirm the position.

Law on Costs

31.      The court has full discretion to determine the issue of costs in the Royal Court by virtue of Article 2(1) of the Civil Proceedings (Jersey) Law 1956, which states:-

"2       Power of Royal Court to award costs

(1)       Subject to the provisions of this Part and to rules of court made under the Royal Court (Jersey) Law 1948, the costs of and incidental to all proceedings in the Royal Court shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid."

32.      In exercising that discretion, the court has developed an approach, initially through the well-known case of Watkins & Anor v Egglishaw & Ors [2002] JLR 1 and approved by the Court of Appeal in Flynn v Reid [2012] (2) JLR 226. Those founding principles are stated at paragraph 7 of Watkins 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."

33.      The plaintiffs urged the court to recognise them as the "winning" party.  They advanced the argument that considering the guidance in paragraph 7(e) in Watkins, identification of a winning party is a matter of "common sense" and that there is no automatic rule that disqualifies a party from being deemed a "winning" party merely because they do not succeed on all the issues in dispute.  In support of their position, Advocate Angus quoted from the case of HLB Kidsons v Lloyds Underwriters [2008] 3 Costs LR 427 at para 11 where Mrs Justice Gloster states:-

"the court can properly have regard to the fact that in almost every case even the winner is likely to fail on some issues".

34.      In reply Advocate Gardner submitted that a more accurate understanding of the guidance in Watkins required closer consideration of the other comments of Commissioner Page.  At paragraphs 7(b) and (c) the Commissioner stated that, in furtherance of the overriding objective of doing justice between the parties, the following was salient:-

"(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..."

(c)       It is a mistake, however, to strain overmuch to try and label one party as the "winner" and one as the "loser" when the complexity or the circumstances of the litigation do not readily lend themselves to analysis in these terms"

35.      In addition, Mr Tuckwell relied on the case of A.E.I. Rediffusion Music Ltd. v Phonographic Performance Ltd. [1999] 1 WLR 1507.  First, Advocate Gardner referred to the  comments of Lord Woolfe, M.R., where he criticised the decision of the Chair in the tribunal below for:-

"[placing] far too great a significance, in a case where there are a number of issues, in trying to find a party who can be described as an overall winner and then attaching importance to that label."

36.      Second, Advocate Gardner reminded the court of the comments of Mummery, L.J. where he agreed with Lord Woolfe, M.R., and stated:-

"[t]he Chairman of the tribunal took the wrong approach. He proceeded on the basis of a self-imposed fetter on the discretion. He was influenced by the perceived need to find a winner and a loser in a case where the final determination of the tribunal was somewhere between the respective positions adopted by the parties"

37.      Finally, Advocate Gardner took the court to the comments of Commissioner Page in the case of Pell Frischmann Engineering Limited v Bow Valley Iran Limited and others [2007] JLR 479 at 486:-

"Many cases, no doubt, readily lend themselves to such a classification, but many - including many cases of a commercial nature - do not. If, on the one hand, these more recent decisions do, indeed, represent a retrenchment from the line adopted by the Court of Appeal in A.E.I., I would respectfully suggest that, so far as the practice of the Royal Court is concerned, the approach adopted by Lord Woolfe is to be preferred."

Decision

38.      I have no difficulty in acknowledging that the claim at the heart of this dispute is complex and evidentially burdensome.  The plaintiffs' allegations regarding the actions of the defendants (and in particular Mr Tuckwell) are broad and cover a sizeable period of time.  The complexity is evidenced by the considerable efforts to which the parties went to argue over the details of the electronic discovery: from the topics, to the custodians and from the date ranges to the search terms.  This was a detailed and hard fought hearing.

39.      Any order for costs must start from the position of seeking to do justice between the parties.  As I have set out above, that may be achieved in some cases by determining one party as the "winner" where that is readily apparent.  I have wrestled with whether the court is able to characterise either of the main protagonists in this case as the "winner".

40.      I have regard to the fact that the summons under consideration at the Hearing clearly was drafted with the intention of seeking three separate and distinct orders, only one of which was in regard to electronic discovery.  At the Hearing I accepted Mr Tuckwell's stance that it would be inappropriate for the court to order that lists of issues and facts should be imposed on the defendants as "agreed lists" when that was evidently not the case.  Whilst I accept the suggestion that those submissions did not take up a large proportion of the time at the Hearing, these were orders which ought not to have been sought in those terms.  Time and effort was incurred in dealing with the orders sought and it is appropriate to recognise that the plaintiffs did not succeed with those limbs of the summons. 

41.      Turning to the electronic discovery protocols, neither party were entirely successful.  I have been invited to consider the calculation of success by reference to mathematical analysis - to compare how many unique documents the Order facilitated as against the initial positions of the parties or their positions at the Hearing.  For my part, I am reluctant to turn the assessment of a hearing into a percentage based calculation as I do not believe that this was what Lord Woolfe or Mummery LJ intended in their useful guidance on the exercise of the court's discretion.

42.      It is open to the court to have regard to any and all considerations that may have any bearing on doing justice between the parties. I therefore look at the position of both sides.  For the plaintiffs, I am sympathetic to the argument that a summons (not entirely in the terms of the one they issued) needed to be filed to ensure case management where disagreement between the parties existed on the topic of electronic discovery.  They were successful on a number of points.  In particular, the court was with the plaintiffs on the issue that, notwithstanding that Mr Tuckwell had admitted facts in his pleading, this did not automatically mean that discovery was not required or appropriate in regard to certain aspects which went to motive and intention.  There were a number of topics which Mr Tuckwell refused to countenance as being appropriate for discovery and which the court found in favour of the plaintiffs. 

43.      However, counterbalancing those successes, the plaintiffs were unable to convince the court (and therefore Mr Tuckwell was successful in defending his stance) that the emails to and from family members ought to be included.  Furthermore, there were specific topics which the court dismissed in their entirety (e.g. FTV's conversion from preferred to ordinary shares, FTV's purchase from the shareholders and the secondary sales) together with search terms denied and dates ranges shortened (e.g. change of the defendant company's business model and forced resignations of the defendant company's independent directors). 

44.      The plaintiffs have stressed that the alleged uncooperative attitude of Mr Tuckwell and his reference to the requests for discovery as being "fishing trips" were inappropriate and contrary to the duty of the parties as set out in the Practice Direction RC17/08.  When a party adopts such a stance and is universally or substantially unsuccessful at a subsequent hearing, then they risk the wrath of the court and adverse costs orders.  However, in the present case, the defendants were successful in defending a number of positions in respect to the draft protocol relied upon by the plaintiffs and I am unwilling in these circumstances to penalise Mr Tuckwell for his robust defence of his position. 

45.      In my estimation and for the reasons set out above, it is not "readily apparent" to me that any one party was the winner in the Hearing.  In light of that conclusion, doing justice between the parties dictates that the costs of the Hearing are costs in the cause and I order such. 

Authorities

Financial Technology Ventures II (Q), L.P. and Ors v ETFS Capital Limited and Anor [2020] JRC 032.

Practice Direction RC17/08.

Civil Proceedings (Jersey) Law 1956.

Watkins & Anor v Egglishaw & Ors [2002] JLR 1.

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

HLB Kidsons v Lloyds Underwriters [2008] 3 Costs LR 427.

A.E.I. Rediffusion Music Ltd. v Phonographic Performance Ltd [1999] 1 WLR 1507.

Pell Frischmann Engineering Limited v Bow Valley Iran Limited and others [2007] JLR 479.