Costs - appeal from an order of the Master
Before : |
T. J. Le Cocq, Esq., Bailiff, sitting alone |
Between |
Montague Goldsmith AG (in liquidation) |
Plaintiff |
And |
Goswick Holdings Limited |
Defendant |
Advocate R. O. B. Gardner for the Plaintiff.
Advocate S. J. Alexander for the Defendant.
judgment
the bailiff:
1. This is an appeal from an order of the Master ("the Order") in the above captioned sets of proceedings in which the Master ordered that Montague Goldsmith Capital AG (in voluntary liquidation) ("the Plaintiff") should pay a further sum of £80,000 by way of security for costs within 21 days of the date of the Order.
2. The reasons for the Master's Order are set out in his decision dated 27 April 2020 (unpublished) ("the Master's Decision"). Goswick Holdings Limited ("the Defendant") appeals against the Master's Decision and seeks an order from this Court that the Decision be set aside and within 14 days the Plaintiff pays into Court the sum of £280,310.69 by way of security for the Defendant's actual and incurred costs to 5th March, 2020, and a future estimated cost in defending the proceedings or, in the alternative, the Plaintiff pays the sum of £194,008.29 within the same delay.
3. There are two claims that have been consolidated and are being heard together. Claim 2018/203 (the Goswick claim) is claim brought by the Plaintiff against the Defendant for 50% of the profits arising under a purported contract between them relating to a real estate development in Croydon.
4. Claim 2018/267 (the Trust claim) is a claim brought by the Trustee of the structure (GH Investments Limited) for losses arising under a purported contract between them and a Mr Karim Mawji and/or the Plaintiff relating to four different real estate developments in the United Kingdom (including the real estate development in Croydon which is the subject of the Goswick claim). The Trust claim does not give rise to the application for security for costs made by the Defendant.
5. The Plaintiff concedes that it is liable to lodge security for costs for the Goswick claim and in or around 13th January, 2019, had already paid an initial sum of £80,000.00 into court for that purpose to apply for all stages up to and including discovery.
6. The Master's Decision, in respect of which the current appeal is before this Court, was about the Defendant's claim for substantially greater sums by way of security for costs.
7. The Master's Decision related to the Defendant's application of security for costs of the Goswick claim in a total of £377,976.55 comprising:-
(i) £79,761.50 for the Defendant's additional actual costs defending the action up and to including the discovery;
(ii) £84,644.04 with regard to the Defendant's further actual costs in defending the action up to and including 4 December 2019;
(iii) £213,571.01 the Defendant's estimated future costs up to and including trial.
8. The Plaintiff objected to the payment of those sums and did so principally on two basis:-
(i) That the Defendant has improperly apportioned costs between the Goswick claim and the Trust claim on a 50:50 basis;
(ii) The Defendant has incurred fees and anticipates further fees at levels for which, so the Plaintiff asserts, are disproportionate to the matters in dispute.
9. The Plaintiff has paid the amount into Court ordered in the Master's Decision and the total sum accordingly lodged in respect of security for the Defendant's costs is £160,000.00.
10. The jurisdiction that this Court exercises on appeals from the Master has been set out in the case of Holmes v Lingard and others [2016] JRC 167. In effect, where the appeal lies against an exercise by the Master on delegated powers then the Court applies the tests in Murphy v Collins [2000] JLR 276 as applied in Downes v Marshall [2010] JLR 265.
11. The Master is here exercising a delegated jurisdiction and accordingly the test in Murphy v Collins applies. The essence of that test is the Court should exercise its own discretion and give such weight as it thought fit to the exercise by the Master of his discretion.
12. In Holmes v Lingard (above) the Court in paragraph 26 said this:-
"it is not clear to us that the principles applicable in Downes and Incat, where there is no delegation of the Court's powers but rather the Registrar or Greffier respectively are exercising an independent jurisdiction, apply in cases where, as here, the Master is exercising a delegated jurisdiction. We apply the test in Murphy. The Master has very substantial procedural expertise and experience and that high measure of regard should be paid to his judgment and exercise of discretion in such procedural matters."
13. These are the principles applicable to the instant appeal. The Court will consider the matter afresh but will also pay for a very high measure of regard to the exercise by the Master of his discretion and judgment with regard to procedural matters.
14. What then are the key elements of the Master's Decision?
15. In his decision the Master identified two questions that he was required to determine. The first was how should costs be apportioned between the Goswick claim and the Trust claim, and the second was the amount of security to be ordered for past and future costs.
16. With regard to the first question posed, the Master indicated that he did not think it possible to separate out the costs completely between the two sets of proceedings by reason of an overlap between them. There was overlap in connection with Mr Karim Mawji, set off of losses and a factual dispute relating to profit.
17. The Master identified however that whilst there was an overlap there was greater focus on the dispute and evidence in the Trust claim and he accordingly concluded that a straightforward equal split of costs was not justified. He also disagreed with the apportionment suggested by the Plaintiff because of his identification of the extent of the overlap between the two cases. He concluded that a one third / two third division was appropriate.
18. With regard to the amount of security, the Master did not agree that a 75% Factor B mark-up claimed by the Defendant was justified and took the view that the appropriate mark-up was 50%. In the Master's opinion the case was "more complex than an ordinary run of the mill case but not so complex as to justify the mark-up claimed".
19. The Master also identified concerns about the number of fee earners involved. He said "this suggests to me, based on my experience, that there has been or will be duplication between fee earners that will not be recoverable on taxation". He also noted that some of the costs involved lawyers learning how to carry out a discovery exercise which would not be recoverable.
20. He took the total hours claimed from the affidavit of Advocate Vincent sworn on the 20th December, 2019 ("the Vincent affidavit") and expressed a view that the total hours said to be needed to take both actions to trial (1320) would not be justifiable on taxation as necessarily incurred. The Master took the view that for witness statements 200 hours was appropriate, for expert reports 80 hours and for schedules of loss and damage 20 hours. He further disagreed that the attendance of three lawyers at trial was justified and he allowed against the sums claimed no more than 500 hours for trial and preparation. He totalled the amounts that he had allowed as 800 hours which was 60% of the hours that had been claimed. He did not take the view that an additional mark-up of 10% would be justified and applying the principles that he had identified to future costs, he reduced the claim (net of the 10%) by a further 20% (to reflect his view of the appropriate mark-up to the Factor B rates) and further reduced it to reflect the fact that only 60% of the hours claimed would be justifiable on taxation. This produced £246,000 for future costs of the whole action and reduced the sum by a further two thirds to reflect the future costs of the Goswick action producing a figure of £82,000.
21. The Master then turned his attention to costs already incurred which was approximately £245,000. He adjusted this figure to reflect the same principles that he applied to future costs and identified the resulting figure of £81,666 only marginally exceeded the costs already paid in to Court in the sum of £80,000 and did not therefore conclude that any additional security for costs was justified.
22. In his decision, the Master expressly took into account the submission that costs had to be proportional and that the Court will look at the overall costs incurred having regard to what is at stake. On the basis of the information before him, the Master determined that the provision of a further £80,000 was proportional.
23. In the final part of his decision, the Master noted that the sum that he had ordered was less than the sum the Plaintiff had offered by way of further security which was £130,000 but that the Defendant had rejected this.
24. In essence the Defendant's argument is a straightforward one. The Defendant points out that the Master's Decision in considering the Defendant's claim for future costs by reference to the estimate of those future costs dated the 6th September 2019, whereas the Master should have conducted that exercise in connection with costs estimated on the 5th March 2020. Furthermore, so it is alleged, the Master erroneously assessed the Defendant's actual incurred costs with reference to evidence detailing those costs to the 4th December 2019, whereas he should, so it is argued, have carried out the assessment exercise with reference to an updated schedule which were prepared for the purposes of that exercise evidencing actual and incurred costs to the 5th March 2020.
25. The Defendant further asserts that it was common ground between the parties that the assessment should have been made on the basis of current and updated figures and it would be inappropriate to assess, for example, future costs where those costs had in fact been incurred as at the date of the assessment. The Defendant points out that the Plaintiff, in an email of the 10th December 2019, made clear that it considered it appropriate "that your clients provide an accurate indication of their costs for producing witness evidence, now the witness evidence has been exchanged" and further requested that the Defendant "update the schedule to your letter for consideration by our client following mediation".
26. The Defendant agreed to the adjournment of its application on the basis that its updated costs position would be assessed at the hearing and in its email of the 12th February, 2020, the Defendant explained to the Court that it intended on providing an updated costs position for the purposes of the assessment. Cost schedules were prepared and the Plaintiff responded to those cost schedules. The Plaintiff's objections were dated the 6th April, 2020, and it is clear on the face of the objections that the costs claim being considered by the Plaintiffs related to:-
(i) £80,000 already paid into Court;
(ii) £293,409.08 actually incurred costs;
(iii) £254,071.81 estimated future costs which is the amount claimed in the updated schedules.
27. The Defendant further argues that the updated schedules were in fact prepared on the basis of a 50/50 split and given that the Master found that a 33/67 split was appropriate the correct approach in line with those findings would be to apply a 17% reduction on all claims by the Defendant which would amount to 50% minus 33%.
28. With regard to the Factor B rate, the Defendant points out that the updated schedules meant that a significant portion of the costs claimed in respect of actual costs and future costs were capped well below the proposed uplift and that an application of a 20% deduction to all costs would therefore operate to reduce the total claim costs well below what would be covered by a 50% Factor B uplift which the Master considered appropriate.
29. The Defendant goes on to claim that the Master should not have had any concerns about the number of fee earners employed and it was not appropriate in the circumstances to apply a 40% deduction given that the Master's concerns about duplication should not exist on the basis of the updated schedules. The Defendant submits on the basis of the amended schedules that either they should be accepted in their entirety, save for the following adjustments:-
(i) That professional fees incurred by all fee earners outside of the core legal team should be removed;
(ii) The Factor B rate of 50% should be applied to actual incurred costs and future estimated costs;
(iii) That a 17% reduction be applied to actual and incurred costs and future estimated costs to reflect the Master's finding on apportionment; and
(iv) That a 10% uplift in connection with client care and conduct in respect of future estimated costs be removed.
30. The Defendant's alternative position is that in the event the Court were to be minded to continue with the Master's additional 40% reduction in respect of all fee earners, then the Defendant submits that the updated schedule should be accepted in their entirety but that:-
(i) All professional fees, both for actual incurred time and future estimated costs should be subject to a reduction of 40%;
(ii) The Factor B rate of 50% should be applied to actual and incurred costs and future earned estimated costs to reflect the Master's findings on apportionment;
(iii) The 10% uplift in connection with client care and conduct in respect of future estimated costs should be removed.
31. Revised schedules have been put before me which on the basis of the first submission above would produce a total figure of £280,310.69 as additional security and, in connection with the second position above would produce a total figure of £194,008.29. Both of these figures would be over and above the £80,000 already paid into Court by the Plaintiff in January of 2019.
32. The argument of the Plaintiff is equally straightforward.
33. The Plaintiff asserts that it is clear, and is apparent from the decision, that the Defendant is incurring fees at an "alarming, disproportionate rate". This, so it is argued, means that costs are incurred that will not be recoverable on taxation.
34. The Master had and exercised a very wide discretion to review costs that are sought and to assess them in the round, and he applied appropriate reductions and considered what would be recoverable on taxation. The exercise he carried out was appropriate and his determination of security for costs was apt and should stand.
35. He expressly applied his experience to the litigation and there is no reason to look behind his determination. His reasoning was clear and, in effect, he proceeded on the following basis:-
(i) The Defendant had an inefficient system of work using too many fee earners;
(ii) It had spent too long on every stage of the litigation;
(iii) The case is not complex enough to justify more than a 50% Factor B uplift;
(iv) The Defendant's costs make up no more than one third of Mourants' total fees for both the Trust and Goswick claims.
36. With regard to future costs, the Plaintiff argues that a principle thrust of the Defendant's contention is that some of the Defendant's future costs in September of 2019 have been converted into incurred costs by the time the Master came to undertake the exercise and other unforeseen costs arose. The Plaintiff asserts that the conversion of estimated to incurred costs is inconsequential because the Master's jurisdiction is to look at security for costs in the round and would not itself draw a distinction between future and incurred costs.
37. In relying on the figures contained in the Defendant's December schedule which had been calculated by reference to Mourant's full commercial rates (not Factor A rates plus 50%) could, so it is asserted, have inadvertently inflated the sum sought by Mourant by up to 145%.
38. Further, the Plaintiff argues that the amended schedule of future estimated costs dated the 29th April, 2020 is worthless to the Court on the basis that:-
(i) Jurisprudence makes it clear the Court must be provided with sufficient information that "will enable the Court to make an estimate of the costs of litigation";
(ii) The amended schedule of future costs just provides rough time estimates and hourly rates for each class of fee earner from the 30th March 2020 and it is difficult to make an estimate of costs on that basis;
(iii) Consequently if the Court revisits the future costs element of the Master's Decision, any determination based on the Defendant's amended schedule of future costs would be a flawed determination.
39. With regard to costs already incurred, the Master's approach is characterised by the Plaintiff as holistic, broad and a general estimation of quantum as he is entitled to do within his delegated jurisdiction. It is asserted that by reducing the Defendant's incurred costs by 66% it has done in fact rather better than it would have done if the Master had reduced its incurred costs on an item by item basis. Furthermore, the Master determined the Defendant's incurred costs based on full commercial rates which would have inflated the sum that the Defendant could legitimately have claimed.
40. In conclusion, therefore, the Plaintiff argues that the Master's cost Decision in effect reflects that the Defendant's lawyers have incurred fees that "dwarf what they should have incurred on a dispute of the size of the Goswick claim".
41. It does not appear from the Master's Decision that he was addressed on the principles relating to his jurisdiction to order for security for costs or, if so, there appears to have been no issue in that regard that he felt the need to resolve. This can be readily understood. The Master's jurisdiction which is derived from Rule 4/1(4) of the Royal Court Rules 2004 as amended which provides that:-
"Any plaintiff may be ordered to give security for costs."
42. It is, to me, almost axiomatic that this jurisdiction in terms of both whether security should be given and for how much is extremely broad and should be determined on a case by case basis.
43. A number of other principles are clear from the cases put before me by the Plaintiff.
44. In Condor (UK) Limited (trading as Court consultants) v Hotel de France (Jersey) Limited [1993] JLR Notes-4C the note reads:-
"Although the court's power to order security is discretionary, it should not take into consideration the estimated costs of the defendant's cross-claim extending beyond the plaintiff's claim, nor any head of costs which is likely to be disallowed on taxation. Finally, the court should ensure that its proposed order is not oppressive in view of the size of the claim to which security is to apply."
45. In the unreported judgment in the same case, the Court said this:-
"It appears to me that what I have to do here is to determine the extent of the costs which would need to be incurred by the defendant in defending the original actions but to exclude therefrom the costs which would be incurred in prosecuting the counterclaim over and above the sum of £70,000. This is, of necessity a very difficult calculation and will be by way of an estimate." (My underlining)
46. It is usual to discount an award for prospective or future costs. In Heseltine v Egglishaw and Others [1989] JLR 1 Hamon Commissioner quoting Griffiths LJ in Procon (GB) Limited v Provincial Building Co Limited [1984] 2 All ER at 379 in the following terms:-
"It is, of course, for the parties seeking an order for security to put forward the core material that would enable the court to make an estimate of the costs of the litigation. In the normal course of things, it is to be expected that the court will, to some extent, discount the figure it is asked to award. Allowance will have to be made for the unquenchable fire of human optimism and the likelihood that the figure of taxed costs put forward would not emerge unscathed after taxation."
47. The Plaintiff summarises this approach as being that the costs sought by an applicant for security for costs is not the same as what a party is likely to recover on taxation and is intended to be less.
48. The assessment of a sum that should be paid by way of security for costs is not a precise science. It is inevitably based upon a number of different factors including, but not limited to, the estimate provided by the claiming party, allowance made for uncertainties, the complexity and value of the claim, and the judge's professional assessment and experience of similar litigation matters.
49. The Master proceeded based on figures put before him. The Master's Decision is brief and does not specify what he referred to other than the Vincent Affidavit. However, it is common ground that he had before him both those earlier and the updated schedules.
50. The updated schedules, as regard future costs were general and not broken down and therefore were of limited assistance. It would have been difficult for the Master to form a view on how many lawyers and at what seniority had been allocated for each element. He was in my view justified in proceeding on the detailed analysis in the schedules to the Vincent Affidavit. The general nature of the litigation had not changed. That the Master may have referred to earlier estimates prepared by the Defendant as opposed to the most recent schedules does not in my view necessarily make a material difference to the correctness of the Master's assessment. The fact that certain estimated future expenses had at the time of the assessment been converted to actual and billed quantities does not necessarily have a substantial effect and may indeed be not an uncommon feature of applications for security for costs where time that is estimated to be likely to be taken to do something may well have been taken (although not necessarily converted to fees) between an estimate being provided and the question of security for costs being determined. What the Master was doing was to make an assessment in the round.
51. The Master's reasoning was clear from his decision. He took the fees and the estimates and deducted from them the appropriate allowances based upon his assessment of the balance of work between the Goswick claim and the Trust claim and the appropriate Factor B uplift based on his view of the complexity and value of the claim concerned. He clearly brought his considerable litigation experience to bear in assessing the appropriate number of hours and indeed fee earners and certainly formed the view, as he was entitled to do, that the Defendant's claim by way of security for costs was excessive in the circumstances.
52. The matter was of course complicated by the fact that many of the costs incurred were incurred in connection with both sets of proceedings but in my view, the Master's assessment that there should be a one third / two third division as opposed to an equal division between the costs incurred is reasonable in all of the circumstances.
53. The Master could have carried out a line by line review of expended costs and future costs. He did not, in my judgment, need to do so. He was entitled, as he did, to form a general estimate and to take into account, as he did so expressly, the need to stand back and look at the overall costs having regard to what is at stake.
54. It is a matter for litigating parties as to what level of resources they choose to deploy in dealing with a case. The discipline brought to bear on that is what might reasonably be recovered by way of costs at the end of the day.
55. The Master was, in my judgment, entitled to take the view that he did as to the reasonable level of likely costs recovery in the event of the Defendant's success. Although this Court is to bring its own judgment to bear, it is entitled to give whatever weight it considers appropriate to the judgment of the Master. In my judgment that weight should be very high in a case such as this. As I have already intimated the Master is a highly experienced litigator and procedural judge and I accordingly give substantial weight to his judgment.
56. It is for me to consider whether I should overturn the Master's Decision having placed, as set out above, a high measure of regard both to his judgment and exercise of discretion in procedural matters. Security for Costs is a matter quintessentially within the purview of the Master's discretion and it seems to me in a case such as this, only if I am satisfied that the Master materially under-assessed the costs should I interfere with his exercise of judgment and discretion in this case. It seems to me that such an approach is also mandated by the overriding objective.
57. The Master took the total costs claimed, removed 10% mark-up for client care (which appears to be accepted by the Defendant), reduced by 20% the Factor B uplift from 75% to 50% (which again, appears to be accepted on one of the Defendant's scenarios), and then reduced by 40% to reflect the amount that was recoverable on the standard basis for taxation in the Master's judgment. Thereafter he reduced the sum claimed by two thirds to remove the costs associated with the other claim - the Trust claim. This was in my view a reasonable method of achieving a just result which as I said at the beginning of this section is not a precise science but is a general estimate based on a number of intangibles and based on the judge's experience.
58. I decline to interfere with the Decision and dismiss the appeal.
Authorities
Holmes v Lingard and others [2016] JRC 167.
Murphy v Collins [2000] JLR 276.
Downes v Marshall [2010] JLR 265.
Royal Court Rules 2004 as amended.
Condor (UK) Limited (trading as Court consultants) v Hotel de France (Jersey) Limited [1993] JLR Notes-4C.
Heseltine v Egglishaw and Others [1989] JLR 1.
Procon (GB) Limited v Provincial Building Co Limited [1984] 2 All ER