Jersey Unreported Judgments

Costs

[2021]JRC118

Royal Court

(Samedi)

20 April 2021

Before     :

R. J. MacRae, Esq., Deputy Bailiff

 

Advocate N. A. K. Williams for the Plaintiff.

Advocate S. J. Alexander for the First Defendant.

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

judgment

the deputy bailiff:

Introduction

1.        The Court sat on 18^th March 2021 in order to hear argument as to where costs should lie in respect of the judgment after trial dated 26^th January 2021 (Financial Technology Ventures II (Q) LP and Ors v ETFS Capital Limited and Tuckwell [2021] JRC 025).

2.        The parties - the Plaintiffs, the Company and Mr Tuckwell - were not ad idem as to the incidence of costs.

3.        The Plaintiffs submitted that they were the 'winners' of the proceedings and should have all their costs on the standard basis. 

4.        Mr Tuckwell submitted that the proper order was no order as to costs in view of the fact that, inter alia, the Plaintiffs had failed on so many issues.

5.        Initially the Company was uncertain as to what order for costs it invited the Court to make.  The Company stated that it invited the Court to make a 'just' costs order.  I rejected this as an unhelpful suggestion.  If the Court was to make a costs order in favour of a company, even a company which had purported to act impartially in the course of the trial, it should be in the context of a specific costs application.  The Company subsequently made a written proposal to the Court in relation to the appropriate order in respect of its costs which is complex and will be considered in detail below.

6.        Prior to considering the arguments advanced, in so far as they were relevant, it is appropriate to set out the principles upon which the Court should exercise its discretion in respect of costs.  Those principles were not, in large measure, the subject of dispute. 

The relevant principles

7.        It is accepted that the Royal Court has a broad discretion in relation to costs pursuant to Article 2(1) of the Civil Proceedings (Jersey) Law 1956, which provides that:

"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."

8.        This discretion is to be exercised in accordance with well-established principles.  The starting point is the decision of Commissioner Page in Watkins v Egglishaw [2002] JLR 1, as approved by the Jersey Court of Appeal in Flynn v Reid [2012] (2) JLR 266.

9.        In Watkins v Egglishaw, Commissioner Page said:

"(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) and A.E.I. v. Phonographic Performance.

(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), 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."

10.      I note that in Flynn v Reid, the Court of Appeal referred to not only Watkins v Egglishaw but the English case of Elgindata Limited (No 2) [2002] 1 WLR 1207.  In Flynn, Beloff JA said:

"14.As stated in Watkins (2002 JLR 1, at para. 7), the principles are broadly in accordance with In re Elgindata Ltd. (No. 2), a decision of the English Court of Appeal which predated the Civil Procedure Rules, although with additional flexibility now that the overriding objective is engaged. Elgindata is itself summarized in the judgment in Watkins (ibid., at para. 3) and draws a distinction between two different situations (a) that a party may be deprived of his costs where he raises issues on which he fails even though he has succeeded overall; and (b) that he may be ordered to pay the unsuccessful party's costs if he raises issues or makes allegations improperly or unreasonably. The Royal Court has indeed in practice tended to draw a distinction between these two forms of costs orders (see for example Café de Lecq Ltd. v. R.A. Rossborough (Ins. Brokers) Ltd.) It is not (and never was) necessary to show unreasonable conduct to trigger the former and less severe of the two, and the dictum of Lord Woolf, M.R. in A.E.I. Rediffusion Music Ltd. v. Phonographic Performance Ltd. ([1999] 1 W.L.R. at 1522) insofar as it suggests otherwise should be treated with caution."

11.      Accordingly, a successful party may not be ordered to pay the other side's costs unless they make allegations improperly or unreasonably, but the successful party may be deprived of their costs if they raise issues upon which they fail, even though they have succeeded overall.

12.      This particular point was addressed again by the Court of Appeal in the case of Tantular [2020] JCA 013.  That was a case factually dissimilar to this as it involved the making of saisies judiciaires in respect of the property of Mr Tantular.  Accordingly, it was not a 'normal' civil case by any means.  Nonetheless, the Court considered the costs orders that it might make, particularly in the context of whether or not it should make an 'issues based order or a proportional or percentage-based order'.  McNeill JA, giving the judgment of the Court of Appeal, said this:

"55.      In our judgment the award of costs should be in relation to the appeal as a whole.  Particularly cogent reasoning is required to enable a court to depart from ordinary practice and make an issues-based order.  When such orders are made, practical complications in assessment typically arise and add both to irrecoverable costs and to the strains of litigation for the parties involved.  It is only where it would be manifestly unfair to parties to grant an ordinary order for costs and where individual issues appear capable of being separated out with a reasonable degree of certainty that an issues-based order will be appropriate. 

56.      As regards proportional or percentage-based orders, different considerations often militate against the making of such orders, especially at appellate level.  Without carrying out a mini-taxation, a court will rarely have sufficient information to make a percentage-based order which reflects the actual proportion of work, out of the whole, which a litigant has carried out for those parts of the appeal upon which success has been achieved.  The conduct of litigation is an art, not a science, and it is almost the rule, perhaps increasingly so, that litigants and their representatives will deploy as many lines of argument as appear appropriate in order to persuade the tribunal in question.  The result of a percentage-based order can often be to punish a successful litigant and, in broad terms, such a result should ensue only where a significant amount of time has been taken up with a discrete line of argument which had no prospect of success whatsoever."

13.      Accordingly, the Court should proceed on the footing that generally it is appropriate to make an order in relation to the costs of the case as a whole.  To make an issue-based order is complicated and both the Plaintiffs and Second Defendant agreed that it would be, inter alia, expensive and difficult to calculate the consequences of such an order in this case.  There is a tension between what Beloff JA said in Flynn v Reid and what was said by McNeil JA in Tantular.  There is no suggestion in the judgment of Beloff JA that a successful party may only be deprived of its costs only if it pursues a line of argument which has "no prospect of success whatsoever".  Beloff JA simply said that the party may be deprived of their costs where they raise issues on which they fail, although they have succeeded overall.  In my view, the approach of Beloff JA (Birt JA and Collas JA agreed with his reasons in Flynn v Reid) is to be preferred.  A successful party may be deprived of some of their costs where they raise issues on which they fail even though they have succeeded overall; it is not necessary for the Court, having held that a party has failed to prove its case on a particular issue, to go further and find that that was an issue upon which they had no prospect of success whatsoever.  On the facts of this case, the difference between the two approaches does not, as will be considered below, have a significant consequence.  But there will be cases when such a difference in approach will lead to different outcomes.

14.      The approach of the Court of Appeal in Flynn v Reid appears to be consistent with the approach in England and Wales, according to Hollington on Shareholders' Rights (9^th Edition):

"9-28. An unfair prejudice petition will, more than most types of litigation, often raise a host of factual and other issues.  A petition may succeed even though the petitioner fails on a number of issues.  In such a case, the general principles governing the liability for the costs of the proceedings were prior to the CPR as follows: 

           (1) the petitioner is entitled to their costs, save for the costs attributable to the allegations made by them upon which he failed;

           (2) the petitioner will be deprived of their costs attributable to the allegations made by them upon which they failed; and

           (3) the petitioner will not, however, be ordered to pay the respondents' costs attributable to those issues, unless the allegation was made improperly or unreasonably. 

These principles must now, however, be read subject to the CPR and recent authorities, where the courts have been more willing to penalise parties who raise points which fail....

9-29. If there is a need to make allowance for the issues upon which an otherwise successful party has lost, the courts favour percentage costs orders, i.e. orders that a party should pay a certain percentage of the costs in the proceedings, over issues-based costs orders, because of the fact that the latter pose such problems in the assessment process.  The Court of Appeal in English v Emery Rumbold & Strick Ltd [2002] 1 WLR 2409 at [115] has emphasised that, although the court seeks in its costs order to reflect success or failure on particular issues, it should preferably do this by apportioning costs, not by ordering costs related to particular issues: i.e. percentage rather than issue-specific costs orders."  

15.      As to the Court of Appeal's view in Tantular that litigants will often 'deploy as many lines of argument as appear appropriate', that is an accurate representation of the tactical approach adopted by many parties in substantial civil proceedings, but in my view it is unhelpful to throw the proverbial kitchen sink at the other party, pleading issues which have, on any reasonable view, little or no prospect of success and in such circumstances a successful litigant's costs need to be considered in the context of such discrete lines of argument being pursued which ultimately failed.

16.      In this regard, I was assisted by the decision of Commissioner Sir Michael Birt in the case of MB & Services Limited v Tatiana Golovina and United Company Rusal Limited [2020] JRC 099.  In that case, Commissioner Birt, having reviewed the authorities referred to at paragraphs 14 to 21 of the judgment, noted as follows:

"21. As pointed out at (iii) in the passage from Elgindata cited above, the Court will not make a deduction for every issue or allegation upon which a successful party fails.  This is consistent with the observations of Simon Brown LJ and Christopher Clarke J cited above to the effect that in many cases the winner is likely to fail on some issues and that it is a fortunate litigant who wins on every point.  Accordingly, as stated in Elgindata itself, it is only where the issue has caused a significant increase in the cost or length of the proceedings that a deduction may, in the Court's discretion, be made.  Where a deduction is made, it is generally, in my judgment, preferable to adopt a broad and reasonably robust approach and estimate a percentage deduction rather than ordering a deduction by reference to the exact time spent on the unsuccessful issue, which can only be ascertained on taxation; see for example the observation of Robert Walker JA in United Wire Limited v Screen Repair Servs (Scotland) Limited [1997] TLR (cited in Pell Frischmann Engineering Limited v Bow Valley Iran Limited [2007] JLR 479 at [6]) as to the desirability of adopting a reasonably robust approach and avoiding, if possible, complicated costs orders that may result in complex and expensive taxation proceedings.

22. Issue 1 took up a significant proportion of the time and expense in relation to this application.  It would have been open to the plaintiffs to have conceded issue 1 and simply based their opposition to the application to stay on issue 2.  They did not do so and it seems to me that issue 1 was of sufficient significance in terms of time and expense that they should not in general be able to recover their costs in connection with that issue from the defendant.  The question therefore is what percentage deduction to make. 

23. I have noted the pages of the judgment devoted to each issue together with the pages of the skeleton argument of each side.  These of course vary.  I also accept that, for the purposes of fixing upon a deduction from the plaintiffs' costs, the matter for consideration is the percentage of time and effort spent by the plaintiffs rather than by the defendant.  On that aspect, I accept Advocate Redgrave's submission that more of the plaintiffs' effort was directed towards issue 2 than issue 1.  Furthermore, even if the plaintiffs had not opposed issue 1, time and effort would have been devoted to general matters not specifically related to either issue, such as setting the scene, explaining the causes of action and describing the relevant factual background.  Given that the defendant has failed overall in its application and taking a broad view and adopting the robust approach envisaged by Robert Walker J, I consider that a fair deduction would be 30%. 

24.  Accordingly, I order the defendant to pay 70% of the plaintiffs' costs of and incidental to the application on the standard basis."

17.      I agree that it is appropriate to adopt a 'broad and reasonably robust approach and estimate a percentage deduction rather than ordering a deduction by reference to the exact time spent on the unsuccessful issue'.

18.      The decision in Pell Frischmann Engineering Limited v Bow Valley Iran Limited [2007] JLR 479 was also drawn to my attention.

19.      In that case the proceedings were instituted many years after the material events had occurred.  The plaintiffs, importantly, had made no attempts to settle and failed to respond to the counter offers on behalf of the defendants to settle.  After a trial lasting thirty-five days, the transcript of which ran to over five thousand pages, the plaintiffs recovered £500,000 which was a modest recovery and reflected success on no more than one limited component of the litigation. 

20.      Accordingly, the plaintiff was awarded only 20% of its costs and the defendants 80% of their costs to represent their success in defeating all of the other aspects of the plaintiff's claim.  The Court held that the classification of parties as 'winner' and 'loser' would not always be appropriate. 

21.      I was also referred to some English authorities to which I have regard.  Some of them concern similar cases, that is to say cases where there was a petitioning shareholder inviting the Court to find that they were unfairly prejudiced by the conduct of the responding party.  In the matter of Bird Precision Bellows Limited (1981 case 003420, Court of Appeal Civil Division), Oliver LJ said:

"In the circumstances of this case I think it is perfectly evident that the respondents were compelled to go on in order to achieve the result that they finally achieved.  In doing that, they may have over valued their shares as a matter of valuation; but that frequently happens and I have never heard it suggested that because someone has claimed too much in the way of damages he is to be deprived of the costs of proving the damages which he does finally manage to establish, so long as those damages are in fact in excess of the amount paid into court, which is of course is the equivalent of the calderbank letter in the present context."

22.      In Re Elgindata, the English Court of Appeal considered an appeal against a costs order made by a trial judge who had deprived the petitioning applicant of most of their costs in an unfair prejudice case.  This was because, inter alia, the petitioner had been unsuccessful on most of the issues.  Every case is different, but in that case the Court of Appeal, when allowing the appeal, held that 'the fair and proper order for us to make is to deprive the petitioners of half their costs and no more' (Nourse LJ at page 1216F).

23.      I also note (and I will return to this) that in relation to the costs of the company, Nourse LJ said (page 1216H):

"In a normal case of this kind it would be right that the company itself should not have to bear any of its costs, because otherwise the value of the successful party's shares might be correspondingly diminished.  But here the price for the petitioner's shares has now been agreed and cannot be further affected.  In the circumstances, there is no necessity for any order as to the company's costs."

24.      The Plaintiffs drew to my attention the case of Barnes Limited v Time Talk (UK) Limited [2003] EWCA 402, a case on rather different facts, in which the English Court of Appeal observed at paragraph 28:

"In deciding who is the successful party the most important thing is to identify the party who is to pay money to the other.  That is the surest indication of success and failure."

25.      In HLB Kidsons v Lloyds Unwriters [2008] 3 Costs LR 427, Gloster J said, again in a case on very different facts from the case before me, that the aim always is to 'make an order that reflects the overall justice of the case'.  Gloster J went on to say at paragraph 10:

"The court may, of course, depart from the general rule, but it remains appropriate to give 'real weight' to the overall success of the winning party.'

At paragraph 11 she said:

"There is no automatic rule requiring reduction of a successful party's costs if he loses on one or more issues.  In any litigation, especially complex litigation such as the present case, any winning party is likely to fail on one or more issues in the case."

26.      The Court went on to reduce the costs awarded to the successful party on account of their failure on two discrete issues resulting in a reduction of 11.16% on account of their total bill of costs in £225,000 (paragraph 16 of the judgment).

27.      With those principles clearly in mind, I turn to the facts of this case and the decision of the Royal Court.

This case and the decision of the Royal Court

28.      It is important that this decision on costs does not become a recitation of the findings of the Royal Court.  Accordingly, I do not repeat or surmise the Court's findings.    

29.      It is necessary to identify the successful party or 'winner'.  It is also necessary to give real weight to that factor when considering who should bear the costs of these proceedings. 

30.      The Plaintiffs argue that they were successful, and in respect of the areas where they were unsuccessful those were relevant to the background to the matters upon which they did succeed, and in any event the proceedings were only necessary because of Mr Tuckwell's conduct. 

31.      Mr Tuckwell argues that in fact the identity of the winner in these proceedings is far more 'nuanced'.  He says that the Plaintiffs' principal pleaded claim was for a just and equitable winding up, and it was only at trial that they shifted to say that their main claims were on account of unfair prejudice.  He says that the claim for just and equitable winding up was rejected by the Court and that in respect of the Plaintiffs' claim for unfair prejudice they failed to prove that the appropriate date for the valuation was the Sales in 2018, the Court preferring Mr Tuckwell's argument that the appropriate date for valuation was the date of trial, and that the Plaintiffs also failed in their argument that the Plaintiffs' shares should be valued without being subject to a minority discount.

32.      He argues that the fact that the Plaintiffs were first to appeal, which only prompted Mr Tuckwell's cross-appeal, reveals the Plaintiffs' real appreciation as to who was the 'winner' in this case. 

33.      Mr Tuckwell argues that the buy-out ordered by the Court is at a price of much less than the Plaintiffs wanted and, on any view, the price that Mr Tuckwell will ultimately pay for the Plaintiffs' shares is much closer to Mr Tuckwell's offer made in 2018, as repeated by him during the trial, than what the Plaintiffs would have received had they succeeded in persuading the Court that their shares should be valued at the date of the Sales in 2018 and not subject to a discount.

34.      Nonetheless, any reasonable person reading the Court's conclusions on unfair prejudice at paragraphs 463 to 465 of the judgment would be in no doubt that the Plaintiffs were, taking the case as a whole, the successful party in this case and accordingly the starting point must be that the costs of the proceedings should follow the event.

35.      However, that is not the end of the matter and in view of the contents of the Plaintiffs' pleadings, the witness evidence, the way in which the trial progressed and the Court's findings, it would be extraordinary if the Plaintiffs were to have the whole of their costs in this case.

36.      Mr Tuckwell is right to observe, through his counsel, that the Plaintiffs failed on all the allegations of unfair prejudice prior to the events of 2017 and 2018.  It was put to me that 'they did not get home on one complaint'. 

37.      Although those allegations only occupy a relatively short part of the judgment, (a point to which I will return) the time that they occupied, both prior to and during the trial, is better reflected by considering the documents filed by the Plaintiffs and the progress of the trial itself.

38.      The Plaintiffs' case on their 'expectations' as contained in their pleadings, skeleton argument and opening submissions, and the circumstances arising from the failure of the IPO / sale of the Company in 2010-2011 were either not accepted by the Court or were largely irrelevant to the Court's findings of unfair prejudice.

39.      As to the key section of the Amended Order of Justice entitled 'Mr Tuckwell's prior self-dealing and prejudicial conduct' at paragraph 6 of the Amended Order of Justice, which occupies eight pages of the Plaintiffs' pleading, all the allegations of unfair prejudice therein were rejected.  The areas upon which the Plaintiffs succeeded occupied a lesser part of the Plaintiffs' pleaded allegations - principally paragraphs 9 and 10 of the Amended Order of Justice (although the allegations in paragraph 10 in relation to the Company's new investment policy were not found to amount to unfair prejudicial conduct per se), and paragraph 11.  The Plaintiffs' allegations (in paragraph 10A) in relation to a potential shift in the Company's tax residency raised in the Amended Order of Justice also did not lead to a finding of unfair prejudice.

40.      Similarly, in the Plaintiffs' Skeleton Argument under the title 'Factual basis for the relief', the matters pleaded in relation to 'expectations', 'Mr Tuckwell's fee demand', 'the expectations of Millennium and Susquehanna', in respect of the IPO, Mr Tuckwell's alleged self-dealing, the unauthorised share allocation, the proposed share repurchase, the removal of Mr Cukier from the Board, and the purported transfer to the Tuckwell Foundation occupy over eighteen pages, and the matters upon which the Plaintiffs were successful at trial occupy between thirteen and fourteen pages, before the Plaintiffs spent another three pages detailing allegations in relation to the potential shift in the Company's tax residence and restructuring, which again did not result in any relief being granted to them.

41.      If the Plaintiffs had restricted their pleadings to the issues upon which they succeeded, then any evidence in relation to the allegations upon which they failed may have been touched upon by the Plaintiffs as part of the background to the much later events of 2017 and 2018, but the evidence would (or at least should) have been presented briefly and in less contentious terms, and would not have needed to have been pleaded out and then subject to detailed (sometimes very detailed) evidence at trial as befitted pleaded allegations of unfair prejudice.  

42.      Not only were these allegations unsuccessful, in the opinion of the members of the Court, they had little or no prospect of success.  Some of the allegations, for example in relation to what was described by Mr Cukier as 'Mr Tuckwell's unprecedented demand for a personal fee', were simply overstated and wrong on any analysis (see paragraphs 141 to 146 of the judgment).

43.      As to the allegations pleaded at paragraph 6 of the Amended Order of Justice, all of which failed, the Court observed at paragraph 158:

"The evidence and arguments in relation to the LTIPs will be considered reasonably briefly.  Indeed, none of the instances of unfair prejudice asserted by the Plaintiffs prior to the Sales, including the LTIPs, Mr Tuckwell's proposal for a buy back of some of his shares, Mr Tuckwell's removal of Mr Cukier from the Board and the transfer of shares to the Tuckwell Foundation, will be dealt with at great length.  Regrettably, collectively these issues occupied several days of evidence (including at least two days of cross-examination of Mr Tuckwell) and none of these matters, in the view of the Court, either individually or collectively, amounted to or led to unfair prejudice to the Plaintiffs.  However, all four matters are pleaded as instances of unfair prejudice in the Amended Order of Justice."

44.      Although the evidence in relation to these unsuccessful claims is summarised and the Court's conclusion provided in the space of fifteen pages or so, that does not fairly represent the amount of Court time that was spent dealing with these allegations.  Whole days would pass without any evidence given which was capable of amounting to unfair prejudice.  For example only, as the Jurats noted during the cross-examination of Mr Tuckwell.  It was only on the third of the four days of cross-examination that the Plaintiffs embarked on asking Mr Tuckwell about matters which might (and did) give rise to findings of unfair prejudice.

45.      Bearing in mind the Court's finding that prejudice in this case had to, and could only, mean financial prejudice (paragraph 29 of the judgment) it was always going to be highly likely, if not inevitable, that these claims for unfair prejudice were unsuccessful as they gave rise to no such prejudice.  And although these matters may have been touched on as background to what occurred in 2017 and 2018 and they did, as set out by the judgment, in some respects help explain Mr Tuckwell's hostility to FTV, that had already been established and in any event was clear from Mr Tuckwell's evidence.

46.      Furthermore, much of this conduct was separated by the events that post-dated the Sales by several years and was of limited relevance to the matters which gave rise to the Court's findings of unfair prejudice.  On behalf of the Company, it was said at the hearing that 66% of the documents which it provided on discovery related to the period prior to 2017, and that was the cause of several hundred thousand pounds of costs being incurred.  The Company added that a good proportion of the costs spent on discovery had limited value to the outcome of the trial and that the breadth of the allegations made by the Plaintiffs gave rise to material being located and discovered which was not necessary even to frame the subsequent unfair prejudice.  Far less documentation would have been provided by the Company if the claims had been differently framed.

47.      It is said on behalf of Mr Tuckwell that the vast majority of the Plaintiffs' witness evidence was irrelevant to the issues upon which the Court made findings adverse to him.  Mr Tuckwell suggests that 88% of the witness evidence was irrelevant to the matters upon which the Plaintiffs succeeded.  Although that cannot be accepted, it is certainly accurate that Mr Tuckwell's advocate had to spend substantial periods of time cross-examining on matters which did not and could not reasonably have given rise to successful claims of unfair prejudice, and that much of the witness evidence was of limited relevance to the events of concern in 2017 and 2018.  On examining it again, Mr Cukier's witness statement (he was the first and principal witness for the Plaintiffs) would have been much less than half the length had it focused on the matters which the Plaintiffs ultimately succeeded.

48.      The Plaintiffs' costs are high (nearly £11 million) and although the size of their costs is not relevant for the purpose of my decision in relation to the incidence of costs (that is a matter for taxation, although it is a matter of relevance when I come to the consideration of any interim payment), it demonstrates the amount of legal and other work which went into this case.  Mr Tuckwell's costs exceed £4 million and the Company's costs are approaching £1.75 million.

49.      The Jurats and I discovered during the course of the trial, to our considerable surprise, that there had been no offers, negotiations, or attempts at mediation in this case beyond Mr Tuckwell's original proposal made to some of the Plaintiffs and his offer to settle made during the trial.  The Plaintiffs point to the fact that Mr Tuckwell made his offer (paragraph 345 of the judgment) on a take it or leave it basis.  However, even in a case such as this, and in the Court's experience, in the majority of cases where proceedings are issued, compromises can be and are made if parties begin negotiations or agree to A.D.R. 

50.      A compromise does not merely save the parties money.  This case, including pre-trial hearings, Court reading in time for the trial and judgment writing time, occupied at least seven weeks of a full-time judge of the Royal Court; in excess of five to six weeks of the time of two Jurats, led to Greffiers and ushers working late into the night, (the Court sometimes had to sit until 8pm to accommodate the Plaintiffs' US witnesses) at a time when the Court was under staffing pressure owing to the public health crisis and the fact that the Court was sitting in an hotel.  As indicated, the members of the Court were surprised when we learnt that there had been no attempts at all by the Plaintiffs to engage in settlement discussions.  This cannot be in the public interest, consistent with the overriding objective or the way in which civil proceedings should be run in this jurisdiction today.  The failure of the Plaintiffs at any stage to ever propose or to engage in settlement discussions or to make any offer of any kind is something which, in my view, I am entitled to take into account, but in the absence of the parties agreeing that I should do so, is not a matter to which I give significant weight. 

51.      The principal factors to which I have given weight are those alluded to already in this judgment, namely the Plaintiffs' failure on the majority of their pleaded case, such issues taking up a substantial amount of Court time, together with the incurring of associated costs arising from discovery and the preparation of other material such as witness evidence.  In the circumstances I have taken a broad view of the fair order to be made in this case; it is not appropriate to make an issues based order and taking all the circumstances into account and in the exercise of my discretion, I order that Mr Tuckwell pay 50% of the Plaintiffs' costs on the standard basis to be taxed if not agreed.

The costs of the injunction proceedings

52.      The costs of these proceedings were, in the context of the overall case, insubstantial.  At the end of the trial and partly at the instigation of the Court, the Plaintiffs asked the Company to give an undertaking to retain sufficient assets to meet any buy-out order that might be made by the Court, pending judgment. 

53.      The Plaintiffs were then required, absent a continuing undertaking from the Company, to issue injunctive proceedings by re-amending their Amended Order of Justice.  The Plaintiffs said that the Company was acting on the instructions of Mr Tuckwell and that he should pay the Plaintiffs' costs of and incidental to those proceedings.

54.      At the hearing the Company stated that it was not acting on the instructions of Mr Tuckwell and that they had a substantive defence to those injunctive proceedings because, inter alia, there was no risk of dissipation in this case, or at least insufficient to warrant the granting of the order sought in the Plaintiffs' Re-Amended Order of Justice containing such injunctions. 

55.      Having regard to the fact that there was a substantive defence to an application that was ultimately never determined (because the Court gave its judgment before that application was due to be heard in April 2021) on normal principles there should be no order for costs.  Such an approach is consistent with the decision of Birt, Deputy Bailiff, in Berry Trade Limited v Moussavi [2003] JLR Note 51, where the Court held that, in circumstances where an interlocutory injunction is obtained, the Court should normally reserve the costs until the decision of the substantive proceedings is known.  A similar decision was made in the English High Court in Picnic At Ascot v Klaus Derigs [2001] FSR 2. 

Interim payment

56.      The Plaintiffs seek an interim payment on account of their costs.  Again, the parties were not in dispute as to the relevant principles in this regard.  In Crociani v Crociani [2014] (1) JLR 503, Beloff JA, giving the judgment of the Court of Appeal, said:

"16. In my view, the achievement of justice, to which all exercises of discretion under procedural rules aspire, would usually require that a party who is, pursuant to a court order, entitled to his costs, should be paid on account a percentage of the amount he is likely to recover on taxation calculated on a conservative basis to avoid any real risk of overpayment.

17. This conclusion is consistent with and supported by the jurisprudence in England and Wales at a time before the CPR contained its present presumption.

18. In Mars UK Ltd. v. Teknowledge Ltd. (8)-the first relevant decision-Jacob, J. identified the principle in this way ([1999] 2 Costs L.R. at 46-47):

           "I now turn to the second issue, whether or not there should be an order for interim payment. The first thing to do is to consider what the general rule should be, interim payment or not. There is no guidance given in the Rules other than that the court may order a payment on account. There is no guidance in the Practice Direction. So I approach the matter as a question of principle. Where a party has won and has got an order for costs the only reason that he does not get the money straightaway is because of the need for a detailed assessment. Nobody knows how much it should be. If the detailed assessment were carried out instantly he would get the order instantly. So the successful party is entitled to the money. In principle he ought to get it as soon as possible. It does not seem to me to be a good reason for keeping him out of some of his costs that you need time to work out the total amount. A payment of some lesser amount which he will almost certainly collect is a closer approximation to justice. So I hold that where a party is successful the court should on a rough and ready basis also normally order an amount to be paid on account, the amount being a lesser sum than the likely full amount."

His analysis is in effect adopted in the contemporary version of the CPR."

57.      The Plaintiffs go on to contend that the 'starting point' for an interim payment is 50% of the costs claimed on the standard basis, referring to the decision in Francis v JFSC [2018] JRC 064A.  However, I note that in Crociani the payment was 33.3%, not 50%, of the sum anticipated on taxation.

58.      In this case, the costs incurred by the Plaintiffs are high.  That is not to say that they might not be justified on taxation.  The Plaintiffs' advocates said they were 'proportionate' to the sum in dispute.  Bearing in mind the difference between what the Plaintiffs 'recovered', in terms of the sum that Mr Tuckwell will need to pay to purchase their shares and what he was prepared to offer (the difference between Mr Tuckwell's offer at trial, and the sum effectively awarded by the Royal Court ranges from $44.23m to $56.64m, depending on the valuation of the portfolio companies), legal costs incurred by the parties exceeding £17 million (£11 million for the Plaintiffs) may not necessarily be described as 'proportionate'.  Again, that is a matter for taxation.

59.      All three Plaintiffs managed to instruct a single Jersey advocate but instructed different English law firms.  The Plaintiffs contend that there is 'unlikely to have been any duplication between them' but that seems to me to be an optimistic assertion.  Although Ogier, who conducted the entire trial, incurred costs calculated on a taxation basis (i.e. with the appropriate factor A rate and a factor B rate of 100%) totalling £2,086,529, having spent 5,431.20 hours on the matter, one of the law firms managed to spend 5,319.35 hours on the case and bill the relevant Plaintiff £2,649,997, and another managed to spend 4,734.44 hours and bill £3,031,895. 

60.      In any event, these are matters for taxation, but bearing in mind the Court's obligation is to be cautious and the fact that one of the Plaintiffs instructed a law firm which spent a much reduced period on the case, namely 1,300.60 hours, billing £557,560, I have decided to proceed on the footing that Mr Tuckwell may, as will be his right, object to the costs of the entirety of the sums billed by the said firms.  In any event, the bills were not subject to the factor A / factor B analysis that is required by authority.  In Incat Equatorial Guinea Limited and Luba Freeport [2010] JLR 435, Birt, Bailiff, noted that in respect of the costs of foreign solicitors, the following:

"24. It appeared initially that Advocate Goulborn might be seeking to argue that the Greffier must calculate a Factor A rate for each foreign lawyer; in other words, he should calculate the rate for a firm practising in, for example, central London. However, it became clear that Advocate Goulborn was arguing that, for all foreign lawyers, the maximum amount that could be allowed for any work was an hourly rate calculated by reference to the applicable Factor A rate for Jersey lawyers uplifted by the Factor B rate for the relevant case.

25. It seems to me that the answer to Advocate Goulborn's submission is to be found in the terms of r.12/7, quoted at para. 8 above. It is clear that paras. (a) and (b) envisage two different situations. In the circumstances envisaged by para. (a), the work done by the foreign lawyer is work that could have been undertaken by the Jersey lawyer, e.g. preparing a witness statement, drafting a pleading. In those circumstances, it is only fair to the paying party that the amount allowed on taxation should be no greater than that which would be allowed for a Jersey lawyer to do the same work. Indeed, this is what para. (a) says in unambiguous terms. A Jersey lawyer would be entitled to an hourly rate calculated by reference to the Factor A rate current at the time the order for costs was made, uplifted by such Factor B rate as the Greffier allows in relation to the particular case. That determines the maximum hourly rate which a foreign lawyer may be allowed on taxation for any work falling within para. (a). It follows that the Greffier must, in relation to such work, check the hourly rate claimed by the foreign lawyer against the hourly rate calculated by reference to the Factor A and Factor B rate which would be allowed for a Jersey lawyer. If the hourly rate claimed by the foreign lawyer exceeds the amount which would be allowed for a Jersey lawyer, it must be reduced to the hourly rate for the Jersey lawyer. If the hourly rate of the foreign lawyer is equal to or less than the Jersey rate, the hourly rate claimed by the foreign lawyer may be recovered.

26. The circumstances envisaged by para. (b) are different. This relates to work done by the foreign lawyer which, in the context of the proceedings, could not reasonably have been done by a Jersey lawyer. In those circumstances, the amount recoverable by the foreign lawyer is not related to a Jersey lawyer's fees; it is simply what is reasonable. It is for the Greffier to assess in a particular case what is reasonable but clearly in some circumstances, e.g. the use of specialist counsel or solicitors, the hourly rate allowed may be greater than that which could be recovered by a Jersey lawyer."

61.      Accordingly, the work of the English solicitors, who apparently were doing work such as discovery and preparation of witness statements, should have been calculated by reference to the factor A rate, subject to a factor B uplift. 

62.      Subsequent to the hearing, on 1^st April 2021, the Plaintiffs supplied to the Court what they described as an 'alternative costs schedule' indicating that if the solicitors' costs of the three English firms instructed were subject to the factor A rate plus a 100% factor B uplift, then they would fall from £2,657,648 to £2,119,020; from £3,031,895 to £2,128,054 and from £557,558 to £543,959; yielding a net claim on account of the Plaintiffs' costs (disbursements in full and factor B at 100%) of £9,426,592.

63.      I do (again this is a provisional view subject to taxation), express surprise that all the hours spent by the Ogier lawyers and English solicitors in relation to this case are subject to 100% uplift.  That may be appropriate for some of the trial work but perhaps not for all work done.  This is a question for taxation but it reinforces the need to approach these matters with caution.

64.      Accordingly, I proceed on the footing that it is appropriate, bearing in mind the order made, to order that the Second Defendant pay 25% of the following costs within two months of this judgment, namely:-

1  Ogier                                                                                                               £2,056,529

                                                                25% of total                  =          £514,132.25

2  The costs of counsel (excluding the Australian costs as they relate to claims that were unsuccessful and may be subject to particular arguments on taxation)

(i) Rebecca Loveridge - Barrister fees                                              £    8,196

(ii) Emma Horner - Barrister fees                                                    £155,960

(iii) Bankim Thanki QC - Barrister fees                                            £  25,563

(iv) Michael Todd QC - Professional fees                                         £914,869

(v) Gregory Denton-Cox - Professional fees                         £495,901

(vi) RLH Legal Costs Consultancy - Professional fees                       £  29,750

                                                                Total                             =          £1,603,239

                                                                25% of total                  =          £407,559.75

3 The costs of trial

(i) Trial technology and transcription (50% split)                                £140,357

(ii) Hotel Cristina (50% split)                                                           £  29,170

(iii) Attorney travel, hotel and expenses                                           £  13,286

(iv) Expert witness fees for Noel Matthews / FTI Consulting               £411,822

(v) Witness familiarisation training                                                   £  41,438

(vi) Other hearing expenses                                                            £    2,447

                                                                Total                             =          £638,520

                                                                25% of total                  =          £159,630

4      Discovery and data management costs

(i)        Electronic data hosting and management                                £  43,873

(ii) Online research and company registration search                        £    1,226

(iii) E-discovery services                                                                 £298,049

 

                                                                Total                             =          £343,148

                                                                25% of total                  =          £  85,787

5 Misc costs

                Advice from Ogier corporate team                                                £    2,999

                                                                Total                             =          £     2,999

                                                                25% of total                  =          £   749.75

6 Stamp duty costs

(i) 26.4.19 - Service                                                                       £       200

(ii) 3.5.19 - Court tabling                                                                £       310

(iii) 2.9.19 - Summons date fix                                                       £         30

(iv) 6.11.19 - Summons date fix                                                      £         30

(v) 18.11.19 - Court fee                                                                  £       625

(vi) 22.11.19 - Hearing                                                                   £       300

(vii) 13.12.19 - Hearing                                                                   £       600

(viii) 20.12.19 - Hearing                                                                  £       300

(ix) 28.2.20 - Summons date fix                                                     £         30

(x) 16.3.20 - Hearing                                                                     £       200

(xi) 20.3.20 - Summons                                                                 £         30

(xii) 15.5.20 - Summons                                                                £         30

(xiii) 29.6.20 - Summons                                                               £         30

(xiv) 23.7.20 - Hearing                                                                   £       200

(xv) 29.7.20 - Hearing                                                                    £         30

(xvi) 4.9.20 - Hearing                                                                     £       100

(xvii) 19.10.20 - Hearing                                                                 £       320

(xviii) 20.1.21 - Trial                                                                       £  56,240

                                                                Total                             =          £   59,605

 

                                                                25% of total                  =          £14,901.25

Final cost summary (25% of each total from each category)

(i)              Ogier costs                                                                                  £ 514,132.25

(ii)            The costs of counsel                                                          £ 407,559.75

(iii)           The costs of trial                                                                £ 159,630.00

(iv)           Discovery and data management costs                               £   85,787.00

(v)            Misc costs                                                                        £        749.75

(vi)           Stamp duty costs                                                              £   14,901.25

                                                                FINAL TOTAL               =          £1,182,760.00

Interest on costs

65.      As to interest on costs, both parties agreed that I had a wide discretion.

66.      The Plaintiffs sought an order novel to this jurisdiction, but nonetheless one which the parties agreed I had the power to order, namely that Mr Tuckwell pay interest on costs from the date upon which the relevant invoice was paid.  Although doubtless there is jurisdiction to make such an order, it would be a complex matter to implement.

67.      In the circumstances, I order interest on costs at the Court rate from the date of conclusion of the trial, 13^th November 2020. 

The costs of the Company

68.      The submission in the Company's extremely brief Skeleton Argument (less than half a page in length) was that the Company had adopted a neutral position throughout the proceedings save to oppose the Plaintiffs' application that the Company be wound up on the just and equitable basis and that the Company 'should be paid its costs on the standard basis by the parties'.

69.      This gave no indication as to which party in particular the Company thought should pay its costs. 

70.      The advocate for the Company said that most of the Company's costs resulted from discovery and, as indicated already, that a good proportion of those costs resulted to discovery which had limited value to the outcome of the trial. 

71.      When pressed on who should bear its costs, the Company indicated that it was 'neutral' on the issue.  It seems to me that although the Company may properly adopt a neutral stance in unfair prejudice proceedings, that was unhelpful in the context of who should bear its costs at the end of the proceedings when the Court's judgment was known.

72.      When pressed on what costs order the Company sought, Advocate Alexander said that he wished to take instructions and would revert tomorrow.  This he did by letter to the Court which I now summarise.

73.      The Company says that of the total costs of £1.73 million incurred on behalf of the Company, £1.43 million had been paid by 13^th November 2020 - the valuation date at which the Court ordered the buy back of the Plaintiffs' shares and accordingly (as I understood it from Advocate Alexander's submissions to me at the costs hearing) the valuation of the shares in the Company as at the final day of trial took into account the fact that those £1.43 million in costs had been paid. 

74.      As to the Company's costs, they consisted broadly of £1 million in Mourant fees; £340,000 in respect of an English firm which assisted with discovery; £315,000 in fees charged by the e-discovery provider; and £16,000 and £44,000 in respect of two Silks who advised the Company, the former in relation to discovery and the latter in relation to providing the Company advice generally.

75.      The Company says that approximately £1.4 million in costs related to discovery, of which some 66% related to documentation created prior to November 2017, which was said to be important because prior to that date the Court made no findings of unfair prejudice.  In terms of the balance of legal costs of £330,000, around £120,000 related to trial and preparation for trial, of which between 35% and 50% was concerned with the allegations against Mr Tuckwell relating to events occurring before November 2017.

76.      The Company said that it should not be required to bear its own costs and that all shareholders in the Company, not just the Plaintiffs and Mr Tuckwell, have suffered by reference to the reduction in the NAV of their shares as a result of the Company's costs of the litigation.

77.      The Company said that a reasonable starting point, 'where both sets of litigants achieve some level of success at trial, would be a 50/50 split between Mr Tuckwell and the Plaintiffs'.  However, they went on to say that that should be subject to an adjustment owing to the fact that a considerable part of the Company's costs were incurred as a result of allegations made by the Plaintiffs which failed.  In the circumstances the Company concludes that the overall order, taking into account all the factors in this case, should be that the Company's £1.4 million in discovery costs should be split as to approximately £931,000 to be paid by the Plaintiffs and approximately £469,000 to be paid by Mr Tuckwell, and in respect of the other costs of £330,000, approximately £198,000 should be paid by the Plaintiffs and approximately £132,000 should be paid by Mr Tuckwell.

78.      Drawing all these arguments together, the Company asked for an order that the Plaintiffs pay 66.5% of the Company's total discovery costs and Mr Tuckwell pays 33.5% of those costs, and in respect of the remainder of the Company's costs 60% be borne by the Plaintiffs and 40% by Mr Tuckwell.

79.      It should not be forgotten that the Company is now, or will be when the Court's orders are carried out, owned as to approximately 90% by Mr Tuckwell who is the chairman and one of three directors.

80.      The Plaintiffs' advocates responded to this suggestion made on behalf of the Company, asserting that the approach suggested would result in the Plaintiffs bearing almost all the Company's costs, notwithstanding what they regard as their success.  They noted that the argument that they should bear 60% - 66.5% of the Company's costs in circumstances where the Plaintiffs have already effectively borne 35% of the Company's costs (by way of their shareholding) to the end of the trial on 13^th November 2020, would have the effect that the Plaintiffs would end up bearing approximately 94% of the Company's costs.  They say that approach cannot be just or right.  They went on to argue that when the Company was carrying out its discovery exercise, it was really carrying out Mr Tuckwell's discovery exercise by reference to his email accounts etc and that the Court should have regard to the observation made on behalf of Mr Tuckwell that any payment of the Company's costs amounts to Mr Tuckwell largely paying himself as approximately 90% shareholder - the result of the Court's order is that the Plaintiffs will effectively cease to be shareholders as at 13 November 2020.

81.      Accordingly, the Plaintiffs contend that all these costs should be paid by Mr Tuckwell. 

82.      The Plaintiffs go on to suggest, as they did in Court, that in fact the right order is for Mr Tuckwell to pay the Company's costs and in doing so directly refund the Plaintiffs 35% of the Company's costs paid as at the date of the trial, i.e. make a direct payment to the Plaintiffs on account of their contribution as shareholders to the costs of the Company. 

83.      These are, of course, very different positions.

84.      I accept that generally it may be appropriate to make an order that the unsuccessful party pays the costs of the Company.  However, that is not the application the Company makes in this case. 

85.      In my view, the appropriate order is that the Company bear its own costs.  I say that for the following reasons.  Firstly, although unusual, it is certainly not an unknown order.  I note that in Re Elgindata (see paragraph 22 and 23 above), that was the very order made because in the view of Nourse LJ 'here the price for the petitioners' shares has now been agreed and cannot be further affected'.  This is also the position in this case.  The petitioners' shares have been valued as at the end of the trial on the basis of the net asset value of the Company at that date. 

86.      Secondly, the fact that the Plaintiffs will in effect end up bearing 35% of the Company's costs paid up to the date of trial (but none of the costs unpaid at that date), in the sense that they were shareholders in that proportion, and that Mr Tuckwell will bear 58% on account of his shareholding is not too distant from the effect of the costs order that I have made in relation to the costs of the proceedings. 

87.      Thirdly, I was initially concerned about the effect on the remaining minority shareholders who hold around 7% of the Company's shares.  It might be thought to be unfair that they bear, albeit indirectly, any costs of litigation in which they did not participate.  However, the effect of paragraph 471 of the Judgment is that if they are to be bought out, they will be bought out on the same basis as the Plaintiffs and will not be prejudiced by the fact that a significant proportion of the Company's costs had not been paid by the Company as at the date of the conclusion of the trial.  It would not be right for the minority shareholders to be bought out on a basis that is more favourable than the basis upon which the Plaintiffs are to sell their shares, and in a sense they have benefitted from the Plaintiffs proceedings without taking proceedings themselves.  Further, they will not be prejudiced by the Company having to bear its own costs unpaid at the date of the conclusion of the trial, which will in effect mean that as to those costs of the Company, assuming that the minority shareholders wish to be bought out, 100% of such costs will be borne by Mr Tuckwell if he becomes the single shareholder in the Company.

88.      Fourthly, although the Company's costs are substantial, they are not significant in terms of the Company's total value - amounting to significantly less than 1% of the same.  The effect on the minority shareholders of the incidence of costs will be correspondingly relatively small.  I might have reached a different conclusion in relation to the Company's costs had the net asset value of the Company been substantially lower and the minority shareholders correspondingly significantly prejudiced by the costs incurred by the Company. 

89.      Accordingly, considering matters in the round, in my view it is just and appropriate to make no order in respect of the Company's costs.

Authorities

Financial Technology Ventures II (Q) LP and Ors v ETFS Capital Limited and Tuckwell [2021] JRC 025. 

Civil Proceedings (Jersey) Law 1956. 

Watkins v Egglishaw [2002] JLR 1. 

Flynn v Reid [2012] (2) JLR 266.

Elgindata Limited (No 2) [2002] 1 WLR 1207. 

Tantular [2020] JCA 013. 

Hollington on Shareholders' Rights (9th Edition). 

MB & Services Limited v Tatiana Golovina and United Company Rusal Limited [2020] JRC 099. 

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

Bird Precision Bellows Limited (1981 case 003420, Court of Appeal Civil Division). 

Barnes Limited v Time Talk (UK) Limited [2003] EWCA 402. 

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

Berry Trade Limited v Moussavi [2003] JLR Note 51. 

Picnic At Ascot v Klaus Derigs [2001] FSR 2

Crociani v Crociani [2014] (1) JLR 503. 

Francis v JFSC [2018] JRC 064A. 

Incat Equatorial Guinea Limited and Luba Freeport [2010] JLR 435.