Jersey Unreported Judgments

Costs - decision on the second and third defendants' application for security for costs

[2022]JRC106

Royal Court

(Samedi)

11 May 2022

Before     :

Advocate Matthew John Thompson, Master of the Royal Court.

 

Advocate R. S. Christie for the Plaintiff.

Advocate D. Evans for the First Defendant was excused from appearance.

Advocate S. C. Thomas for the Second and Third Defendants

CONTENTS

		Paras
1.	Introduction	1
2.	Background	2-7
3.	Submission	8-33
4.	Submission in reply	34
5.	Decision	35-58

judgment

the MASTER:

Introduction

1.        This judgment contains my decision on the second and third defendants' ("the defendants") application for security for costs, in particular whether the plaintiff should be compelled to provide additional security and if so, how much.  By reference to the detailed schedules provided by the defendants, the total amount of security for costs sought (including security already provided of £500,000) was £2.1 million.  The amount of costs incurred and to be incurred by the defendants is explored in more detail later in this judgment.

Background

2.        This is the latest in a series of judgments I have issued in this matter reported at Pender v GHH (Jersey) Limited and Ors [2019] JRC 228 (dealing with discontinuance of certain claims and costs); Pender v GHH (Jersey) Limited and Ors [2020] JRC 109 (dealing with discovery and a stay pending provision of a valuation of the first defendant) and Pender v GHH (Jersey) Limited and Ors [2022] JRC 028 (dealing with exchange of supplemental expert reports).  In addition to the application for security for costs, I also had to determine an application for discovery and whether a waiver of legal advice had occurred which will be dealt with in a separate judgment.  I have referred to these previous judgments and the judgment to be produced because this is clearly a bitter dispute between the parties which has already manifested itself in a number of contested interlocutory applications.

3.        The proceedings themselves are brought under Article 141 of the Companies (Jersey) Law 1991.  What is at the heart of the dispute is how the defendants dealt with the plaintiff's interests in the first defendant as a shareholder following termination of the plaintiff's employment as CEO.  The grounds relied upon to justify the plaintiff's removal are also challenged by the plaintiff as part of the allegations alleging unfair prejudice in respect of the treatment of the plaintiff's shares in the first defendant.

4.        In relation to security for costs the plaintiff had already provided security for costs through an after the event insurer in the sum of £500,000.  In his affidavit sworn on 9^th February 2022, in offering to increase the ATE Policy to £1 million the plaintiff also stated at paragraph 50: -

"Ultimately, I will arrange for ATE to be put in place to cover any sum which the court thinks fit. that is not without its cost to me. I am not able to reveal commercially sensitive information, but the premiums for ATE are obviously very significant and they have to be funded somehow.  Accordingly, any unreasonably high or unnecessary ATE put in place by me would result in not just an unnecessary premium at my expense, but a multiplication of that premium as a result of the funding arrangements."

5.        The amount of compensation sought by the plaintiff by reference to his expert evidence ranges between £12.3 million and £51.1 million (see table 2.1 of the plaintiff's expert report dated 14^th June 2021).  The plaintiff further argues, as noted in my last judgment, that the value of the first defendant has increased because it has outperformed its own financial targets.  The defendants' valuation of the plaintiff's shareholding is nil.

6.        I have referred to these valuations because I am generally aware that after the event insurers will take a significant insurance premium; in return for funding (inter alia) that insurance premium, litigation funders will then take either a percentage of any compensation awarded, or a multiple of the funding committed to the case.  While the plaintiff has not revealed the details of his arrangements with his after the event insurer and litigation funder, the greater the risk the after the event insurer faces, the larger the insurance premium, and correspondingly the larger the share of any compensation awarded or the multiple return that a litigation funder will retain if the case is successful.  In this case if the approach of the defendants' expert is preferred, assuming findings of unfair prejudice, the plaintiff's after the event insurer may face a significant liability in costs at least for the amount of any security provided, which it has to meet.

7.        In relation to the plaintiff's affidavit, he has not otherwise provided any details of any other assets he owns.  The only evidence of those assets was that provided by the defendant in the affidavit of Advocate Davies sworn on 4^th February 2022 which referred to the plaintiff's previous matrimonial home being sold in March 2020 and the plaintiff's interests in certain start-up businesses in the UK.  No accounts have yet been published in a publicly available format in relation to such businesses (because no obligation to do so yet applies).

8.        In relation to the defendant's security for costs application, also attached to the affidavit of Advocate Davies were detailed schedules of costs.  The total amount of costs incurred and to be incurred was just over £5.4 million.  I refer to the some of the detail contained in these schedules later in this judgment.  The defendants were not however seeking security for this amount but rather limited their application to £2.1 million of which £500,000 had already been provided.  The defendants were therefore seeking security in the additional sum of £1.6 million.

Submissions

The defendants' submissions

9.        The defendants' focus in their submissions was that, because the plaintiff had agreed to increase security up to £1 million or such sum as the court might decide, the central issue was how much security the plaintiff should provide.

10.      However, I required the defendants to justify why security should be provided at all because on the evidence before me the plaintiff appeared to be living and working in England and therefore ordinarily any costs order in the defendants' favour could be enforced by registering a Royal Court costs order with the English Court based on Leeds United v Admatch [2009] JLR 186.

11.      This led Advocate Thomas to make the following submissions: -

(i)        There was a lack of evidence about the plaintiff's assets; the only evidence was of a matrimonial home which had been sold.  Any current home might also be mortgaged.

(ii)       What the plaintiff was doing was offering an insurance policy because he did not want to reveal his assets.

(iii)      The refusal by the plaintiff to file information about his assets and instead offer an insurance policy was something I was entitled to take into account both in deciding whether or not to order security for costs and how much security should be provided (see paragraph 30 of Holmes v Lingard [2015] JRC 172).

(iv)      Any lack of clarity from the plaintiff was also relevant towards the decision of whether or not to order security for costs (see Geneva Trust Co. (GTC) SA v Tchenguiz [2019] JRC 110A at paragraph 74).

(v)       This was also litigation which was both making serious allegations, and which allegations involved a complex background.  Although Advocate Thomas accepted the issue concerned dilution of the plaintiff's shareholdings, at trial the defendants would have to explain to the Jurats the complexities of the first defendant's business and why it took the steps it did.  In addition, understanding the approach to valuation taken by the plaintiff would also be complex because the defendants' case was that such an approach was unusual.  Given the amounts of damages being sought by the plaintiff this was also a high value case.

12.      In relation to the amount of security sought, this was a case where a mark-up of 100% was justified because of the complexity of the case.

13.      The amount of costs had been reviewed by an independent costs draftsman who was aware of the applicable principles.

14.      There had also been an appropriate division of tasks between the lawyers in London and Baker & Partners.  The lawyers in London in particular were retained to assist with the extensive discovery exercise and witness statements.  The latter was because the majority of the second to third defendants' witnesses were based in England.

15.      The quantum of costs dealing with expert evidence was higher than might be expected because of the different approaches taken by experts which had to be both analysed and explained to the court.

16.      In approaching the exercise of discretion in relation to quantum, there was no argument that the claim would be stifled.  However, Advocate Thomas fairly accepted that I possessed a general discretion.  He also accepted that any increase in security would affect what insurance premium the plaintiff's after the event insurer would require, which correspondingly would affect the financial return from the plaintiff to the litigation funder if the claim was successful; he submitted that the effect of an increase in security was the plaintiff's commercial risk.

The plaintiff's submissions

17.      Advocate Christie for the plaintiff advised that the plaintiff had not elected to argue that security should not be provided and had offered up to £1 million of security in total through his after the event insurer.

18.      He did however observe that the only justification that the defendants had put forward was a lack of clarity on the part of the plaintiff.  This submission by the defendants did not lead to any inference that the plaintiff was hiding assets or had no other assets.  There had been no effort on the part of the defendant to set out what the defendant knew about the plaintiff or to investigate the plaintiff's affairs in any detail.  I was also entitled to consider whether a successful professional was likely to be impecunious or likely to hide assets.

19.      I was also invited to look at matters in the round which included having regard to the level of security offered by the after the event insurers.  The obtaining of after the event insurance was a prudent approach to protect the family home.  It did not mean that the plaintiff was impecunious.

20.      The reason why the plaintiff had not chosen to reveal details of other assets was that the present dispute was one that was extremely bitter and personal.  Advocate Christie in this regard drew my attention to a handwritten note taken by the plaintiff when his contract was terminated which suggested that Mr Punter was making an offer to allow the plaintiff to walk away with 25% and "feel lucky".  The plaintiff saw this as a threat and put in context why the plaintiff would not identify his assets but obtained after the event insurance.  This was not therefore a case where any  lack of clarity should lead to a necessity for security.

21.      In relation to the claim it was arguable that the plaintiff's position was that his investment in the first defendant in terms of his efforts and sweat equity had been taken away from him.

22.      The plaintiff was not however contending that the provision of security would stifle the claim which is why the plaintiff had made the offer to increase security up to £1 million.

23.      The quantification of costs at a level of £5 million however was being used oppressively and was a tactical approach to lead the Court to order a higher figure than could be justified.  The defendants clearly did not believe their own figures given they were asking for total security of £2.1 million only.

24.      The wider context relevant to the application was a series of tactical approaches taken by the defendants and summarised at paragraph 119 of Advocate Christie's skeleton as follows:

"The Defendants' Approach to the Litigation

119. Before addressing the bill of costs specifically, the Plaintiff observes that, as set out in the two affidavits filed on behalf of the affidavits, it is not surprising that the Defendants costs are so high when they expend so much time and energy on "strategic" endeavours which lead nowhere. Examples include:

a. the application to stay the proceedings in May 2020 on a misguided basis;

b. the oppressive and unnecessary redaction which must have taken many hundreds of hours to apply;

c. the various different tranches of discovery (excluding ongoing discovery), including insisting on a confidentiality agreement in relation to the over 4,000 Talon and Ohio documents picked on a self-serving basis, which the Defendants have redacted to such an extent that they are irrelevant anyway;

d. the writing of long letters about the Plaintiff's expert evidence which do not appear to lead anywhere;

e. the repeated refusal to provide further discovery in relation to the forecasts, which was then later withdrawn;

f. when ordered by the Court to explain why certain documents had not been disclosed earlier, the filing of an affidavit which rather than giving such an explanation, justifies the Defendants' position and expresses outrage at some length, in a solicitor's affidavit, that the Plaintiff has made serious allegations against PSG;

g. the taking of highly partisan positions at every opportunity - see for example the time spent by lawyers on the expert reports, both past costs [G/1/G83- G84/EBD2/pages 3-4/section (4)] and projected costs for the further report [G/1/G89/EBD2/page 9/section (7)] in regard to the second of which the Master has already criticised the proposed costs but they have been maintained in this Summons; consistent with this theme, the Defendants' first expert report was late in part because "It has also taken longer than anticipated to respond to parts of Mr Arora's report" [G/3/G307/GA-1/page 168].

h. the repeated writing of long letters about security for costs without having identified the sum sought or provided a bill of costs at all - or later on, a bill of costs to include trial; essentially a completely pointless endeavour;

i. the failure to negotiate a single discovery issue or offer to provide a single further document in relation to the outstanding discovery issues (at least, to date);

j. an 8 page affidavit of a costs draughtsman purporting to be expert evidence for which there is no permission and which is entirely inappropriate given the Court's expertise."

25.      The offer of an additional £500,000 of security was not made lightly because it carried consequences for the plaintiff in terms of what risk the after the event insurance would assume and on what terms.

26.      The relevant factors as to the amount of security were set out Café de Lecq v R.A. Rossborough (Insurance Brokers) Limited [2011] JRC 011 at paragraphs 48 to 49.  While there was some complexity, ultimately this case was about what steps had been taken in relation to the plaintiff's shareholding.  This did not justify the costs involved and the defendants were making a meal of the dispute.

27.      While there was a dispute between experts the resources being deployed to try and knock down the plaintiff's approach which the defendants did not like were not justified.  It was not complex to say that the plaintiff's expert had made use of inappropriate comparisons.

28.      Advocate Christie also questioned the role of the different fee earners involved and their number.

29.      The approach of the plaintiff therefore had been to conclude that a bill of £1.5 million would be a reasonable one at the end of the proceedings and therefore on the standard basis a figure of £1 million was justified.

30.      The plaintiff's legal costs since June 2020 were £190,000 whereas the defendants' costs appeared to be over £1.2 million.

31.      The above observations led to the following submissions in respect of the bill of costs provided which was in nine parts.  By reference to each part the plaintiff contended as follows: -

(a)       In respect of costs incurred post issue of proceedings up to service of the answer and counterclaim there was a lot of duplication, and the overall cost was too high.

(b)       The same observations were made in respect of costs from service of the answer and counterclaim up to the second directions hearing on the 19^th May 2020.

(c)       There was extensive duplication in respect of costs incurred for discovery.  The LDM hosting fees were also not explained. There was no evidence justifying these costs.

(d)       The costs incurred for expert evidence were also very high and were also not justified; the observation was also made that the legal fees for reviewing expert evidence were higher than the expert fees charged.

(e)       The mediation was a one-day mediation and therefore did not justify the costs claimed. 

(f)        Not all costs incurred post the mediation were justified (Item 6).

(g)        At Item 7 the figure of £47,000 for the security for costs hearing was both putting the cart before the horse and was not justified for a half day hearing.

(h)       The costs for the directions hearing did not need three advocates.

(i)        The claim for security for costs for specific discovery depended on the outcome of the application and was again subject to the same criticisms of duplication and excessive and unjustified hosting costs.

(j)        Costs of over £900,000 for preparing witness statements were described as extraordinary.

(k)       The level of costs claimed for consideration of the plaintiff's witness evidence also involved duplication and was far too high to be justifiable.

(l)        The same comment applied to the preparation and exchange of further expert evidence; both the expert's initial fee for producing a report and the supplemental fee were also said to be excessive.

(m)     The figures claimed for trial preparation of £1.6 million were also excessive.  A five-week trial was not needed.  Nor was 90 days of preparation.

(n)       The uplift claim of 100% was not justified for this dispute and certainly was not justified for interlocutory matters (See Financial Technology Ventures v ETFS [2021] JRC 118 at paragraph 63).

(o)       The FTV case was also instructive in looking at the approach which simply focused on the costs of the Jersey lawyers alone.

(p)       The overall approach I should take was set out in Montague Goldsmith AG (in liquidation) v Goswick Holdings Limited [2020] JRC 245B at paragraphs 53 to 55.  This was support for the proposition that I should look at matters in the round rather than taking a line-by-line approach notwithstanding the plaintiff's criticisms of the detailed schedules provided by the defendants.

Submission in reply

32.      Advocate Thomas in reply made the following observations: -

(i)        This was a case where it was necessary for an order for security to be made.  Whatever was ordered was not going to be enough to cover the defendants' costs given the complexity of the case.

(ii)       It was important for the defendants for the level of cover from the after the event insurers to be increased.

(iii)      The court should disregard any suggested difficulties the plaintiff might face to provide ATE insurance because there was no evidence entitling the court to draw such a conclusion.

(iv)      It was because the approach taken by the plaintiff was complex and the background to the case was complex that the amount of security sought was justified.

(v)       In relation to the hosting costs these could not be switched off and were necessary to preserve documents.

(vi)      Discovery was complex also because irrelevant material had to be excluded.

(vii)     There was nothing improper about the defendants' approach to expert evidence and the court should reject any implication that suggested otherwise.

(viii)    Advice both after discovery and after mediation was appropriate.

Decision

33.      The first question I posed as to whether security for costs should be ordered at all arose because the plaintiff on the evidence before me appeared to be a UK resident with a family home and business interests in the UK.  There was no other evidence put before me that he had any connection with any other jurisdiction or that there was any risk of the plaintiff ceasing to have any connections with the UK thus making enforcement potentially more difficult.

34.      The defendants could have provided such evidence given that they employed the plaintiff as CEO and were therefore likely to have information about the extent of his connections with the United Kingdom.

35.      The reason for posing the question about whether security should be provided at all arises from Leeds United v Admatch [2009] JLR 186.  Paragraph 2 of the headnote to Leeds is as follows: -

"(2) The appeal would be allowed, and the security would be repaid to the appellant. Applications for security for costs against non-resident plaintiffs should be assessed on an individual basis and the respondent had not established that there was a real need for security in the present case. The indiscriminate practice of requiring security for costs from plaintiff's resident outside Jersey constituted discrimination on the ground of status under art. 14 of the European Convention on Human Rights, in that it impeded their right of access to the courts under art. 6. "Status" covered any characteristic personal to an individual, including a person's settled residence or a company's place of incorporation and registration. The residence of an individual or the incorporation of a company in Jersey conferred a different status from residence or incorporation in the United Kingdom, and discrimination between Jersey and UK litigants was therefore prohibited under art. 14. The protection of the ability of a Jersey defendant, if successful, to enforce a costs judgment in its favour was a legitimate objective but the indiscriminate practice of requiring security from all non-resident plaintiffs was not a proportionate means of achieving it. First, it could not be said that, even if a plaintiff's claim would not be stifled by providing security, he would not suffer substantial prejudice, as providing security was likely to have significant financial implications. Secondly, although in certain cases Jersey defendants might have considerable difficulty in enforcing costs judgments overseas, which might be slow, expensive and stressful, the difficulty should be assessed in individual cases. In the present case, the appellant, like most non-resident plaintiffs in Jersey, was British and the registration of a costs judgment in the United Kingdom was straightforward and inexpensive. If it were established that there was a probability that a non-resident plaintiff had no assets or would seek to hide them, security for costs would probably be ordered, unless it would stifle the plaintiff's case. In the present case, however, there was no basis for making such a finding against the appellant. The trivial expense of registering a costs judgment in the United Kingdom did not even justify an order for security in the reduced amount that had been allowed by the Master."

36.      At paragraph 11 of the judgment the Court of Appeal said this: -

"The assumption that it was necessarily just in principle (other things being equal) to spare a defendant the need to enforce a judgment for costs abroad has always been open to two substantial objections. One is that it originated at a time when there were legal and practical difficulties and considerable delay and expense involved in enforcing judgments internationally, especially judgments for costs against the losing party, which were routinely awarded by courts standing in the English common law tradition but not generally in civil law jurisdictions or the United States. There is, however, no logical relationship between residence outside the jurisdiction and inability or unwillingness to pay a successful defendant's costs. Moreover, any procedural difficulties in recovering costs from solvent plaintiffs are much diminished by the reciprocal enforcement of judgments, which has become a normal feature of modern international litigation. The second objection is that an order to a non-resident plaintiff to put up security for the defendant's costs in advance of any trial of the merits is an impediment to his access to justice which, on the face of it, calls for special justification. The fact that such an order is available only where the plaintiff resides out of the jurisdiction is discriminatory as well. It is worth remembering that others do not always see these matters as we do. As recently as 1999, the French Cour de Cassation regarded it as contrary to public policy to enforce the order of an English court awarding costs against a plaintiff, after his action had been summarily dismissed for failing to comply with an order for security)."

37.      In relation to the plaintiff being British the Court of Appeal stated the following at paragraph 21: -

"The law relating to the enforcement of judgments in England is not obscure and Jersey lawyers, who deal with English law every day, can reasonably be expected to be familiar with it. A Jersey judgment for costs will be enforceable in England in the same way as an English judgment, by registration in the United Kingdom under Part I of the Foreign Judgments (Reciprocal Enforcement) Act 1933. The Deputy Bailiff has not suggested that registration is a problematical procedure and indeed it is not. We have had put before us a letter from a firm of English solicitors indicating that it would cost £50 in court fees and that its charges would be £500. The grounds for setting registration aside are narrowly defined by the statute and there is no reason to think that any of them would apply in this case."

38.      In paragraph 22 of Leeds the Court of Appeal then explored when security might be ordered.  It gave the example of plaintiffs having no assets or hiding them, subject to the effect of stifling.

39.      In paragraph 23 the Court of Appeal discussed the risks of the approach it was adopting leading to more rather than less applications and therefore stated as follows: -

"23 Some of the Deputy Bailiff's observations suggest that the court should not have to decide in each individual case whether it is likely to be difficult for the defendant to enforce a judgment for costs, because the result will tend to complicate applications for security, making additional demands on court time and adding to interlocutory costs. We accept that this may happen in some cases, although we doubt whether it is generally true. It has not been the experience of the courts in England in the wake of Nasser (4). Indeed, it seems more probable that, if defendants have to establish that there is a real need for security for costs before making the application, the volume of such applications will fall, especially in the large proportion of claims where the non-resident plaintiff is British. However, even if this were not the case, we would reject the proposition on principle. One of the more reliable signs that a measure is disproportionate to its objective is that it is applied in accordance with a blanket rule, instead of being confined to cases where it is actually necessary. Under a proportionate system of procedure, a British plaintiff would not be required as a matter of course to put up security for costs in cases where it is unnecessary, simply because, if it were a Spanish plaintiff, investigation might show that security was necessary."

40.      The implication behind this paragraph is that applications for security would have to be assessed on an individual basis, with the defendants having to establish that there was a real need for security.

41.      This implication was expressly recognised in Café de Lecq v R.A. Rossborough (Insurance Brokers) Limited [2011] JLR 31 where at paragraph 20 (ii) the Royal Court stated: -

"(ii) Non-resident plaintiffs, who may be required to provide security to meet the legitimate objective of protecting the ability of defendants to enforce costs judgments outside the jurisdiction, such applications to be assessed on an individual basis."

42.      In the present case the plaintiff conceded that it should provide security.  In my judgment notwithstanding the ease of enforcement of costs orders in the United Kingdom, on the facts of this case on balance the plaintiff was right to make that concession for the following reasons.

43.      On any view the costs of this litigation will be expensive.  While I consider later in this judgment the quantum of the costs the defendants say they will incur, if the defendants receive a cost order in their favour following a trial, the costs that will be recovered on the taxation will at least run to hundreds of thousands of pounds if not a seven-figure sum.  This is one factor I consider can be taken into account in deciding whether or not to order security for costs in principle, notwithstanding the availability of straightforward mechanisms to register costs orders and to take steps to enforce the same.

44.      This litigation is also at the more complex end of the scale.  Although it concerns steps taken in relation to the plaintiff's shareholding in the first defendant, the court will need to understand the business of the first defendant to evaluate why the second defendant took the steps it did to inject further funds and why it took the steps it did in relation to the plaintiff's shareholdings.  There is also a dispute about how to value the first defendant.  There are very different approaches taken by the experts and the Royal Court will have to decide whose evidence they prefer.  The different approaches taken by the experts are complex which explains why significant costs will be incurred to explain these approaches and the evidence relied upon by both parties.

45.      The present case is therefore far removed from many claims that come before the Royal Court.  It is a case about a breakdown in relations between parties engaged in a sophisticated commercial venture who have fallen out in a material way.  It is very different from the more straightforward types of cases that come before the Royal Court such as the majority of personal injury cases or contractual disputes either between an individual and a supplier of goods or services or between business partners.  In my experience I consider it is also more complex than many claims about investment performance or many of the applications by trustees for directions.  While each case is determined on its merits, a case of this kind which is at the complex end of the scale is the type of case that justifies security even if the costs order can be enforced in another jurisdiction in a relatively straightforward manner.

46.      It is also appropriate to look at matters the other way around.  Leeds and Café de Lecq do not conclude that security for costs can never be ordered against a UK resident individual.  Rather the court is required to be satisfied that something is required to justify an order for security for costs.  In Leeds the Court of Appeal focused on assets being hidden or a plaintiff being impecunious.  In Orange Capital v Standard Bank [2013] JRC 221A I referred to a lack of candour.  In Geneva Trust Company (GTC) SA v Tchenguiz [2019] JRC 110A I considered that a lack of clarity could be taken into account in deciding whether or not to order security.

47.      In the present case, in addition to the complexities I have referred to, the plaintiff has also consciously chosen not to reveal details of his assets (for reasons I understand given the nature of the dispute with the defendants).  It is also relevant that the plaintiff by reference to his expert evidence is seeking significant sums.  The defendants are therefore resisting a high value claim which when taken with the complexity I have referred to and the unwillingness of the plaintiff to reveal details of his assets together in this case justify for an order for security for costs in principle.

48.      In relation to the amount of security, it is well-known that I can order security in any amount as a matter of discretion; the relevant factors were listed in A.E. Smith & Sons Limited v L'Eau des Iles (Jersey) Limited [1999] JLR 319 and in particular involve the balancing the risk of injustice to a plaintiff if prevented from pursing a genuine claim with injustice to the defendant if no security is ordered.

49.      The approach to be taken to quantification was also explored by Deputy Bailiff Le Cocq in Montague Goldsmith AG (in liquidation) v Goswick Holdings Limited & Ors [2020] JRC 254B at paragraphs 53 to 55 as follows: -

"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."

50.      In this case the question of stifling does not arise.  Nor does the question of the prospects of success arise beyond the claim being a hard-fought case.  It therefore cannot be said that there is a high degree of probability that one party or the other will succeed.  I also do not regard this as a case where the plaintiff's want of means have been brought about by the defendants.  Firstly, I do not have evidence of the plaintiff's financial position.  Secondly, whether the plaintiff has been deprived of assets by the defendants' approach depends on what the Royal Court determines at trial.  If the defendants' approach is not found to amount to unfair prejudice, then the steps taken in relation to the plaintiff's shareholding will be found to be justified. 

51.      What does appear to me to be relevant is that the plaintiff's resources are more limited compared to the resources that appear to be available to the defendants which was why the plaintiff entered into arrangements with an after the event insurer.  This difference in resources can be seen by the schedule of costs provided for this claim because the second defendant, who appears to be driving the defence of this litigation, wishes to incur costs of over £5 million in order to defend the present claim. From the evidence that has been filed about the plaintiff he does not appear to have anything like the same level of resources.

52.      As against that, while the plaintiff has offered security from his after the event insurer that it will meet costs up to a certain point, the ability of a successful party to enforce costs against an after the event insurer and whether an after the event insurer should be treated as a third-party funder at present is an unanswered question.  This again is a relevant factor in determining what amount of security to order.  There are real policy questions about whether after the event insurers can be treated as third party funders or whether their liability is limited to any costs they have agreed to cover.  In the latter scenario the defendants would then only be left with enforcing any balance of costs awarded in their favour (once quantified) against any available assets of the plaintiff.

53.      Turning now to the schedule of costs provided by the defendants, in deciding what security to order, it is right to remind myself that a successful defendant, absent an order for indemnity costs, would only recover an order for standard costs which extends only to costs necessarily incurred.  If there is any doubt about whether costs have been necessarily incurred that doubt is resolved in favour of the plaintiff.  In other words, the onus is on the defendants to show that costs were necessarily incurred.

54.      The conclusion I have reached is that on any view the defendants will not persuade the court that costs of £5 million are necessarily incurred.  The recent observations of the Royal Court in FTV are apposite.  Deputy Bailiff MacRae suggested that the costs incurred by the plaintiffs in that case were high and might not necessarily be described as proportionate albeit that was a matter for taxation.  That led him to adopt a cautious approach and limit the interim payment to costs incurred by Jersey lawyers rather than English solicitors in support. In noting these observations, I recognise that the FTV case, while also a claim of unfair prejudice, is based on a very different background to the present dispute. The similarities however are the complexity of the dispute and that there had been a falling out between shareholders engaged in a sophisticated commercial  business.

55.      Deputy Bailiff MacRae did express surprise at the plaintiffs' claim for a 100% uplift for all work carried out across the board.  I have taken the same approach in this case.  An uplift of 100% is not justified for every aspect of the costs incurred or to be incurred.  While the complexities I have described are relevant to conduct of the case at trial and preparation of witness statements, the same mark-up is not justified for discovery issues, directions hearings or other interlocutory applications.  The same mark-up may also not be justified for those providing a more junior or supportive role compared to those taking the lead at trial.

56.      The number of fee earners involved is also beyond what is necessary.  The point can be illustrated by this security for costs application which lasted no more than half a day; yet the defendants were represented by three qualified advocates in court.

57.      The number of fee earners involved also raises concerns across the board about duplication; there are six lawyers involved from Baker & Partners plus other legal assistants and two partners and five other associates plus document reviewers from the defendants' English solicitors. 

58.      Taking each heading in the schedule provided by the defendants leads to the following observations.

(i)        Costs up to service of the defence and counterclaim - the costs claimed involved four lawyers

(ii)       Costs incurred after post-service of defence and counterclaim up to the directions hearing, this involved three lawyers at a total cost of £70,000.

(iii)      Costs in relation to discovery are nearly £1.2 million with six Jersey based lawyers plus unqualified legal assistants and four English lawyers involved plus document reviewers. The hosting costs of £445,000 also appear open to challenge.

(iv)      For the costs from November 2020 to service of the plaintiff's expert evidence over £500,000 is claimed.  The detailed comment supporting this part of the schedule appears to suggest duplication of what has gone before.

(v)       The experts' fees of £254,000 again are open to challenge on a taxation as to whether they are necessarily incurred.

(vi)      For the mediation which took one day costs of £167,000 are claimed, the total hours claimed across the different fee earners involved total approximately 350. Based on 7 hours per working day, this equates to 50 days of work for a one-day mediation.  While a one-day mediation does involve a fair amount of preparatory work if a serious attempt is to be made to resolve a case, 50 days' worth of work is not just unnecessary but appears to be disproportionate. While the background is complex, the parties understand that complexity. The focus of mediation should be on whether the parties wish to reach a commercial settlement; the risk of litigation is only  one factor as to why parties might settle,

(vii)     In terms of costs after the mediation clearly some review is required but again concerns about duplication arise.

(viii)    In respect of the claim for costs for the security for costs hearing nearly £50,000 is claimed for a half day hearing which fails the necessity test and again raises concerns about a lack of proportionality.

(ix)      For the specific discovery applications some £195,000 is claimed including £60,000 for further hosting costs.  Again, there are concerns about duplication, whether the hosting costs are justified, and the total amount of costs incurred.  In addition, the defendants have agreed during the hearing to provide further amounts of discovery, having previously resisted the plaintiff's application. While the costs of the application have not yet been determined, the defendants may not be categorised as the winner in relation to this aspect of the dispute.

(x)       For the costs of producing witness evidence nearly £1 million is claimed with statements being taken by English solicitors with Jersey lawyers in attendance. This is duplicative. While the defendants wish to proof other shareholders, the central witness evidence will come from a few individuals only.

(xi)      The consideration of the plaintiff's witness evidence (which is likely to come from the plaintiff) primarily also involves four Jersey based lawyers and three English lawyers. These costs are open to challenge as not being necessarily incurred and as being disproportionate.

(xii)     For further expert evidence the total amount claimed is nearly another £300,000 again involving a number of lawyers plus a further large expert fee.

(xiii)    In terms of trial and trial preparation, the suggested length of trial is 5 weeks.  In my judgment it is likely to be less than that because the focus of the evidence will be between the main protagonists namely the plaintiff, Mr Pender, Mr Samuels and the experts.  I also do not regard the time claimed for trial preparation as justified.  A suggestion of 3 days of preparation for each day of trial is in my experience much more than normal even for complex cases.

59.      In making the above observations, I am conscious that the defendants are seeking far less than the amount of costs they say will be incurred.  That is also a factor to take into account.  However, by reference to the detailed observations I have made the amount of costs incurred or to be incurred is significantly above the necessity threshold and a number of cases may be found on a taxation to be disproportionate.  Advocate Christie's warnings that I should not be distracted by the total amount of costs claimed when assessing what is actually being asked for therefore carry force.  For the reasons I have summarised in the preceding paragraph the total amount of costs claimed is very far from being justified and in a number of cases crosses the line of being disproportionate.

60.      I have also attempted to carry out an exercise of looking at the schedule of costs and the headings used by the defendants and apply my own experience of having been engaged in complex matters to attempt to assess what costs meet the threshold of having been necessarily incurred and are proportionate.  Using the headings in the schedule I therefore reached the following conclusion.

Preparation of Defence	£50,000
Costs up to hearing on 19th May 2020	£25,000[1]
Discovery [plus £100,000 for the hosting]	£200,000
Expert evidence	£200,000
Mediation	£50,000
Costs post mediation	£20,000
Security for costs	Nil[2]
Further directions	£5,000
Considering amendments to the order of justice	£10,000
Specific discovery	Nil
Witness statements	£250,000
Considering the plaintiff's witness evidence	£100,000
Further expert evidence	£100,000
Preparation for trial	£300,000
Trial	£200,000
	£1,510,000

61.      This figure is extremely close to the starting point suggested by the plaintiff (without any supporting analysis provided to me).  The purpose of this approach was to give a more accurate indicator as to what costs might be claimed by the defendants if they were successful at trial because of the concerns set out above about the schedule of costs filed. 

62.      This analysis does not mean that the defendants should recover security for costs in that amount because I possess an unfettered discretion to order security in whatever amount is appropriate.  My analysis is however a relevant factor to have regard to in deciding what security to order.

63.      In order to reach a decision, I have therefore had regard to all of the above matters listed above.  In relation to the plaintiff the more the plaintiff is required to put up by way of security, the greater the financial impact that will be on him and he will recover less himself if he is successful at trial.  While I cannot determine the precise effect of that because the plaintiff has chosen not to reveal that information, the effect of requiring more rather than less security I know from my general experience will lead to the after the event insurer requiring a greater insurance premium, which correspondingly would lead to the litigation funder taking a greater financial return from the plaintiff if the claim is successful.  In the defendants' favour they are facing a significant claim with the complexities I have described above.  If the defendants are successful and a significant costs order is made in their favour it would be unjust for the defendants not to have some access to money to start to recoup their costs, rather than just having to take steps to enforce any costs order in England against whatever assets the plaintiff might own.

64.      At present the plaintiff has offered £500,000 but will increase that sum to £1 million or such other sum as I have ordered.  The defendants seek an additional £1.6 million.

65.      The conclusion I have reached is that the plaintiff has not offered enough but the defendant is seeking too much.  Looking at both what the defendants might justify on a taxation and balancing all matters between the parties I have concluded that the plaintiff shall provide security from its after the event insurer of an additional £750,000.  A total figure of £1.25 million as a fund to meet costs necessarily incurred in my judgment strikes the appropriate balance between the plaintiff and the defendants.  It is a significant sum available to meet a costs order in the defendants' favour and reflects the sort of costs that can be justified on a taxation, and which are proportionate for this dispute.  It is, however, not so a large a sum which in my experience would have such an unduly adverse impact on the plaintiff that he could not proceed to trial and if successful achieve a significant recovery after taking into account payments due to his ATE insurer and/or litigation funder.

Authorities

Pender v GHH (Jersey) Limited and Ors [2019] JRC 228. 

Pender v GHH (Jersey) Limited and Ors [2020] JRC 109.   

Pender v GGH (Jersey) Limited and Ors [2022] JRC 028. 

Companies (Jersey) Law 1991. 

Leeds United v Admatch [2009] JLR 186. 

Holmes v Lingard [2015] JRC 172. 

Geneva Trust Co. (GTC) SA v Tchenguiz [2019] JRC 110A. 

Café de Lecq v R.A. Rossborough (Insurance Brokers) Limited [2011] JRC 011. 

Financial Technology Ventures v ETFS [2021] JRC 118. 

Monteague Goldsmith AG (in liquidation) v Goswick Holdings Limited [2020] JRC 245B. 

Café de Lecq v R.A. Rossborough (Insurance Brokers) Limited [2011] JLR 31

Orange Capital v Standard Bank [2013] JRC 221A. 

Geneva Trust Company (GTC) SA v Tchenguiz [2019] JRC 110A. 

A.E. Smith & Sons Limited v L'Eau des Iles (Jersey) Limited [1999] JLR 319.