Jersey Unreported Judgments

Costs.

[2022]JRC155

Royal Court

(Samedi)

25 July 2022

Before     :

Advocate Matthew John Thompson, Master of the Royal Court.

 

Advocate P. C. Sinel for the Plaintiffs.

Defendant excused from appearance.

Advocate M. Davies for the First to Third Party and the Sixth to Twelfth Third Parties.

Advocate P. G. Nicholls for the Second to Fifth Third Parties.

CONTENTS

		Paras
1.	Introduction	1
2.	Submissions	2-17
3.	Decision	18-40

Judgment

the master:

Introduction

1.        This judgment contains my decision in respect of the costs of the applications determined by my judgment dated 12th July 2022 reported at Patel v JTC Trust Company Limited and Ors [2022] JRC 150 ("the Judgment")

Submissions

2.        The Third Parties all sought their costs under the indemnity basis, on the basis that they were the clear winners and that the total failure of the Plaintiffs' application combined with the Plaintiffs' unreasonable conduct both in advance and during the hearing justified indemnity costs.  They also argued there was no basis to depart from the general rule of costs following the event to deprive the Third Parties of any part of their costs.  Both also invited me to consider whether any personal costs orders should be made against Advocate Sinel or Advocate Leeuwenburg being the two advocates with the responsibility for preparation and presentation of the application. 

3.        The reason why it said that the Third Parties were the clear winners was that the Plaintiffs' application to amend was refused.  Given that the threshold for amendments to be approved was not generally a high one it was clear that the Third Parties were the winners. 

4.        The fact that the Judgment indicated that certain amendments might be allowed if properly pleaded did not alter the conclusion that the Third Parties were clear winners because the application to amend before the Court was clearly refused.

5.        In relation to indemnity costs, the Third Parties firstly criticised the Plaintiffs for wholly failing to engage notwithstanding that they were sent detailed objections to their proposed amendments, principally in a letter from Ogier dated 6^th January 2022 and also in a letter from Steenson Nicholls also dated 6^th January 2022. 

6.        Their reason for seeking an order for indemnity costs was because there was no basis to assert fraud.  The affidavit did not contain evidence in support of such an allegation and the Plaintiffs had failed to address the applicable law in relation to the requirements to plead fraud.  Advocate Nicholls described this as an egregious breach. 

7.        In relation to arguments advanced by the Third Parties where they did not succeed, the test was that any arguments raised had been raised improperly or unreasonably or had caused a significant increase to the length of the hearing or the costs of the proceedings. 

8.        Both Advocate Nicholls and Advocate Davies argued that what was at the heart of the application was a lack of particularity concerning unsubstantiated allegations of dishonesty where their clients had been successful. 

9.        Advocate Nicholls submissions were supported by Advocate Davies.

10.      Advocate Sinel for the Plaintiffs contended I should take an issue-based approach to the amendment application. 

11.      He therefore argued that the Plaintiffs were unsuccessful on arguments relating to:

(i)        the lateness of the application;

(ii)       the lack of reasonable prospects of success

(iii)      bad faith;

(iv)      a dispute about discovery between the Plaintiffs and the Defendant which was not before the court;

(v)       that the claims were capable of being struck out; and

(vi)      that there was an internal incoherence in the Third Parties' approach.

12.      Where the Third Parties had been successful was in respect of a lack of particularity, but they had been unsuccessful in respect of the other arguments raised. 

13.      Advocate Sinel also emphasised that this was case where his clients had given firm instructions that they had been lied to which was the basis for the allegations in fraud. 

14.      Advocate Sinel was unable to explain why his clients had not engaged with Ogier and Steenson Nicholls in response to the correspondence sent on 6^th January 2022 as he was not involved in the matter at the time. 

15.      The amendment application was also complicated by the preliminary challenge made by the Third Parties that the application could not be brought at all.  There were also problems of late discovery. 

16.      In relation to not placing before the court the relevant authorities on fraud, Advocate Sinel apologised. 

17.      He criticised the other sides' approach as being to try to stifle the claim at all costs.  There was not therefore a total failure because an amended pleading would be produced addressing the court's concerns.  He also argued that the original order of justice was not wholly unparticularised.

Decision

18.      In relation to the applicable principles on costs, these were summarised in MB & Services Limited v Golovina & United Company Rusal Plc [2020] JRC 099 at paragraphs 14 to 17 as follows: -

"14.    Although it appears from the English authorities cited by the defendant that a party who has been successful overall may nevertheless be ordered to pay the costs of the other party on an issue on which the successful party has failed even where it was not unreasonable to raise that issue, that is not the position in Jersey.

15.      The leading authorities on costs in Jersey are Watkins-v-Egglishaw [2002] JLR 1 in the Royal Court and Flynn-v-Reid [2012] (2) JLR 226 in the Court of Appeal. Both decisions (Watkins at para 6(d) and Flynn at para 14) specifically approved the well-known statement of principle by Nourse LJ in In Re Elgindata Limited (No 2) [1992] 1 WLR 1207 at 1213;-

"In order to show that the judge erred I must state the principles which ought to have been applied ... The principles are these. (i) Costs are in the discretion of the court. (ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails, but where that has caused a significant increase in the length or costs of the proceedings he may be deprived of the whole or a part of his costs. (iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party's costs.

16.      This statement of principle is as applicable today as it was in 1992, but courts have become more willing than perhaps previously to make orders which have regard to success or failure on particular issues. Thus, Page, Commissioner, in Watkins approved as applicable in Jersey the observation of Lord Woolf MR in A.E.I. Rediffusion Music Limited-v- Phonographic Performance Limited [1999] 1 WLR 1507 at 1522:-

"I draw attention to the new Rules because, while they make clear that the general rule remains, that the successful party will normally be entitled to costs, they at the same time indicate the wide range of considerations which will result in the court making different orders as to costs. From 26 April 1999 the "follow the event principle' will still play a significant role, but it will be a starting point from which a court can readily depart. This is also the position prior to the new Rules coming into force. The most significant change of emphasis of the new Rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new Rules are reflecting a change of practice which has already started. It is now clear that too robust an application of the "follow the event principle' encourages litigants to increase the costs of litigation, since it discourages litigants from being selective as to the points they take. If you recover all your costs as long you win, you are encouraged to leave no stone unturned in your effort to do so".

17.      In Flynn, the Court of Appeal made it clear that, as per (iv) of Elgindata, a successful party will only be ordered to pay the costs of an unsuccessful party on a particular issue if the successful party has raised the issue improperly or unreasonably. Thus Beloff JA at [21] of Flynn said:-

"As set out in Elgindata ..., a successful party should only be ordered to pay the costs of an unsuccessful party where the successful party has raised issues or made allegations improperly or unreasonably."

As Beloff JA pointed out at [14] of his judgment, it is not (and never was) necessary to show unreasonable conduct for the court to make an order under (iii) of Elgindata, namely that the successful party be deprived of his costs on an issue which he has raised unsuccessfully."

19.      Advocate Davies during the hearing drew my attention to the Court of Appeal authority of Fang & Ors v Attorney General & Ors [2020] JCA 013 where the Court of Appeal at paragraphs 55 and 56 stated as follows: -

"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."

20.      These are the principles I have applied.

21.      In relation to the amendment application, in my judgment it is right to characterise the Third Parties as the clear winners and to make a costs order in their favour.  What the Plaintiffs sought was permission to amend their order of justice to add amend certain of the Third Parties as defendants and to bring claims against them.  That application was wholly unsuccessful.  The fact that in the future a further application to amend might be made addressing the matters raised in the Judgment is not a justification to depart from the task the authorities referred to above require me to carry out, which is to determine whether there was a clear winner in respect of the Plaintiffs' application. 

22.      It is also not appropriate to make an issue based costs order in this case.  I am not satisfied that the arguments raised which were not successful were raised improperly or unreasonably.  Nor did they extend or contribute unreasonably to the length of the hearing.  The main focus of argument was on the lack of particularity and the allegations of fraud where the Third Parties prevailed. 

23.      In respect of particular criticisms advanced by Advocate Sinel, in my judgement his submissions on lateness confused the costs in respect of the preliminary application made by the Third Parties that the application to amend could not be brought at all with whether the application once permitted to be brought was late.  The latter point did not occupy very much of the court time or submissions. 

24.      In relation to the arguments about the lack of reasonable prospects of success, these were conflated with the absence of particularity and so do not justify a taking an issue based approach. 

25.      In relation to the bad faith argument this was not extensive and was based on a request for sight of correspondence between the Plaintiffs and the Defendant about the present application.  In my judgement, while I ruled that the question of discovery of such documents was a matter for another day and a separate application, it was not unreasonable for the Third Parties to express concern about why such material had not been produced.  This issue also did not contribute extensively to the hearing. 

26.      In relation to arguments about whether a claim should be struck out, again such claims related to and overlapped with concerns about the absence of particularity.  

27.      The arguments about internal incoherence related to the Letter of Assurance.  In respect of this issue however I have found largely in the Third Parties' favour and therefore do not believe that a costs order in the Plaintiffs favour on the arguments put before me is justified.  In addition, the arguments were not particularly lengthy and did not contribute to or extend the hearing unreasonably.

28.      As to the basis of costs, there are three factors pointing towards indemnity costs.  The first of these is the failure by the Plaintiffs advocates to engage with the correspondence sent in January 2022. 

29.      Paragraphs1.2 of Ogier's letter to Sinels dated 6^th January 2022 contained the following: -

"1.2 For the reasons more fully detailed below, we consider that the DAOJ: (a) is defective as a matter of procedure; (b) disregards rules of pleading and is accordingly defective; (c) seeks to advance claims which are frivolous, abusive and vexatious; (d) fails to meet numerous aspects of the test for leave to amend; and e advances wide-ranging claims of fraud without any proper pleading whatsoever."

30.      Steenson Nicholls in their letter of the same date to Sinels stated the following: -

"The requirement for proper particularisation is all the more significant in circumstances where your clients are now seeking to allege fraud. As you will be fully aware, allegations of fraud must not be alleged without credible evidence to establish an arguable case of fraud. Discovery has taken place, and as you are fully aware, there is no evidence of fraud, lest of all, credible evidence to establish a remotely arguable case of fraud. Furthermore, any pleading of fraud must properly set out the facts, matters and circumstances relied on to show fraudulent motive or intention. Your pleading fails to do so. You will also be aware that if fraud is alleged without supporting evidence or particularisation (as is the case here), an advocate may be personally liable for wasted costs and susceptible to sanction by the Jersey Law Society for breach of Rule 4.2. of the Code of Conduct."

31.      Sinels did not respond to these allegations and should have done.

32.      Secondly Advocate Sinel's skeleton did not disclose relevant authorities on pleading fraud which it should have done.  Advocate Sinel has apologised for this omission, which apology I accept. 

33.      Thirdly the draft pleading did not meet the requirements to plead fraud cited at paragraphs 4 and 5 of Makarenko v CIS Emerging Growth Limited [2001] JLR 348 set out at paragraph 92 of the substantive judgment. Nor did the evidence relied upon for the reasons set out at paragraph 122 of the substantive judgment justify an allegation of fraud.

34.      While I understand Advocate Sinel's instructions are that his clients had been lied to, as Makarenko makes clear more is required to plead fraud.  Ultimately, it is the responsibility of an advocate to test the evidence a client wishes to rely on to see whether the threshold to plead fraud is met or not.  If it is not met, notwithstanding a client's instructions, an advocate should not plead fraud.  That duty, which is owed to the Court, overrides any duty to a client. 

35.      These are all matters of serious concern.  As against that, there is some force to Advocate Sinel's criticisms of the Third Parties' conduct as set out at paragraph 126 of the Judgment. 

36.      In addition, the arguments about a lack of particularity were hard-fought but did not cross the threshold to take this case out the norm. 

37.      In my judgment in this case, and balancing these competing considerations, to award standard costs only does not meet the criticisms advanced by the Third Parties about the Plaintiffs' conduct; yet to award indemnity costs only would be making a costs award in favour of the Third Parties where a significant part of the dispute was no more than a hard-fought case. 

38.      I therefore consider that in this case to do justice between the parties the Third Parties should recover 50% of their costs on the indemnity basis and 50% on the standard basis.  This is because adopting the words in Fang a significant amount of time was taken up dealing with allegations of fraud and dishonesty and the issues could have been narrowed, had Advocate Sinel or his firm responded to the correspondence in January 2022.  The costs order should reflect these concerns. 

39.      In respect of the costs of the cost hearing, the Third Parties should recover their costs on the standard basis as, while they have obtained a costs order in their favour, the arguments before me do not justify an indemnity costs order for the cost hearing. 

40.      In light of this conclusion, I do not consider that any personal costs order is justified against either Advocates Sinel or Leeuwenberg.  The question of any conduct said to breach the Law Society Code of Conduct is also a matter for the parties to take up with the Law Society under the statutory disciplinary process applicable to advocates if they choose to do so. 

41.      Finally, in respect of costs in relation to the Third Parties' procedural objection, where I ordered that each party should bear their own costs, I agree it is a matter for taxation as to what split the Third Parties choose to argue should be applied for in relation to this application compared with the amendment application.  Although I agree with Advocate Sinel that a significant part of the time spent was with his amendment application, the Third Parties should be allowed an opportunity to review the time they have recorded in relation to this matter and to set out what proportion of the costs they say they have incurred related to the amendment application. 

Authorities

Patel v JTC Trust Company Limited and Ors [2022] JRC 150.

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

Fang & Ors v AG & Ors [2020] JCA 013.

Makarenko v CIS Emerging Growth Limited [2001] JLR 348.