Jersey Unreported Judgments

Costs.

[2023]JRC161

Royal Court

(Samedi)

11 September 2023

Before     :

Advocate David Michael Cadin, Master of the Royal Court

 

Advocate P. G. Nicholls for the Plaintiff.

Advocate G. C. Staal for the Defendant.

judgment

Introduction

1.        The parties have agreed that the Plaintiff may have leave to discontinue proceedings.  The dispute between them concerns whether the costs of the proceedings should be paid by the Plaintiff, and if so, whether on a standard, or an indemnity, basis.

Background

2.        This claim concerns building works which were carried out by the Plaintiff to the Defendant's property.  It is founded upon a succinct Order of Justice issued in November 2021, comprising 7 paragraphs and 2 A4 pages, which alleges that:

"3.       By contract made on or about November 2018 the Plaintiff agreed to undertake certain construction works for the Defendant at the Property.

4.        The Plaintiff submitted a tender for the proposed works on or around 28 November 2018 in the sum of £872,295.32 (excluding GST), and subject to any agreed variations, agreed to undertake the said works for that price...

6.        The Plaintiff submitted a total of 25 valuations in respect of the said works. Those valuations totalled some £878,000.94. Against these valuations the Plaintiff has received the sum of £820,062.99 leaving a balance to be paid by the Defendant under the last valuation (valuation 25) of some £57,937.95."

3.        Save for an issue about the number of valuations, and whether there is any balance to pay, these paragraphs of the Order of Justice are agreed.

4.        As were the Defendant's averments in her Answer that the parties agreed that certain works, totalling £212,950, were to be omitted and the contract price reduced accordingly.  It was also accepted by the parties that the contract works had not been completed. 

5.        On the pleadings, the Plaintiff therefore claimed a further £57,937.95 on an uncompleted contract for works in the sum of £659,345.32, in respect of which it had received £820,062.99.  The burden was therefore on the Plaintiff to establish variations to the contract for an additional £218,655.62.

6.        There was no schedule annexed to any of the pleadings justifying such variations and it is clear from the material before me that this lack of information has percolated through both the contract, the pre-action correspondence and the claim.

7.        In terms of pre-action correspondence, the Plaintiff sent a letter of claim on 1 November 2021 giving the Defendant 14 days in which to respond.  The Defendant did in fact reply within the time allowed and indicated that she would respond substantively by 1 December 2021.  The Plaintiff replied some 9 minutes later indicating that it would issue proceedings. 

8.        In submissions before me, Advocate Nicholls for the Plaintiff said that the claim was a simple, low value claim which neither party could sensibly pursue to trial, and the objective in issuing proceedings was to crystallise the claim and to get the parties' respective quantity surveyors to agree the figures.  That is not, however, what Advocate Nicholls' contemporaneous correspondence stated.

9.        Proceedings were issued in November 2021 and in April 2022 the parties agreed directions which included a stay for settlement discussions and provision for discovery in the event those discussions were unsuccessful.  At about the same time, the Plaintiff provided the Defendant with a copy of its final account prepared by its quantity surveyor.

10.      On 27 May 2022, the Defendant made a without prejudice save as to costs offer to discontinue the proceedings with no order for costs.  That offer was not accepted.

11.      The Defendant swore a detailed affidavit of discovery in July 2022 in which she averred that:

"25. Having reviewed the available Valuations including the Plaintiff's Measurement Sheets I remain unable to understand how those relate to work done at Beau Pre and whether they relate to work I agreed for the Plaintiff to do. The Plaintiff has been unable or unwilling to assist in this regard.

26. Instead of providing evidence to support its claim for payment, the Plaintiff issued a letter before action dated 1 November 2021 (the "Claim Letter", [LG1/1-2]) in relation to Invoice 811 which I received on 7 October 2021 which had therefore remained unpaid for only 25 days. The Claim Letter does not attempt to particularise the basis of the Plaintiff's claim...

33. Absent particulars of any discussions or agreements between the Plaintiff and me as to any "variations" or additional works, their scope, costs and payment terms, the basis of the Plaintiff's claim remains unclear.

34. Whilst I have repeatedly raised these issues since my Answer, including for example in open correspondence dated 7 and 21 April 2022, I do not know what case I am to meet in order to deal with the Plaintiff's claim..."

12.      The correspondence I have seen supports the Defendant's averments. 

13.      No evidence has been filed by the Plaintiff in relation to this application.

14.      In August 2022, the Plaintiff offered, on a without prejudice save as to costs basis, to settle the proceedings for £35,000 which was not accepted.

15.      In June 2023, the Court chased the parties for an update on the proceedings which led to an email from the Plaintiff's advocate on 7 June 2023 indicating that his client "no longer intends to proceed with this action. I am therefore instructed to seek the Master's leave pursuant to RCR 6/31 (1) to discontinue the proceedings with the usual order that the Plaintiff pay the Defendant's reasonably costs to be taxed on the standard basis if not agreed."

16.      The Defendant disagreed that the usual order, or indeed, the appropriate order in this case, was an order on the standard basis and requested that the Plaintiff bring that matter back before the Court. 

17.      In support of the Defendant's submissions, Advocate Staal filed a Skeleton Argument together with a schedule of costs in the sum of approximately £63,405 comprising disbursements for a quantity surveyor of approximately £5,000 and time costs, 90% of which we incurred by partners at a rate of approximately £473 per hour.

18.      In submissions before me, Advocate Nicholls for the Plaintiff sought leave to discontinue but submitted that:

(i)        he did not concede that the Plaintiff should pay the Defendant's costs;

(ii)       there was no proper basis for ordering indemnity costs;

(iii)      the amounts being claimed by the Defendant for costs are wholly disproportionate in that they exceed the sum in issue and are therefore contrary to the Overriding Objective;

(iv)      the Court should decline to make any order for costs in favour of the Defendant or alternatively, only make an order for a percentage of her costs.

Relevant Law

19.      The law in relation to the basis upon which costs should be awarded has most recently been considered by Commissioner Thompson in Sheyko v Consolidated Minerals Limited [2023] JRC 099 in which he held that "the starting point was not indemnity costs but an exercise of discretion."

20.      That discretion needs to be exercised in the light of Commissioner Page's comments in JFSC v AP Black (Jersey) Ltd [2007] JLR 1 where he held that:

"This means that while it is common practice for costs to be awarded against the discontinuing party, on the basis that that reflects the justice of the case, each case has to be considered in the light of its own particular circumstances, with due reference to the principles summarized by this court in Watkins v. Egglishaw"

21.      In terms of the basis for awarding indemnity costs, the law is clear:

"...in order for an indemnity award to be made there must be something to take the case out of the ordinary and a degree of unreasonableness (of which abuse of process is but an example) but recognizing that there is an "infinite variety" of circumstances where it may be right and proper for the court to make such an award."  (C v PS [2010] JLR 645, paragraph 12)."

Discussion

22.      There has been no trial in these proceedings, and there will not be one.  The information before the Court is necessarily limited.

23.      However, it is clear from the material before me that the Defendant has repeatedly, and unsuccessfully, tried to extract from the Plaintiff details of the works allegedly justifying firstly the invoices raised, and subsequently the claims made in the Order of Justice. 

24.      Objectively, little appears to have changed over the course of this litigation:

(i)        it is, and always has been, a relatively modest claim which was always likely to be eclipsed by the aggregate of the parties' costs;

(ii)       the Plaintiff was unwilling and/or unable to justify its invoices to the Defendant when they were raised;

(iii)      rather than taking stock and reflecting on this patent information imbalance, it chose to issue proceedings;

(iv)      when challenged in the course of the proceedings, it did not to justify the amounts claimed in its pleadings or otherwise;

(v)       it was not until April 2022, 6 months after the proceedings had been instituted, that the Plaintiff actually provided a final account;

(vi)      the Plaintiff eventually decided to discontinue the proceedings in June 2023, albeit that no explanation has been given by the Plaintiff as to why it has chosen so to do beyond the fact that this litigation is not economic.  However, that was not a new development; it always was going to be uneconomic in the form chosen given the failures to share information, narrow the issues, identify which issues needed investigation and by whom, and to establish any basis whereby this litigation might be capable of being pursued at a proportionate cost.

25.      The pre-action process (set out in Practice Direction RC 17/01) is intended to avoid situations like this arising.  The costs of litigation can mount quickly and where the sum in issue is modest, may well exceed the amount of the claim.  It is incumbent on parties to litigation to work together to further the Overriding Objective of dealing with cases justly and at proportionate cost.  In my judgment, the Overriding Objective should also form part of any pre-action considerations, including whether and when to issue proceedings, whether an alternative dispute resolution process might be appropriate and whether the benefits of any step justify the costs.

26.      In this case, having correctly recognised that it was a claim for modest damages and costs would quickly make litigation uneconomic such that neither party could sensibly pursue it to trial, the Plaintiff should have been wary of issuing and should proactively have explored alternative routes to resolution with the Defendant.  In my judgment, the requirement for the Plaintiff to take stock before issuing was all the greater given that a final account had not been prepared, and it had not answered the Defendant's requests for information (which would inevitably have to be met at some stage).  In my judgment, the Plaintiff's failure to engage properly in the pre-action process and instead to issue proceedings, evidence a degree of unreasonableness on its part. 

27.      That unreasonableness continued insofar as the form of those proceedings was concerned.  Knowing that the basis of the alleged variations which might justify the amount claimed was inevitably at the heart of this dispute, it chose to issue an Order of Justice which did not particularise the variations.  Indeed, it was not until April 2022 that details were given by the production of a final account and in my judgment, given that this was a modest claim, the Plaintiff could and should have awaited production of that account before considering proceedings.

28.      As is set out by the Defendant in her affidavit of discovery, the Plaintiff's failure to provide proper particulars of the basis of the claim also increased the costs incurred by the Defendant in relation to those proceedings.

29.      Commissioner Page noted in Pell Frischmann Engineering Limited v Bow Valley [2007] JLR 479 that an award of costs on an indemnity basis is:

"to achieve a fairer result for the party in whose favour it is made than would be the case if he were only able to recover costs on the standard basis; in the end, it is a question of what would be fair and reasonable in all the circumstances."  

30.      In my judgment, the Plaintiff's unreasonableness in relation to this claim and the consequential impact on the costs incurred by the Defendant justify an award on an indemnity basis.

31.      It follows that the Plaintiff has been unsuccessful in its submissions on costs following discontinuance.  I therefore order that the Plaintiff shall pay the Defendant's costs of and incidental to the proceedings on an indemnity basis.

32.      In deference to the Plaintiff's submissions, in my judgment:

(i)        decisions as to the basis of costs should be determined on principle rather than by reference to the possible quantum of those costs; it is not an answer to a claim for indemnity costs to say that the amount claimed is disproportionate or excessive;

(ii)       if a Plaintiff chooses to issue proceedings in relation to a claim which it recognises at the outset is uneconomic to pursue (in the sense that costs will be disproportionate to the sum in issue), it cannot thereafter seek to avoid liability for the Defendant's costs on the basis that they are disproportionate to the sum in issue;

(iii)      there is no material before me that would justify only allowing the Defendant to recover a percentage of her costs; for me to so order would be entirely arbitrary.

Interim Payment on Account of Costs

33.      The principles to be applied when considering a payment on account were summarised in Marange Investments (Proprietary) Ltd v La Générale des Carrieres et des Mines SARL [2013] JRC 119A at paragraphs 42 to 44 and paragraph 51 and applied by Master Thompson in Alpen Partners Limited v Al-Amiri [2022] JRC 279 and I do not propose to recite them in this judgment, albeit that they are at the forefront of my considerations.

34.      The Defendant is clearly the successful party in this litigation and ought to get the money to which she is entitled under the costs order as soon as possible.  Accordingly, a payment on account should be made.

35.      In relation to the quantum of that payment, I think that I should take a broad brush approach and should not seek "to conduct a taxation or carry out a detailed review of the successful party's costs but should adopt a rough and ready approach in order to arrive at a figure which the successful party would almost certainly collect."  (Crociani v Crociani [2014] (1) JLR 503).

36.      Advocate Nicholls submits that:

(i)        the Court cannot, on the information available, carry out any rough and ready assessment of the Defendant's costs;

(ii)       the quantum of the Defendant's claim for costs is excessive and he draws attention amongst other things, to the seniority of the fee earners involved, the rates charged (by reference to Factor A and Factor B), and the lack of detail as to the work carried out;

(iii)      the Court must have regard to the facts that this claim was explored and negotiated between the parties' respective quantity surveyors not their lawyers, and that the Defendant's quantity surveyor charged approximately £5,000 whereas the lawyers charged approximately £55,000.

37.      Courts are frequently required to make broad brush assessments of costs in the light of limited information and in my judgment, I have sufficient information before me so to do.

38.      Practice Direction RC 09/02 provides that:

"1.2    In accordance with Rule 12/5 of the Royal Court Rules 2004, on a taxation of costs on the indemnity basis all costs shall be allowed except insofar as they are of an unreasonable amount or unreasonably incurred with any doubts being resolved in favour of the receiving party.

1.3      In drawing a bill for taxation on the indemnity basis it is not necessary to specify separately Factor A and Factor B rates.  Instead, the bill should specify the hourly rate claimed for each fee earner."

39.      Accordingly, considerations of Factor 'A' and Factor 'B' rates are not relevant to the issue before me. 

40.      Applying a broad-brush approach, whilst there are clearly points which may be capable of argument on taxation, there is nothing manifestly unreasonable in the Defendant's schedule of costs which should obviously be discounted for the purposes of any interim payment of costs to assessed on an indemnity basis.  In my judgment, the Defendant is almost certain to collect at least 50% of the amount claimed and I make an order for an interim payment on account of costs in the sum of £31,700.

Authorities

Royal Court Rules 2004. 

Sheyko v Consolidated Minerals Limited [2023] JRC 099. 

JFSC v AP Black (Jersey) Ltd [2007] JLR 1. 

C v PS [2010] JLR 645.

Practice Direction RC 17/01.

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

Marange Investments (Proprietary) Ltd v La Générale des Carrieres et des Mines SARL [2013] JRC 119A.

Alpen Partners Limited v Al-Amiri [2022] JRC 279.

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

Practice Direction RC 09/02.