Jersey Unreported Judgments

Costs - reasons for requiring the advocates for the parties to bear the costs of the directions' hearing personally

[2020]JRC012

Royal Court

(Samedi)

23 January 2020

Before     :

Advocate Matthew John Thompson, Master of the Royal Court

 

Advocate S. M. J. Chiddicks and Advocate P. C. Sinel for the Plaintiff and Third Parties.

Advocate M. C. Goulborn for the Defendant.

judgment

the MASTER:

1.        This judgment contains my reasons requiring the advocates for the parties to bear the costs of the directions' hearing personally.

2.        The proceedings were commenced by order of justice issued by the plaintiff on 3^rd April, 2019.  In summary, the plaintiff alleges breaches of duty by the defendant as former trustee of certain trusts in relation to the defendant's dealings with trust property.  As a consequence equitable compensation is sought from the defendant.  The plaintiff is the current trustee.

3.        For the purposes of this judgment, the detail of the allegations does not need to be set out save that the allegations concern renewal of banking facilities between January 2014 and January 2016.  The amount of equitable compensation sought is around £750,000.  The case is one therefore that involves some degree of complexity but it is by no means the most complex dispute to trouble the Royal Court.  Neither, on the other hand, is it at the lower end of the value of proceedings that are issued.

4.        Initially the proceedings were stayed.  In 2019, pleadings were amended due to the defendant (originally named as Minerva Trust Company Limited) being acquired by the JTC Group.  This led to a change of plaintiff because the original plaintiff (JTC Trustees Limited) was another company also forming part of JTC Group, which was therefore replaced by the present plaintiff.

5.        In July 2019, the defendant filed its answer and sought permission to join the third parties which permission was granted by an act of court dated 25^th July, 2019.

6.        The third parties filed their answer on 17^th October, 2019.

7.        The act of court of 25^th July, 2019 also provided for a directions hearing to take place on 28^th October, 2019.  Although the plaintiff/third parties wanted to proceed with this hearing for directions to be issued, I vacated it, having reviewed the pleadings filed at that time, because the answer of the third parties had been filed late and the defendant wished to file a reply to the third parties' answer.  I agreed a reply was necessary so that the issues in dispute were clear. The defendant's reply to the third parties' answer was ultimately filed on 14^th November, 2019.

8.        As part of deciding whether or not to grant an adjournment I wrote to the parties by a letter sent by email dated 24^th October, 2019.  The fourth paragraph of that letter stated as follows:-

"In relation to other directions, I will also consider at the next hearing what approach should be taken in relation to discovery.  I remind both parties of the requirements in respect of discovery and to electronic discovery.  I expect relevant information to be exchanged in advance of the next directions hearing as electronic discovery would appear to be likely and therefore I encourage both parties to make appropriate proposals as to how discovery should be provided, including whether it should be limited.  It is premature to consider discovery before an exchange of information and proposals."

9.        I also set aside two hours for the re-fixed directions hearing rather than one hour to consider whether discovery should be limited.

10.      What underpinned this request was Practice Direction RC 17/08 in respect of discovery of documents held in electronic form. 

11.      In relation to the conduct of directions hearings, Practice Direction RC 17/05 at paragraphs 9 and 10 state as follows:-

"The parties' obligations

9.        In relation to the hearing of any application for directions it is the duty of the parties to:-

a.        consider what directions are required for the matters in issue;

b.        endeavour to agree appropriate directions for the management of the case;

c.        submit any agreed directions to the relevant judge for approval;

10.      Where directions are not agreed, each party shall, at the same time as filing any  written contentions pursuant to Practice Direction 13/01, set out what directions are required; together with a summary of the reasons why the particular direction is required and any supporting material the party wishes to rely on at the directions hearing."

12.      Paragraph 12. of Practice Direction RC17/05 also sets out what orders the court may make at a directions hearing including "What discovery orders should be made including whether discovery should be limited".  This reflects Royal Court Rule 6/17(2) which contains a power to limit discovery.

13.      In relation to electronic discovery, Practice Direction RC 17/08 dealing with discovery of documents in electronic form and contains the following material paragraphs.  Paragraph 4 sets out the general principles to be considered by parties and advisers and any experts retained as follows:-

"4.      When making discovery of Electronic Documents the parties, their legal representatives and any experts retained to assist the parties should have regard to the following general principles:-

a.        Discovery of Electronic documents should be managed efficiently in order to minimise the cost incurred;

b.        All parties to a dispute should as far as possible cooperate with each other in relation to discovery of Electronic Documents.  This includes taking all reasonable steps to agree the process by which discovery of Electronic Documents is provided and exchanged, and providing information on the process, or processes used to make discovery;

c.        Appropriate technology should be used in order to ensure that  the disclosure of process is carried out efficiently and effectively;

d.        As far as is reasonably practical, the legal adviser of each party should allocate an individual within that legal practice to be primarily responsible for the management of the discovery process.  Where a party uses an independent expert to assist with the discovery process, that party shall identify that expert to all the other parties to the litigation;

e.        When managing the discovery process and when providing discovery, a party must at all times act in a manner consistent with the overriding objective; 

f.         In providing discovery of Electronic Documents a party should take reasonable steps to avoid giving disclosure of irrelevant documents, or adopting an approach which may place an excessive burden in time and costs on the party to whom disclosure is given;

g.        As far as is reasonably possible, discovery of Electronic Documents should be in their Original Format unless the Court orders otherwise.

h.        Subject to the obligation to provide Electronic Documents in the Original Format, Electronic Documents shall generally be made available for inspection in a form which allows the party receiving the documents the same ability to access, search, review and display the documents as the party giving discovery;

i.         In making discovery where the metadata is part of the Original Format it should be provided as part of discovery unless the Court orders otherwise ..."

14.      Paragraph 5 contains a warning if the terms of Practice Direction are not complied with as follows:-

"5.      A party who provides discovery without first discussing with other parties how to provide discovery in accordance with the terms of this Practice Direction may be required to meet the cost of that discovery at its own expense and/or may further be required to carry out further searches for documents at its own expense."

15.      Paragraph 10. then requires and sets out the obligations on each party and any legal representative before the first directions hearing as follows:-

"10.    Each party and any legal representative for that party must, before the first directions hearing:-

a.        provide to all other parties information about their intended approach to discovery of Electronic Documents; and

b.        as far as is reasonably practical enter into discussions to seek to agree on how electronic discovery is to be provided." (Underlining added)

16.      The Practice Direction then sets out in more detail what information is to be provided.  For the purposes of this case the relevant paragraphs are paragraphs 11 to 13 which provide as follows:-

"11.    Where a case involves or is likely to involve significant quantities of Electronic Documents or where the majority of the discovery is likely to involve Electronic documents, the parties shall provide information to each other prior to the first summons for directions in relation to the possible scope and extent of discovery in the proceedings by reference to the matters listed in the schedule to this Practice Direction

12.      In particular, in complex cases discussions on how discovery is to be provided should begin at the earliest possible stage.  Consideration should also be given to seeking orders for the provision of discovery at an early stage of the proceedings.

13. The information to be provided in discussions should cover the following matters:-

a.        the categories of Electronic Documents within the parties' control, the computer systems, electronic devices and media on which any relevant documents may be held, a party's storage systems and document retention policies;

b.        the proposed scope of the search for Electronic Documents, and why the scope is reasonable;

c.        any tools and techniques proposed to be used to reduce the burden and cost of disclosure of Electronic Documents, including:-

i.          limiting disclosure of documents or certain categories of documents to particular date ranges, to particular custodians of documents, or to particular types of documents;

ii.         the use of agreed Keyword Searches;

iii.        the use of agreed software tools;

iv.        the methods to be used to identify duplicate documents;

v.         the use of Data Sampling;

vi.        the methods to be used to identify privileged documents and other non-disclosable documents, to redact documents (where redaction is appropriate), and for dealing with privileged or other documents which have been inadvertently disclosed; and

d.        the use of a staged approach to the disclosure of Electronic Documents;

e.        how  Electronic Documents, have been and will be preserved;

f.         the formats in which Electronic Documents are to be provided and exchanged on inspection and the methods to be used;

g.        the proposed basis of charging for or sharing the cost of the provision of Electronic Documents, and whether any arrangements for charging or sharing of costs are final or are subject to re-allocation in accordance with any order for costs subsequently made; and

h.        whether it would be appropriate to use the services of a neutral facility for storage of Electronic Documents."

17.      In relation to what information was exchanged about discovery prior to the re-fixed directions hearing on 18^th November, 2019, Sinels wrote to Advocate Goulborn.  This letter firstly complained about the failure of the former plaintiff to provide trust documentation to the current plaintiff; secondly, it complained about a lack of documentation from the defendant and thirdly summarised various individuals who held relevant documentation including the first third party.

18.      By a letter dated 28^th November 2019, Sinels wrote to Advocate Goulborn stating that they considered that electronic discovery was likely to be beneficial in this case and that they were exploring discovery options with an electronic discovery expert.

19.      The position of the defendant was that it did not agree that the matter was suitable for e discovery.  By a letter dated 20 November 2019 from Carey Olsen to Sinels, Advocate Goulborn stated that "the quantity of documents in its possession, custody or power is not remotely near the volume that would justify the significant expense and time involved in any discovery process".

20.      The difficulty I faced was that notwithstanding my letter of 24^th October, I did not possess sufficient information from either party to decide whether or not electronic discovery was required and whether I should limit discovery.

21.      Advocate Goulborn on behalf of the defendant was not able to describe how many files the defendant held with any accuracy.  The defendant is also a trust company that had been in operation for a number of years until its acquisition by the JTC Group and was of a reasonable size.  It was therefore likely to have electronic systems and processes, as well as any manual files that may have been kept.  However information was not provided to support the assertion by Advocate Goulborn that some form of electronic discovery exercise was not required.  In particular there was no information required by paragraph 13a of the Practice Direction about the categories of electronic documents within the defendant's control, what computer systems and electronic devices and media it operated on which any relevant documents may be held, what storage systems it operated and its document retention policies. 

22.      To advance an argument that electronic discovery was not necessary requires, a business with the level of sophistication of the defendant, to explain what systems were held, how much relevant data relating to the dispute was stored on those systems and therefore what was the most effective way of approaching discovery.  The defendant's approach therefore fell significantly short of what I expected and did not comply with the general obligations on a party and advisors at a directions hearing, including in relation to discovery and electronic discovery. 

23.      To the extent that the argument was that anything relevant had already been provided as part of the provision of trust documents to the plaintiff as a successor trustee, this should have been set out in an affidavit explaining the processes followed and the sources reviewed to provide trust documents and therefore why discoverable documents had already been searched for and provided.  This did not occur.  If I had received such information, I could then have explored what further documentation, if any, the defendant was required to produce.  More information would have allowed me to avoid documents already provided having to be listed again

24.      The approach of the plaintiff did not provide sufficient information either.  While I accept that enquires have been made of third parties who may hold relevant information, information about what is held by the plaintiff or the third parties themselves and how they considered they should provide discovery, was also not provided.  While the plaintiff and third parties had concluded that an electronic discovery exercise was required, the information required by paragraphs 11 and 13 of Practice Direction RC 17/08 set out above had not been supplied in advance of the hearing as required by the practice direction.  This information is essential so that the court can make an informed decision about what discovery orders to make and whether to limit discovery.  Without it the court is left in a position of not being able to determine the most appropriate order to make.

25.      The lack of information required therefore left me in the position of either having to adjourn the directions hearing further until this exchange of information took place or making a discovery order.  I chose the latter option so that the case would progress and the parties would not suffer delay due to a lack of information being provided.  This meant I had to make a general discovery order albeit I indicated during the directions hearing that once the required information pursuant to Practice Direction RC 17/08 was provided, it was open to any party to come back to vary the general discovery order I had made.  This was far from ideal.

26.      The other fundamental issue arising from the approach of both advocates concerned whether there should be any costs consequences as a result of the failure to provide information as required by the Practice Direction and my letter of 24^th October, 2019.

27.      At the commencement of the hearing I expressed my concerns and frustration that neither party had provided the information required including by reference to my letter and that it appeared to me that the fault for this might well lie with the advocates rather than the parties and therefore I adjourned the hearing for a short interval to allow the advocates to consider what should occur including whether they should bear the costs of the hearing themselves.  At the conclusion of the hearing, I reserved my decision on costs so I could reflect on what costs orders I should make including against the advocates personally.  This position was clearly understood by those present.  I was not asked by any advocate for more time to make submissions on costs and I did not receive any submissions until after an earlier draft of this judgment was produced.  Nor in this case did any issue arise that the relevant material had not been provided on instructions, and so there was no issue that any client instruction was privileged.

28.      The question of what costs order to make required consideration as a starting point of the overriding objective contained in Rule 1/6 of the Royal Court Rules.   Rule 1/6(5) provides "The Court must further the overriding objective by actively managing cases."  This includes managing the process of electronic discovery and whether discovery should be limited so that the obligations on parties are proportionate.  Rule 1/6(4) provides that "The parties are required to help the Court to further the overriding objective."  I consider this includes legal representatives.  To the extent there is any doubt about this, paragraph 17 of Practice Direction RC 17/05 states "If any party or its adviser is unprepared for a directions hearing the Court may make such wasted costs orders as are appropriate."

29.      The general principles set out in Practice Direction RC17/08 for discovery of documents held in electronic form make it clear that legal representatives as well as parties should have regard to the general principles.  Similarly, the obligations in paragraphs 10 to 17 of this Practice Direction apply to legal representatives as much as parties. 

30.      It should of course also be remembered that advocates owe a responsibility to the court to ensure that a client's discovery obligations are met (see paragraph 20 of Practice Direction RC 17/07 on discovery and Hanby v Oliver [1990] JLR 337 at page 347 line 40, explored in Haddad v GB Trustees Limited [2018] JRC 227 at paragraph 30 and 31.).

31.      The court's powers in making costs orders are contained in Article 2(1) of the Civil Proceedings (Jersey) Law 1956 as follows:-

"Subject to the provisions of this Part and to rules of court made under the Royal Court (Jersey) Law 1948,[1] 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."

32.      Ultimately what costs order is made is about doing justice between the parties. In Reg's Skips v Yates [2008] JLR 191 in making a personal costs order against an advocate, the Court of Appeal remarked as follows:-

"114. Rules of procedure should be complied with. If, by dint of circumstances, compliance is not possible, the court should be given a full explanation of the circumstances. In this case, the appellant's representatives have elected to give us no explanation.

115 As we have noted, r.18(1) empowers us to award costs on an indemnity basis where it appears appropriate in the circumstances to do so. In our judgment, it is appropriate to do so in this case in order to mark the court's disapproval of the way in which the appellant's representatives have conducted themselves in respect of the new ground of appeal and to discourage parties from conducting themselves in a similar way in future cases.

116 There is nothing in the material before us to suggest that the appellant company was in any way to blame for the failings of its advocates. In the whole circumstances, we order that Messrs. Sinels be liable in costs to the respondents on an indemnity basis in respect of one half day of the hearing and for the remainder of the appeal we find the appellant liable to the respondents in costs on the standard basis."

33.      I regard the above quotation as informative in terms of how I should approach my decision on costs.  It also confirms that under the Civil Proceedings (Jersey) Law 1956 I have jurisdiction to make such a costs order.

34.      The conclusion I have reached was that responsibility for what occurred in relation to the directions hearing before me must fall on the advocates for the parties.  They are the ones who are presumed to know what the obligations are, including the obligations contained in the practice directions I have set out.  It is their duty to explain those obligations to their clients and as far as reasonably possible to ensure compliance.  In this case it was the advisors whom I wrote to on 24^th October, 2019.  It was therefore their responsibility to ensure that the relevant information was provided.  There was also nothing put before me, and as noted above I asked for an explanation during the hearing, to indicate that the lack of information was due to the parties rather than advisors failing to meet the required obligations.  I have therefore concluded the responsibility for what happened and the lack of information provided was due to the advisors rather than the parties.  Nothing has been placed before me to suggest otherwise.

35.      What I therefore decided in terms of costs is that the costs of the directions hearing should be borne by the advisors themselves.  This is in contrast to the usual order made on a directions hearing, which is costs in the cause, absent serious adversarial argument on a particular issue.  To make no order as to costs would not be justified because that would lead to responsibility for what occurred falling on the clients rather than their advisors contrary to the conclusion I have reached, which is that it was the advisors who had failed to take the necessary steps to provide the required information.  It would not be fair or just on the parties to impose a costs sanction on a party for failings which were the responsibility of their legal representative. The costs order I consider should be made therefore best reflects the justice of the case.

36.      I accept this is an unusual order to have made but the courts in numerous decisions have made it clear what is expected in terms of parties progressing a case to trial and have also warned that where this does not occur sanctions may follow.  My decision therefore should not come as any surprise to any advocate involved in contentious matters.  As in Yates, the order I have made reflects my displeasure in the way both parties' advocates have conducted themselves.

37.      After handing down an earlier draft of this judgment, the advocates suggested that I should not make a costs order because to do so was a quasi-disciplinary approach.  In my judgment the discretion vested by Article 2(1) of the Civil Proceedings (Jersey) Law 1956 does not prevent the court making a costs order against an advocate even if in part such an order involves criticism of the advocate and therefore in that sense can be said to discipline an advocate.  However, the court is entitled to exercise its displeasure.

38.      I also do not consider that a separate hearing should take place in every case where a costs order against an advocate personally may be made.  This was a relatively brief directions hearing and where the only costs order contemplated related to the costs of the hearing itself.  It would have been disproportionate to have held a further hearing with detailed submissions in respect of a relatively short hearing.  Case management applies just as much to making appropriate decisions on costs as it does to conducting directions hearings.  The advocates were, in any event, given an opportunity to address me on what order I should make knowing that a personal costs order was a possibility.  They therefore had a fair and proportionate opportunity to make appropriate submissions.  In addition, I have taken into account the observations made after the first judgment was handed down to consider whether the costs order I have considered be made requires any further hearing or whether it is still justified.  For the reasons set out in this paragraph I am satisfied that no further hearing is required.  I also remain satisfied after careful reflection that the order is one that best meets the justice of the case.

Authorities

Practice Direction RC 17/08. 

Practice Direction RC 17/05. 

Royal Court Rules

Hanby v Oliver [1990] JLR 337. 

Haddad v GB Trustees Limited [2018] JRC 227. 

Reg's Skips v Yates [2008] JLR 191

Civil Proceedings (Jersey) Law 1956.