Jersey Unreported Judgments

Costs

[2022]JRC285

Royal Court

(Samedi)

13 December 2022

Before     :

Advocate Matthew John Thompson, Master of the Royal Court.

 

Advocate O. A. Blakeley for the Plaintiff.

Advocate F. J. Littler for the Defendant.

CONTENTS

		Paras
1.	Introduction	1
2.	Background	2-14
3.	Affidavits	15-21
4.	Decision on costs	22-40
5.	Conclusion	41

judgment

the master:

Introduction

1.        This judgment contains my reasons in relation to the plaintiff's application for costs.

Background

2.        The plaintiff's claim is based on her agreeing to act as guarantor to the defendant in respect of two private loans made by a third party to the defendant.  In relation to the plaintiff acting as guarantor for these loans, the defendant provided indemnities to the plaintiff.  The sole owner of the defendant is a Miss Templeton who is now under a delegateship through Advocate Clare Nicolle.  The defendant owns a property called Manleys where both the plaintiff and Miss Templeton resided at various times.

3.        In relation to the guarantees, there were two guarantees which appear to have been executed on 29^th September 2016 and 17^th October 2018, respectively.  In relation to each of the guarantees the defendant provided indemnities to the plaintiff also on 29^th September 2016 and 17^th October 2018.

4.        Clause 1 of the indemnity dated 29^th September 2016 states as follows: -

"That it (the defendant) will at all times hereafter indemnify keep indemnified and save harmless to the extent permitted by law the plaintiff (and her heirs) from and against all and any liabilities costs claims expenses and demands whatsoever and howsoever arising which may be brought or made in connection with the guarantee."

5.        The same wording appears in the indemnity executed on 17^th October 2018.  It is not in dispute that the plaintiff repaid the loans made to the defendant other than the defendant putting the plaintiff to proof of the precise amount repaid.

6.        The plaintiff claimed that the total amount she repaid to the third party was £42,845.51 in respect of the first loan, and £130,492.75 in respect of the redemption of the second loan producing a total of £173,338.26.  This is the figure claimed as set out at paragraph 18 of her particulars of claim.

7.        In the defendant's answer subject to proof that the payments were made, the defendant admitted that the plaintiff paid the sum of £30,000 and £130,492.75.

8.        Prior to the commencement of proceedings, following exchange of correspondence between the plaintiff's then legal advisers and Voisin Law for the defendant, on 15^th September 2021 the defendant offered the sum of £172,402.85 in full and final settlement.

9.        This offer was rejected but the plaintiff indicated she would settle for payment of £172,402.85 plus her costs.

10.      Sadly, matters did not reach agreement at that stage and proceedings were commenced with particulars of claim and an answer being filed.

11.      The matter ultimately settled on 6^th July 2022 when the defendant agreed to pay the sum of £172,402.85 with the question of costs being referred to me for determination.

12.      Paragraph 2 of the settlement contained the following: -

"2.       From the figure at (1) above shall be deducted such sums as may be determined as owing by the Plaintiff to the Defendant (and another party) under the Consent Order for Discontinuance on Settlement dated 22 October 2021 in the action JGR 2021/186 Advocate Clare Louise Nicolle as delegate for Marion Templeton (with limited scope) and Carlingford Limited v Joanne Michelle Makariou (including but not limited to the items (but not necessarily amounts) as pleaded in paragraph 23 of the Defendant's Answer dated 29 April 2022), together with interest thereon at the Court rate pursuant to Practice Direction RC 05/09."

13.      However, the only amounts that might be owed by the plaintiff to the defendant concern costs.  In particular the consent order for discontinuance on settlement dated 22^nd October 2021 does not contain any mechanism to determine whether the plaintiff owes the defendant any money as pleaded in paragraph 23 of the defendant's answer in the present proceedings.  The consent order dated 22^nd October 2021 simply provides for the plaintiff in the present proceedings to pay the costs of the defendant in the present proceedings plus the costs of Advocate Nicolle as delegate of Miss Templeton.

14.      Therefore the defendant has agreed to pay the plaintiff £172,402.85 less any costs due to it in respect of the settlement reached on 22^nd October 2021 leaving it to me to determine what costs should be awarded in respect of the present proceedings.

Affidavits

15.      Both parties filed affidavits with extensive exhibits in relation to this claim for costs.  While I have read these affidavits, for reasons set out later in this judgment, they are of limited relevance in relation to the issues I have to determine.

16.      However, in paragraph 19 of the plaintiff's affidavit, she deposed that issues in relation to the plaintiff's occupation of Manleys are said by the plaintiff to be "totally irrelevant to my claim".  The plaintiff in the same paragraph however accepted that a costs order had been made in the defendant's favour in respect of those proceedings as noted above although no agreement has been reached on the quantum of those costs.

17.      In relation to Advocate Nicolle's affidavit, at paragraphs 11 to 13, based on information supplied by Mr Andrew Begg, when acting as advocate for the defendant, Advocate Nicolle expressed concerns about the relationship between Miss Templeton and the plaintiff.  At this stage I simply observe that these matters were not pleaded and I therefore cannot have regard to them in relation to the present application.

18.      The affidavit then sets out information about the eviction proceedings.  Again, it is not necessary for me for the purposes of the present application to have regard to those proceedings beyond the terms of the consent order agreed between the parties as set out above.

19.      In relation to the loan proceedings, Advocate Nicolle deposed that the defendant offered to settle the principal debt in the sum of £172,402.85 on 15^th September 2021.  That is not an accurate record of what was offered.  What was offered was settlement of that sum inclusive of costs.  No offer for costs was made although the plaintiff's then advisor and Voisin had been engaged in extensive correspondence about what was due.

20.      As far as I can tell from the correspondence provided to me there was no correspondence between the parties between October 2021 and May 2022 when discussions resumed leading to the present settlement.

21.      I referred to these affidavits because shortly before the hearing Advocate Blakeley took objection to some of the correspondence and intermated that he might have to seek an adjournment to seek discovery and to cross-examine Mr Begg as the provider of the correspondence.  However, I did not regard such cross-examination as necessary in order to determine what costs orders I should make.

Decision on costs

22.      In relation to the applicable legal principles, I referred the parties to my decision in Waterfront (LC) Limited-v-Cine-UK Limited [2022] JRC 233 and the approach to be taken where a party sought to rely on a contractual indemnity.  This decision followed on from the Royal Decision in Tygres Investments Limited v The Jersey Homes Limited [2016] JCA 173.  The relevant paragraphs of the decision in Waterfront are paragraphs 33 to 37 as follows: -

"33.    In relation to this application Advocate Cook quite properly drew my attention to the Royal Court's decision in Tygres Investments Ltd v Jersey Homes Loans Ltd [2016] JCA 173 which explored what approach the court should take where a contractual right to indemnity costs exists and how far that affected the court's discretion to award costs. Paragraphs 19, 20, 21, 22, 23, 24, 25, 26 and 27 are the material paragraphs as follows:-

"19. The third issue is the most significant one and is the part of the case upon which Advocate Harvey-Hills particularly relies. The Court of Appeal reiterated that the court had a discretion as to the award of costs. The question was as to the relationship between the court's discretion and any contractual right to indemnity costs. In the course of its judgment, the Court of Appeal (at 192 - 194) quoted a number of observations of first instance judges on this topic and it may be helpful to repeat some of them. In Bank of Baroda v Panesar [1987] Ch 335, Walton J said at 355:-

"It seems to me that it is not possible for a person in the position of the bank to exclude the discretion of the court, but one nevertheless starts from the position that the contractual position between the parties is that the costs will be paid on an indemnity basis. I cannot think that the words 'all costs' mean anything other than that. So one starts from the position that that is the contractual position but not, as I venture to think, binding on the court."

20. In ANZ Banking Group (New Zealand) Limited y Gibson [1981] 2 NZLR 513. Holland J said at 531;-

"The court is given a discretion as to the costs to award. I am satisfied that the fact that the parties have by contract agreed to pay costs on a solicitor/client basis is a factor to be taken into account by me in the exercise of my discretion."

21. In his judgment at first instance in Gomba itself, Vinelott J said:-

"If the parties have agreed the basis of taxation, it would, I think, be an improper exercise of the court's discretion to direct the taxation on some other basis, unless satisfied that there had been some conduct on the part of the mortgagee disentitling him to costs or to costs on the agreed basis."

22. Finally, the Court of Appeal in Gomba referred to the previous decision of the Court of Appeal in Seavision Investment SA v Evennett [1992] 2 Lloyd's Rep 26 in which the court expressed the opinion that a contractual right of one party to an action to have the costs of the action paid by another party could not override the discretion as to costs given to the court but that where an order for payment of the costs was sought, the discretion should ordinarily be exercised so as to reflect the contractual right. This opinion accorded with that of Vinelott J cited above.

23. The Court of Appeal in Gomba summarised the position at 194 as follows:-

"In our opinion the following principles emerge from the cases and dicta to which I have referred.

(i)        An order for the payment of costs of proceedings by one party to another party is always a discretionary order: section 51 of the Act of 1981.

(ii)       Where there is a contractual right to the costs, the discretion should ordinarily be exercised so as to reflect that contractual right.

(iii)      ...

(iv)      ...

(v)       A mortgagee is not, in our judgment, to be deprived of a contractual or equitable right to add costs to the security merely by reason of an order for payment of costs made without reference to the mortgagee's contractual or equitable rights and without any adjudication as to whether or not the mortgagee should be deprived of those costs."

24. The Court of Appeal then applied those principles to the facts of the case and having confirmed that the defendants had a contractual right to retain out of the mortgage funds their costs etc. on an indemnity basis but that the plaintiffs were entitled to object to any items on the ground that they had been reasonably incurred or were of an unreasonable amount, the Court went on to say:-

"(5). In respect of any orders for payment of standard basis costs by the plaintiffs to the defendants that have already been made it is, as we understand it, common ground that the court was not thereby purporting to deprive the defendants of any costs which they were contractually entitled to add to their security. Accordingly, in our judgment, the defendants remain entitled on the taking of the account to their costs on an indemnity basis. ... "

25. Finally the Court made a declaration to reflect its decision and the relevant part reads:-

"That on the taking of the said accounts and inquiry, costs of and incidental to the proceedings on an indemnity basis are not to be disallowed on the ground that an order has already been made for costs of and incidental to those proceedings to be taxed on a standard basis unless it should appear that in making the said order the court intended thereby to deprive the defendants of the right to add those costs or some part thereof to the mortgage security."

26. Advocate Harvey-Hills submitted that these principles were equally applicable in Jersey. He emphasised the desirability of the Court following the guidance given in Gomba and ordering the costs of the successful party on the indemnity basis, if such were the contractual right of that party. Otherwise, having received costs on the standard basis, the successful party would be entitled to institute a separate action to enforce its contractual right for indemnity costs. The Court would then be faced with further proceedings in respect of the difference between standard costs and indemnity costs and would presumably, in order to resolve those proceedings, order further taxation under Rule 12/3(1)(b) so as to quantify the outstanding amount representing the difference between standard costs and indemnity costs. This would be a far less efficient method of proceeding than if the Court were to exercise its discretion to make an order for costs on a basis consistent with the contractual right in the first place. That no doubt, he submitted, was why the Court of Appeal in Gomba decided as it did, namely that where there was a contractual right to costs, the discretion of the court should ordinarily be exercised so as to reflect that contractual right.

27. I see the force of Advocate Harvey-Hills' submissions, However, I am conscious that, as the applicants are not legally represented, I have not had the benefit of adversarial legal argument on this point which, so far as I am aware, has not been raised previously before the Royal Court or the Court of Appeal and maybe of widespread application. In saying this, I make no criticism of Mr Mauger; this is a fairly technical area of law and procedure with which a litigant in person cannot be expected to be familiar. The upshot however is that I am reluctant to go further than is necessary to decide the present case and any views expressed should be regarded as provisional and subject to amendment if necessary."

34.      This led to the conclusions of the Royal Court at paragraph 28 and 29 as follows: -

"28. Subject to that proviso, I would summarise my views as follows:-

(i) Where there is a contractual right on a party to be indemnified in respect of costs, that extends to all costs other than those which have been unreasonably incurred or which are unreasonable in amount. It does not however include costs unreasonably incurred or unreasonable in amount. As was stated in Gomba, the effect of such a contractual right is equivalent to a right to taxation on the indemnity basis.

(ii) The Royal Court is given a discretion as to the award of costs pursuant to the Civil Proceedings (Jersey) Law 1956, Article 2 of which provides:-

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

The Court of Appeal has a similar discretion under Article 16 of the Court of Appeal (Jersey) Law 1961.

(iii) The Court may, in exercise of its discretion, deprive a party of its contractual right to costs in respect of litigation in whole or in part. A simple example would be where that party fails in the litigation and is ordered to pay the costs of the other side. In those circumstances, it cannot possibly be said that, despite the order of the Court and despite having lost, the party is still entitled to enforce its contractual right.

(iv) But in the absence of a specific decision by the Court that, for good reason, the successful party should be deprived of its contractual indemnity, the fact that the Court makes an order for taxation on the standard basis does not remove the contractual right to indemnity costs.

29. That leaves outstanding the question of whether in this jurisdiction the Court should adopt the guidance given in Gomba and normally make an order for costs at a level which reflects the contractual position between the parties. As already stated, I can see the force of the argument put forward by Advocate Harvey-Hills in this respect; but I am reluctant to make a ruling which may have widespread implications for a number of cases when I have not had the benefit of full argument by legal representatives on behalf of all the parties and where I do not consider it is essential to reach a conclusion on this aspect in order to decide this case."

35.      The court then set out the reasons for its decision at paragraph 30.

36.      In relation to the present case, both parties are legally represented and the indemnity in Clause 3.17 clearly covers the present application. I have therefore had the benefit of legal argument on the point and Advocate Cook was not able to draw to my attention any authorities beyond the position set out in Tygres.

37.      In relation to the facts of this case the plaintiff is clearly the successful party. It won on all of the five issues as set out in the substantive judgment. In relation to those issues, had this been a question of an exercise of discretion without the indemnity, then the plaintiff would not have recovered its costs in respect of the first issue on anything other than the standard basis because this was a hard-fought case with arguments on both sides. In respect of the other issues, indemnity costs would have been appropriate in any event because either the defendant adopted arguments which had previously been run in England and which had clearly failed, or because the arguments were bound to fail. I have made these observations because in light of the approach I would have taken when exercising a discretion, there is no reason in this case to deprive the plaintiff of the benefit of its contractual indemnity."

23.      In relation to the present application, in her skeleton argument Advocate Littler firstly raised the argument that no claims or demands were made in relation to the repayment of the loans by the third party to the defendant and therefore contended that the plaintiff had not incurred any costs in connection with the guarantees.  In oral argument she expanded her position to contend that, as the loans to the third party had been repaid, the indemnity ceased to have any legal effect because the loans were paid pursuant to some other agreement between the plaintiff and the defendant.  I was not persuaded by these arguments for a number of reasons.

24.      Firstly the answer filed only pleaded that the plaintiff had not suffered any loss under the guarantee.  It did not plead that the indemnity had ceased to have any effect.

25.      In addition, at paragraph 16 of the plaintiff's particulars of claim the plaintiff pleaded the following: -

"The Defendant was not in a position to repay the Second Pallot Loan when it fell due. The Plaintiff agreed to make the necessary payment on behalf of the Defendant, upon the understanding that she would be reimbursed under the terms of the Second Indemnity Agreement. At that time the total outstanding amount, including interest and fees, was £130,492.75. The Plaintiff paid that sum to Mr Pallot's lawyers on behalf of the Defendant on 15th October 2019. The Plaintiff funded that payment from the proceeds of the sale of an apartment which she had owned."

26.      Paragraph 19 of the defendant's answer pleaded the following: -

"19 Paragraph 16 is admitted save that the Defendant makes no admission that the amount due to be repaid, and which the Plaintiff did repay, pursuant to the Second Pallot Loan was £30,492.75 as pleaded and the Plaintiff is put to strict proof in that regard. The Defendant accepts that the Plaintiff paid the sum of £130,000 (the "Second Loan") to Mr Pallot's lawyers on the Defendant's behalf. The Defendant avers that it is irrelevant to the Plaintiff's claim how she funded the Second Loan." ("Emphasis Added")

27.      The defendant's pleading therefore admits that the plaintiff made the payment on behalf of the defendant on the understanding she would be reimbursed under the terms of the second indemnity agreement.  All paragraph 19 of the defendant's answer asserts is to put the plaintiff to proof of the amount repaid by the plaintiff.

28.      Secondly, as Advocate Blakeley contended, the terms of the indemnity are sufficiently broad enough to cover the claim by the plaintiff because her claim is a liability made in connection with the guarantee.  The position is summarised at paragraph 17 of the plaintiff's first affidavit as follows: -

"17. On or about 15" October 2019 the Second Loan was repaid to Mr Pallot. The Defendant did not have liquid assets to make this payment and neither did Mrs Templeton so I agreed I would make the payment. I did so using money from my bank account the majority of which came from the proceeds of the sale of my apartment. I had discussed the outstanding debt owed to Mr Pallot with Miss Templeton and it was obvious that the Defendant did not have money to pay back the loan and it had been made clear to us previously that the Second Loan would not be extended and so there was no option but for me to make the payment. I was fully aware that if the money was not paid interest would accrue and legal costs would be incurred. Further, given that I knew there was no prospect of the Defendant or Miss Templeton paying back the money I was aware I could be sued under the Second Guarantee."

29.      What the plaintiff did was to mitigate the defendant's loss by making payment early rather than allowing the third party to incur further costs and then claim more interest by delaying matters.

30.      Thirdly, the indemnity was between the plaintiff and the defendant only.  There is nothing in its terms that suggests it came to an end once the loan had been repaid by the plaintiff on behalf of the defendant.  Indeed the indemnity is there to protect the plaintiff against having to pay out the third party which what occurred.  It would be an absurd construction of the indemnity to determine that it did not apply where the plaintiff sought to make payment sooner rather than later to prevent additional sums falling due to the third party.

31.      The second defence raised was that the defendant offered to settle the amounts now as agreed in the settlement sum on 15^th September 2021 before proceedings were issued.  However, that is not the case.  The offer made was inclusive of costs whereas what is now been paid is an agreed figure representing what the plaintiff paid to the third party leaving it for the court to determine what costs orders should follow.

32.      The fact that a decision to settle in July this year was made for practical reasons does not matter.  The plaintiff, before starting proceedings set out what she would settle for plus costs following correspondence with lawyers and the defendant has now agreed to pay that settlement figure.

33.      Furthermore, the defendant was on notice that, if the defendant did not agree to pay the plaintiff's costs, that proceedings would follow the plaintiff rejecting the defendant's offer made on 15^th September 2021.  The claim for costs cannot therefore have come as a surprise especially when the defendant clearly owed the plaintiff the amount of money paid by the plaintiff to redeem the loans.

34.      After the defendant made its inclusive offer, the plaintiff's then advisers had provided a figure for costs.  The defendant therefore knew what sort of costs it was facing.  While the defendant was and remains able to challenge the amount of those costs, the defendant could have conceded the principle that costs were due while filing objections to the amount claimed on a taxation.  For reasons that have not been explained, it chose not to do so.

35.      Furthermore, the defendant took no steps to pause the proceedings to see whether agreement could be reached once a claim had been made including a claim for costs.  The concessions made in July, could have been made in October; yet there was no engagement with the plaintiffs.  As I made clear when I gave my decision, this lack of engagement is extremely troubling when Miss Templeton is very elderly and, when proceedings were commenced, was being cared for in a home.

36.      In relation to what costs order should be made, as the defendant has now conceded the amounts due to the plaintiff without any deduction, then the plaintiff is the clear winner in these proceedings and should recover a costs order in its favour.  Advocate Littler contended that I nevertheless possess a discretion to make a different order.  She contended I should do so because of the matters raised at paragraph 22 of her answer.

37.      Paragraph 22 however is an argument in relation to interest only and not costs.  In addition, while the answer pleads that the plaintiff had received a significant commercial benefit by residing in the wing of Manleys for over 5 years, no set off or counterclaim was pleaded.  The matters raised by paragraph 22 do not therefore amount to an issue in the proceedings and they are not therefore a basis to deprive the plaintiff of a costs order in her favour.  Applying Tygres, it is very far removed from conduct on the part of the plaintiff disentitling her to costs.  The plaintiff is therefore entitled to the benefit of the indemnity and so is entitled to an award of costs on the indemnity basis.

38.      The order for indemnity costs is however subject to the following qualifications:-

(i)        The first qualification is that the costs claim relates to the guarantees and the indemnity only.  It does not extend to any costs relating to the plaintiff's occupation of a wing of Manleys where the plaintiff and Miss Templeton formerly resided.  Those costs are covered by the consent order of 31^st October 2022 and the plaintiff cannot use the indemnity to now recover those costs having previously agreed to pay them.  This covers any costs incurred relating to the plaintiff's occupation of the wing of Manleys and such costs are not therefore recoverable under the indemnity.

(ii)       Secondly, given the amount of material filed for the present application I am concerned as to whether a proportionate approach has been taken by the plaintiff.  I cannot at present determine whether or not the approach has been a proportionate one.  However, I am concerned about how much time appears to have been spent by reference to figures referred to in correspondence when the claim for repayment was relatively straightforward.  Notwithstanding this decision, it therefore remains open to the Assistant Judicial Greffier when carrying out his taxation to conclude that costs claimed had been unreasonably incurred because, in the round, they were not proportionate when looked as a whole.  In making this qualification I agree with Advocate Blakeley that what is reasonable has to in be looked at in the context of what approach the defendant, or its advisors were taking and therefore what steps were reasonable to respond to that approach.

39.      If I am wrong on my conclusion in relation to the scope of the indemnity, the plaintiff is entitled to a costs order in any event.  She has repaid loans for the benefit of the defendant which the defendant admitted has taken place.  However, the defendant refused to repay those loans in an amount later agreed; accordingly the plaintiff should be regarded as the winner for the purposes of a decision on costs.

40.      Furthermore the fact that the plaintiff had to issue proceedings for an amount she indicated prior to starting proceedings that she would settle for also justifies an order for indemnity costs in any event.  The only explanation from the defendant as to why the defendant would not pay the plaintiff's costs concern either the amount of those costs, which is not a reason to agree the principle of paying costs or the plaintiff's rent free occupation which is also flawed for the reasons set out above.  These proceedings were therefore wholly avoidable.  The fact that they occurred does not lie at the door of the plaintiff and appears to lie at the door of the defendant's legal advisers.  They took an uncompromising stance which did not succeed and only chose to engage some eight months after proceedings had started and when further costs had been incurred.

Conclusion

41.      Accordingly, for the reasons set out in this judgment I award the plaintiff her costs of and occasioned by the proceedings on an indemnity basis.  I repeat that this does not however cover any costs concerning occupation of the Wing of the property known as Manleys.  The amount the plaintiff will recover is to be determined on taxation.

Authorities

Waterfront (LC) Limited-v-Cine-UK Limited [2022] JRC 233. 

Tygres Investments Limited v The Jersey Homes Limited [2016] JCA 173.