Jersey Unreported Judgments

Costs judgment

[2016]JCA173

Court of Appeal

30 September 2016

Before     :		Sir Michael Birt, sitting as a Single Judge
Between	Tygres Investments Limited		Appellant
And	Jersey Home Loans Limited		Respondent
Between	GG Investments Limited		Appellant
And	Jersey Home Loans Limited		Respondent
Between	GG Investments Limited		First Appellant
	Geoffrey Robert George Mayger		Second Appellant
And	Pierre Henry Genée and Marlene Genée (née Jouanny)		Respondents
Between	Tygres Investments Limited		First Appellant
	Geoffrey Robert George Mayger		Second Appellant
And	Pierre Henry Genée and Marlene Genée (née Jouanny)		Respondents
Between	Tygres Investments Limited		First Appellant
	Geoffrey Robert George Mayger		Second Appellant
And	Pierre Henry Genée and Marlene Genée (née Jouanny)		Respondents

Mr G. R. G. Mayger appeared in person and as Director for the Appellants.

Advocate J. Harvey-Hills for Jersey Home Loans Limited.

Advocate G. D. Emmanuel for Mr and Mrs Genée.

judgment

birt ja:

1.        On 5^th July, 2016, (Tygres Gg Mayger-v-Genee and Anor [2016] JCA115A), ("the judgment"), following a contested hearing I refused leave to the appellants to appeal against five judgments of the Royal Court entered on 4^th March, 2016, in respect of loans granted to the appellants by Jersey Home Loans Limited ("JHL") or Mr and Mrs Genée, as the case may be.  The full background and nature of the application for leave to appeal together with the grounds for refusing leave are set out in the judgment, to which reference should be made. 

2.        The respondents now apply for their costs.  Mr and Mrs Genée are willing to confine their application to standard costs whereas JHL applies for indemnity costs on a specific ground referred to below. 

Should the respondents be awarded their costs?

3.        Both JHL and Mr and Mrs Genée argue that they have been successful, in that leave to appeal has been refused.  Costs should therefore follow the event in the normal way. 

4.        I have been reminded of the general principles which the Court applies when considering costs, as set out in Watkins v Egglishaw[ 2002] JLR 1 at paras 7 - 9 as endorsed by the Court of Appeal in Flynn v Reid [2012] (2) JLR 226 at para 13 - 14. 

5.        On the face of it, this is a case where costs should follow the event.  The appellants have sought to appeal on various grounds but, having heard argument, this Court has decided that such grounds have no realistic prospect of success, so that leave should be refused. 

6.        Mr Mayger argued that the case was all about fairness and that he had been unfairly treated by JHL.  He further submitted that the point concerning whether the Royal Court should stay proceedings for reference to the Financial Services Ombudsman was a matter of general application where there was no precedent in the Island.  It was reasonable for him to take the point and to argue that the proceedings should have been stayed and/or that there was a discernible defence.  

7.        I accept that Mr Mayger had points which he wished to put forward and he did not conduct the litigation in an unreasonable manner.  Nevertheless, this itself does not suggest that the appellant should not be responsible for the costs of the application for leave to appeal.  In relation to the application, each of the respondents was a clear 'winner' and I see no reason to depart from the general approach of costs following the event.  I therefore rule that the appellants should pay the costs of and incidental to the application for leave to appeal in respect of each of the five judgments. 

Standard or indemnity costs

8.        Mr and Mrs Genée are content with an order for standard costs even though it would have open to them to mount an argument similar to that put forward by JHL as described below.  

9.        JHL applies for costs to be on the indemnity basis.  It does not do so on the basis of unreasonable conduct of the litigation by the appellants and in any event, as already stated, there would be no grounds for making an indemnity costs order on such a basis; there has been nothing in the conduct of this litigation by the appellants which has been unreasonable or could be said otherwise to take it out of the ordinary so as to justify indemnity costs.  

10.      JHL's argument is very different.  In summary, it submits that it is contractually entitled to indemnity costs as a result of the terms of the loans which it granted to the appellants, and that although the Court has a discretion as to the award of costs and the basis of any such award, the Court should, where a contractual right to indemnity costs exists, generally exercise that discretion so as to award costs on the basis agreed by the parties in the contract.  In support of this proposition, Advocate Harvey-Hills relies upon the case in the English Court of Appeal of Gomba Holdings (UK) Limited v Minories Finance Limited (No.2) [1993] Ch 171. 

11.      Each of the facility letters from JHL to GG and Tygres contains the following at paragraph 8:-

"All legal costs, stamp duties and registry fees and other costs and expenses of whatever kind incurred by JHL Limited or JHL's agents in the preparation, execution and operation of the advance or any other documentation connected with the advance including the costs of any proceedings taken by us hereunder shall be for the account of and payable by you on demand."

12.      Advocate Harvey-Hills submits that this was an agreement for the relevant borrower to indemnify JHL against all its legal costs, including those in connection with any proceedings.  JHL was thus entitled contractually to be indemnified for the full amount of the costs which it incurred in the present proceedings. 

13.      He submits that, where an indemnity of this nature arises by reason of the contract between the parties, the Court, whilst retaining its discretion, should nevertheless normally award the costs of any litigation on an indemnity basis so as to be consistent with the contractual position.   

14.      In support of this proposition he referred to the case of Gomba (supra).  In that case, the plaintiff group of companies borrowed sums of money from the defendant bank secured by mortgages.  It was a term of each mortgage that the mortgagor would pay to the bank on demand:-

"...all costs charges and expenses howsoever incurred by the bank or any receiver under or in relation to this mortgage ... on a full indemnity basis including (but without prejudice to the generality of the foregoing) all costs charges and expenses which the bank or any receiver may incur in enforcing this security ..."

Demands for repayment were not met and the bank appointed the second and third defendants as receivers.  Litigation followed concerning what was or was not owed and during that litigation orders were made for certain of the defendants' costs to be taxed on the standard basis.  Subsequently the plaintiffs were able to raise sufficient monies to meet their liabilities and the receivers were discharged.  The plaintiffs disputed the amount which the defendants were claiming for their costs charges and expenses and this was the matter which came before the English court. 

15.      The defendants contended that they were contractually entitled to a full indemnity for all their costs and that accordingly the plaintiffs could not object to any of the costs on the ground that they were unreasonable in amount or had been unreasonably incurred.  Furthermore, this contractual entitlement was not affected by any orders for costs which the court made during the course of litigation unless the court were actually to deprive the defendants of their costs.  Conversely, the plaintiffs submitted that they could object to the amounts claimed by the defendants on the basis that they were unreasonably incurred or unreasonable in amount and that where a court had made an order in litigation for taxation on the standard basis against the mortgagor, the mortgagee was deprived of a right to recover costs on an indemnity basis or to recover all its expenditure. 

16.      The English Court of Appeal considered that three issues arose.  First, what was the effect of the contractual term?  What level of recovery of costs and expenses did it permit?  Second, there was the question of how the defendants' entitledness was to be quantified.  Thirdly, there was an issue as to the extent to which, if at all, the court's powers as to costs could curtail the recovery or retention to which the defendants were contractually entitled. 

17.      As to the first issue, the court concluded with little difficulty that, although the contract prima facie entitled the bank to recover or retain the full amount of its actual costs, this did not include costs which were unreasonably incurred or were unreasonable in amount.  

18.      The second issue (as to quantification) turned on specific provisions of the English rules and procedures and are not relevant for our purposes. 

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 Panessar [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 v 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 Mayger; 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. 

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.  

30.      Having considered the facts of this particular case, I decline to order that costs should be awarded on an indemnity basis for the following reasons:-

(i)        As already stated, applying the normal criteria when exercising the Court's discretion as to costs, there is no question of it being appropriate to order indemnity rather than standard costs.  The appellants have conducted this application for leave to appeal entirely reasonably. 

(ii)       In the absence of legal representation, I have not heard any argument on whether paragraph 8 of the facility letters does indeed constitute an indemnity.  It does not specifically say so (contrast the wording in Gomba set out at para 15 above).  Whilst I think it more likely than not that the provision does constitute an indemnity as to costs, I am reluctant to make an award which determines that without giving the appellants a fuller opportunity to consider the matter, look at other cases and put forward any arguments to the contrary. 

(iii)      This is particularly so where, if it is an indemnity, there will have to be further argument in any event.  That is because in the Royal Court, an order was made merely for fixed costs.  Thus, if JHL wishes to pursue the point on indemnity costs, it will have to institute proceedings claiming the difference between fixed costs and indemnity costs in relation to the proceedings before the Royal Court and there seems little prejudice in JHL having to do the same in relation to the proceedings before this Court. 

31.      For those reasons, in the particular circumstances of this case, I award JHL its costs on the standard basis but without prejudice to its right to claim any additional costs to which it may be entitled under the contractual terms agreed between it and GG or Tygres, whether such claim is made in separate proceedings or as part of any enforcement process in respect of immovable property owned by GG or Tygres respectively or otherwise. 

32.      On a point of detail, JHL asked that any order for costs should be made jointly and severally against GG and Tygres.  I do not think this is appropriate.  There were two separate actions against GG and Tygres respectively in respect of separate loans made to each of them.  The only connection was that the actions were heard at the same time.  I do not think that GG can properly be ordered to pay costs of an action against Tygres and vice versa. 

33.      However, the arguments in relation to the two actions were the same and it would be impossible to distinguish time spent on one action rather than another.  Accordingly, I direct that any costs incurred by JHL should be treated by the Greffier on taxation as having been incurred equally in respect of each action, so that half of the costs as taxed will be payable by GG and half by Tygres. 

34.      In relation to Mr and Mrs Genée, there are three actions but again I think that the fair conclusion is that half of their costs should be attributed to the action against GG and half to the two actions against Tygres. 

Authorities

Tygres Gg Mayger-v-Genee and Anor [2016] JCA115A.

Watkins v Egglishaw [2002] JLR 1.

Flynn v Reid [2012] (2) JLR 226.

Gomba Holdings (UK) Limited v Minories Finance Limited (No.2) [1993] Ch 171.

Bank of Baroda v Panessar [1987] Ch 335.

ANZ Banking Group (New Zealand) Limited v Gibson [1981] 2 NZLR 513.

Seavision Investment SA v Evennett [1992] 2 Lloyd's Rep 26.

Civil Proceedings (Jersey) Law 1956.

Court of Appeal (Jersey) Law 1961.