Reasons for Order of Costs
[2025]JRC088
Royal Court
(Samedi)
28 March 2025
Before :
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Advocate David Michael Cadin, Master of the
Royal Court
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Between
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(1) Maya Mayur Patel
(2) Mayur Patel
(3) Mumta Patel
(4) Priyanka Patel
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Plaintiffs
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And
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(1) JTC Trust Company Limited
(formerly Minerva Trust Company Limited
(2) The Estate of Prakashchandra
(3) Vimalrai Patel
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Defendants
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And
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(1) Prakash Chandra Patel
(2) Gaurang Patel
(3) Illakumari Patel
(4) Parthiv Patel
(5) Akash Patel
(6) Vimalrai rai Patel
(7) Darshnaben Patel
(8) Alakh Patel
(9) Harshal Patel
(10)Laxman Varsani
(11)Chaitanya Varsani
(12)Medha Varsani
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Third Parties
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The Plaintiffs excused from appearance.
Advocate J. P. Speck for the First Defendant.
The First Third Party and the Sixth to
Twelfth Third Parties excused from appearance.
Advocate P. G. Nicholls for the Second to
Fifth Third Parties.
judgment
the MASTER:
Introduction
1.
This is my
judgment as to the appropriate order for costs in relation to an application by
the First Defendant, JTC Trust Company Limited (formerly Minerva Trust Company
Limited) (“JTC”) for permission to discontinue proceedings against
the Second to Fifth Third Parties, Gaurang Patel, his wife, IIlakumari
Patel, and their children, Parthiv and Akash Patel (the “Gaurang
Parties”).
Background
2.
JTC was at
all material times the trustee of three trusts established by the late Prakash
Patel (“Prakash”) between 1994 and 2007. Prakash had three children, namely Maya,
the First Plaintiff; Vimal, the Third Defendant and Sixth Third Party; and
Gaurang, the Second Third Party.
3.
In December
2016, Prakash and other members of family entered into a family agreement (the
“Family Agreement”) and Maya, together with her husband and
children, signed disclaimers in relation to each of the trusts, together with
an indemnity in relation to one of the trusts. The beneficial interests under the
trusts were then restructured to exclude Maya, her husband and children.
4.
In January
2020, Maya, together with her husband and children, brought proceedings to set
aside the disclaimers and the indemnity on the basis that they were procured in
the absence of informed consent or alternatively were void by virtue of being
procured by mistake and/or under duress and/or undue influence.
5.
These
allegations were disputed by JTC and, in the summer of 2020, it issued third
party claims against the other signatories to the Family Agreement seeking to
impound their interests under Article 46 of the Trusts (Jersey) Law 1984,
to recover monies under a contractual indemnity contained in the Family
Agreement, and/or to recover monies on the basis of alleged unjust enrichment.
6.
Answers to
the Third Party Claims were filed by the Third Parties on 30 November 2020 and
in February 2021, by consent, Master Thompson ordered discovery and thereafter
imposed a stay for alternative dispute resolution, which was subsequently
extended until 30 July 2021.
Discovery was completed by the end of May 2021.
7.
On 15 June
2021, Advocate Nicholls for the Gaurang Parties wrote a detailed letter to
Mourant, JTC’s advocates, marked without prejudice save as to costs, and
setting out why, he said, the third party claim had no realistic prospect of
success and offering JTC the opportunity to discontinue the proceedings against
his clients on the basis that they paid his clients’ costs, to be taxed
on the standard basis, if not agreed.
That offer was rejected by Mourant on 14 July 2021.
8.
The
following day, Advocate Nicholls wrote to the parties in relation to a proposed
mediation that had previously been canvassed in correspondence and set out his
desire that any mediation should occur within the period of the stay ordered by
Master Thompson.
9.
On 12
August 2021, under cover of a letter marked without prejudice save as to costs,
Mourant wrote to Advocate Nicholls and the advocate for the other Third Parties
complaining about what it said was an “unhelpful” approach
to mediation and noting that “the Third Parties were heavily involved
in the circumstances which led to the current litigation…[they] should be
involved in any proposed mediation process from the outset…[in] an
all-parties mediation.”
However, Mourant also noted that if the Third Parties were unwilling to
participate in an all-parties mediation, JTC would mediate with the Plaintiffs
alone and in the event that settlement were reached, would surrender its
discretion and seek directions from the Court in its capacity as trustee.
10. By emails dated 17 and 18 August 2021, Advocate
Nicholls confirmed that his clients would participate in an all-parties
mediation provided it occurred on 6 September 2021, but not otherwise. Subsequently, on 31 August 2021, Master
Thompson gave directions for the filing of various potential summonses and
ordered that, if no such summonses were issued, the parties should fix a date
for further directions “within 14 days of conclusion of the mediation
listed for 21st and 22nd October 2021 (if unsuccessful)”.
11. That mediation took place in October 2021,
albeit without Advocate Nicholls or the Gaurang Parties in attendance. Advocate Nicholls was contacted by the
mediator on 29 October 2021, and he subsequently reiterated his clients’
position in an email, namely that they would not contribute to a settlement,
would not drop hands and expected payment of their costs which were in the
region of £125,000 but would accept £100,000. Ultimately, the mediation was
unsuccessful.
12. It was followed by a Calderbank offer from
Mourant to all parties dated 15 November 2021 which proposed substantive terms
for settlement of the Plaintiffs’ claims and a drop hands settlement of
the third party claims by way of a discontinuance with no order for costs. That offer was rejected by Advocate
Nicholls the following day and he repeated his clients’ position that
they would only settle if their costs were met. Nothing further came of those offers.
13. Prakash died in March 2022 and in April 2022,
in a judgment reported at Patel v JTC Trust Company Limited and Ors [2022]
JRC 089, Master Thompson struck out that part of JTC’s Third Party Claim
relating to the claim under Article 46(1) of the Trusts (Jersey) Law 1984
but declined to strike out the claims based on the contractual indemnity or
unjust enrichment.
14. Following that judgment, in May 2022, Mourant
made a further offer to the Third Parties to drop hands, with each side bearing
their own costs. That offer was
rejected by Advocate Nicholls who once again stated that if JTC wished to
discontinue, it would have to pay his clients’ costs, to be taxed on the
standard basis.
15. The proceedings came back before Master
Thompson in June 2022, reported at Patel v JTC Trust Company Limited and Ors
[2022] JRC 150, on an unsuccessful application by the Plaintiffs to amend their
claim to bring additional claims against the late Prakash, Vimal and
Gaurang. The Plaintiffs made a
further application to Master Thompson to amend their claim, which was
successful in part against Prakash and Vimal only, and reported at Patel v
JTC Trust Company Limited and Ors [2023] JRC 009. Prakash and Vimal appealed against the
Master’s decision and the Deputy Bailiff allowed their appeal, in part,
as reported at Patel v JTC Trust Company Limited [2023] JRC 152.
16. In November 2023, MacRae, D.B., set the matter
down on the hearing list and gave directions to progress the matter to a
trial.
17. On 1 December 2023, Mourant made a further
offer marked without prejudice save as to costs, proposing amongst other
things, a drop hands settlement in relation to the Gaurang Parties. That proposal gained some traction with
the Plaintiffs’ Advocate proposing that the lawyers meet to resolve
matters. However, Advocate Nicholls
once again stated that neither he, nor his clients, would be participating in
any without prejudice meeting as they had no proposals to make and had
previously set out the basis upon which they would consent to a discontinuance
of the proceedings.
18. On 31 January 2024, Mourant wrote again to the
parties on a without prejudice save as to costs basis. They noted that notwithstanding recent
correspondence, the parties were not far apart, settlement was entirely
possible and proposed a without prejudice meeting. They also noted that the Gaurang Parties
were putting themselves in “a challenging position by declining
participation in Alternative Dispute Resolution”. That suggestion was roundly rejected by
Advocate Nicholls who indicated that he had made his clients’ position
clear in previous correspondence.
19.
On 19
February 2024, MacRae, D.B., gave further directions for trial and in so doing,
he included the following paragraph at the end of his Act of Court:
“Furthermore, the Court
encourages all the parties to explore ADR. Litigation in these cases in Jersey
is extremely expensive, even for parties who are well resourced. The court
encourages the parties to explore any ways of resolving this matter. The
parties should bear in mind that resolution of these disputes by consent often
results in an outcome which the court could never order, which is to the
benefit of the parties and improves the prospect of there being a continuing
relationship between them in the future. Parties should also consider that if
there is clear admissible evidence as to why ADR did not take place or did not
succeed, that may be something the Court may take into account when the
question of costs falls to be considered.”
20. Mourant picked up on the judicial encouragement
and wrote to the other parties on 5 March 2024 proposing a without prejudice
meeting of lawyers.
21. Advocate Nicholls responded succinctly stating
that “[m]y clients' position remains unchanged”. Mourant then asked for details of his
clients’ costs, and he responded stating that “at today's date
my clients' costs total £238,781.16”. That information was possibly less
informative than it might have been given that the Gaurang Parties had been the
subject of unsuccessful applications by the Plaintiffs and had obtained costs
orders against them. When Mourant
asked for a breakdown to identify the costs incurred on the Third Party Claim,
Advocate Nicholls declined to do so on the basis that the litigation remained
ongoing and such a breakdown would contain privileged and confidential
information.
22. On 16 May 2024, Mourant made a further without
prejudice save as to costs offer to Advocate Nicholls, noting that discussions
had been ongoing with the other parties and that they were close to agreeing
headline terms. This time, JTC
offered a drop hands settlement with a contribution of some £89,000
towards the Gaurang Parties’ costs.
That offer was rejected by Advocate Nicholls who made a counter offer
whereby JTC would pay either an agreed sum of £175,000 towards costs or
that they would pay the Gaurang Parties’ costs, to be taxed on the
standard basis to 15 June 2021 and the indemnity basis thereafter. That counter offer was rejected by
Mourant on 13 June 2024 when they repeated their previous settlement
offer. I note in passing that the
schedule of costs provided to me by the Gaurang Parties relating to the Third
Party Claim, which includes costs on an indemnity basis since 15 June 2021,
quantifies their total costs at £197,972, some £40,000 less than
the total figure communicated in March 2024, and only marginally above that
proposed in the counter offer.
23. By July 2024, it would appear that negotiations
between the other parties were gaining momentum, and the Deputy Bailiff made an
order, by consent, adjourning the trial which had been listed for 5 weeks and
was due to start on 18 November 2024 and extending a stay for settlement
discussions. On 8 October 2024,
Mourant wrote to Advocate Nicholls noting that the substance of a settlement
agreement had been reached by the other parties and stating that JTC intended
to apply to discontinue the proceedings against the Gaurang Parties on the basis
that JTC would agree to meet their costs to be taxed on a standard basis.
24. That offer was rejected by Advocate Nicholls
who once again stated that his clients would agree to a discontinuance only on
the basis that JTC paid their costs, taxed on a standard basis to 15 June 2021
and an indemnity basis thereafter.
That offer was rejected by Mourant.
25. By 24 November 2024, a settlement had been
reached between all parties other than the Gaurang Parties and the proceedings
between them were discontinued on 17 December 2024 on the basis of a
confidential settlement agreement which has not been shared with this Court or
the Gaurang Parties. In January
2025, JTC issued a summons to discontinue the Third Party proceedings against
the Gaurang Parties with “such order as to costs as the court sees
fit”. Although JTC was
content for that application to be dealt with on the papers, Advocate Nicholls
requested a physical hearing.
The Parties’ Submissions
26. Both parties are agreed that the Third Party
Proceedings should be discontinued.
This is an application about costs only:
(i)
JTC’s
position is that:
(a) it should pay the Gaurang Parties’ costs
up until 18 August 2021 (when the Gaurang Parties refused to mediate) on the
standard basis, to be taxed if not agreed; and
(b) the Gaurang Parties should pay JTC’s
costs of the discontinuance application on the indemnity basis, to be taxed if
not agreed.
(ii) the Gaurang Parties’ position is that JTC
should pay their costs up to 15 June 2021, to be assessed on the standard
basis, if not agreed and thereafter on an indemnity basis, and that JTC should
make an interim payment on account of those costs.
27. In support of its proposed orders, JTC submits
that:
(i)
at its
heart, these proceedings arose from a family dispute, and it would have been
beneficial if all members of the family who had been involved in the Family
Agreement in 2016, which included the Gaurang Parties, had engaged
constructively in settlement discussions;
(ii) the Gaurang Parties took an unreasonably
obstructive approach to the litigation by refusing to participate in settlement
discussions and/or mediation;
(iii) they should therefore be deprived of costs to
which they might otherwise be entitled; and
(iv) given their rejection of JTC’s offer to
discontinue on the basis of standard costs and their insistence on an in-person
hearing, the Gaurang Parties should pay the costs of the discontinuance
application on the indemnity basis.
28. Conversely, the Gaurang Parties submit that
throughout this litigation, they clearly and repeatedly set out the basis upon
which they would consent to a discontinuance and that position was based on six
factors:
(i)
they
regarded the third party claims as an obvious negotiating tactic on the part of
JTC to try to bolster any potential settlement pot with the Plaintiffs;
(ii) they regarded the claims as inherently weak and
misconceived in both fact and law;
(iii) the claims had, apparently, become weaker as
the case progressed given that discovery had not produced a smoking gun and the
claims themselves had been narrowed by application and/or amendment;
(iv) the Plaintiffs had twice failed to bring claims
against Gaurang by way of amendment;
(v) JTC had “on no fewer than three prior
occasions” accepted in its own without prejudice correspondence that
it had absolutely no expectation that the Gaurang Parties would be required to
contribute anything towards any settlement with the Plaintiffs as it was
proposing a drops hands settlement insofar as they were concerned; and
(vi) the alleged refusal by the Gaurang Parties to
participate in any settlement discussions was, self-evidently, no bar to
settlement being achieved with the other parties to this dispute. It was those others who, the Gaurang
Parties submit, were the “real parties” to the dispute as they were
the ones who had taken steps to ensure that the Plaintiffs were excluded from
the Family Agreement.
29. At its heart, this is an issue as to how the
Court should deal with the costs of the Gaurang Parties who have adopted an
intransigent stance in litigation, but whose June 2021 offer to allow the
proceedings to be discontinued on payment of their costs was finally agreed to
by JTC, over 3 years after it was first made.
The Applicable Principles
30. The applicable principles on costs were
summarised in MB and Services Limited and Golovina v United Company Rusal
Plc [2020] JRC 099 at paragraphs 14 to 17 as follows: -
“14. Although it appears from
the English authorities cited by the defendant that a party who has been
successful overall may nevertheless be ordered to pay the costs of the other
party on an issue on which the successful party has failed even where it was
not unreasonable to raise that issue, that is not the position in Jersey.
15. The leading authorities on
costs in Jersey are Watkins-v- Egglishaw [2002] JLR 1
in the Royal Court and Flynn-v-Reid [2012] (2) JLR 226 in the Court of Appeal.
Both decisions (Watkins at para 6(d) and Flynn at para 14) specifically
approved the well-known statement of principle by Nourse LJ in In Re Elgindata Limited (No 2) [1992] 1 WLR 1207 at 1213;-
"In order to show that the
judge erred I must state the principles which ought to have been applied ...
The principles are these. (i) Costs are in the
discretion of the court. (ii) They should follow the event, except when it
appears to the court that in the circumstances of the case some other order
should be made. (iii) The general rule does not cease to apply simply because
the successful party raises issues or makes allegations on which he falls, but
where that has caused a significant increase in the length or costs of the
proceedings he may be deprived of the whole or a part of his costs. (iv) Where
the successful party raises issues or makes allegations improperly or
unreasonably, the court may not only deprive him of his costs but may order him
to pay the whole or a part of the unsuccessful party's costs.
16. This statement of principle is
as applicable today as it was in 1992, but courts have become more willing than
perhaps previously to make orders which have regard to success or failure on
particular issues. Thus, Page, Commissioner, in Watkins approved as applicable
in Jersey the observation of Lord Woolf MR in A.E.I. Rediffusion Music
Limited-v- Phonographic Performance Limited [1999] 1 WLR 1507 at 1522:-
"I draw attention to the new
Rules because, while they make clear that the general rule remains, that the
successful party will normally be entitled to costs, they at the same time
indicate the wide range of considerations which will result in the court making
different orders as to costs. From 26 April 1999 the "follow the event
principle" will still play a significant role, but it will be a starting
point from which a court can readily depart. This is also the position prior to
the new Rules coming into force. The most significant change of emphasis of the
new Rules is to require courts to be more ready to make separate orders which
reflect the outcome of different issues. In doing this the new Rules are
reflecting a change of practice which has already started. It is now clear that
too robust an application of the "follow the event principle"
encourages litigants to increase the costs of litigation, since it discourages
litigants from being selective as to the points they take. If you recover all
your costs as long you win, you are encouraged to leave no stone unturned in
your effort to do so".
17. In Flynn, the Court of Appeal
made it clear that, as per (iv) of Elgindata, a
successful party will only be ordered to pay the costs of an unsuccessful party
on a particular issue if the successful party has raised the issue improperly
or unreasonably. Thus Beloff JA at [21] of Flynn said:-
"As set out in Elgindata ..., a successful party should only be ordered to
pay the costs of an unsuccessful party where the successful party has raised
issues or made allegations improperly or unreasonably." As Beloff JA
pointed out at [14] of his judgment, it is not (and never was) necessary to
show unreasonable conduct for the court to make an order under (iii) of Elgindata, namely that the successful party be deprived of
his costs on an issue which he has raised unsuccessfully."”
31. As to the position on indemnity costs, in Pell
Frischmann Engineering Limited v Bow Valley Iran Limited and Others [2007]
JLR 479, Commissioner Page stated:
“25 At the risk of
oversimplifying matters, the result of these English authorities may be said to
be this: that the circumstances in which an award of indemnity costs may, as a
matter of discretion, be ordered are less restrictive than they used to be; there
must, ex hypothesi, still be something to take the
case out of the ordinary, but the range of potentially relevant considerations,
as described by Millett, J. (later Lord Millett) in Macmillan Inc. v.
Bishopsgate Inv. Trust…, is considerable and need not involve any finding
of a lack of moral probity; the test, in a word, is unreasonableness; the
purpose of such an award 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.”
32. The consequences of a party’s failure to
engage in mediation were considered by Commissioner Page in Café De Lecq Limited v R.A. Rossborough (Insurance Brokers) Limited
[2012] (2) JLR 155 where he held that:
“10 It is now well
established that an unreasonable failure to engage in mediation is a factor
that may be taken into account by the court in considering costs. At the time
when the matter was argued before me, there were two reported Jersey cases in
which the court's jurisdiction to take account of such matters had been
considered and recognized: Bespoke Invs. Ltd. v.
Lincoln Nominees Ltd. (1), which followed the decision of the English Court of
Appeal in Halsey v. Milton Keynes General NHS Trust (5), and Manley v. Bell (9)
(both decisions of the then Bailiff, Sir Philip Bailhache). Since then,
Clyde-Smith, Commr. has also had occasion to consider
and affirm the jurisdiction in Prestigic (Wisley)
Nominees Ltd. v. JTC Management Ltd. (12). In each of the earlier cases, the
point at issue was whether the overall successful party should be penalized in
costs for refusing to mediate; and in each of the two Jersey cases the court
concluded that no such penalty should apply because the refusal was, on the
facts, not unreasonable…
12…I venture to add the
following observations, drawing to some extent on the English cases and to some
extent on policy considerations underlying the jurisdiction:
(i) The
jurisdiction extends not just to circumstances in which a party unreasonably
declines to mediate but also to an unreasonable refusal to engage in settlement
discussions or in some other form of alternative dispute resolution: per Judge
Reid, Q.C. in Corenso (UK) Ltd. v. The Burden Group
Plc. (3) ([2003] EWHC 1805 (QB), at para. 60):
"The requirement on parties is
to attempt to resolve their differences without resorting to court ... So long
as parties are showing a genuine and constructive willingness to resolve the
issues between them, it does not seem to me that a party will be automatically
penalised because that party has not gone along with a particular form of
alternative dispute resolution proposed by the other side."
(ii) The virtues of mediation
extend beyond potential savings in costs. The point was made by Sir Philip
Bailhache in Bespoke Invs. (1) in a passage
([2005]JRC098, at para. 5) in which he cited an extract from a 2012 (2) JLR 163
speech that he gave at the launch of the amendment to the Royal Court Rules:
"Secondly, a dispute settled
confrontationally through the courts will often have a bruising effect upon the
parties. There is always a loser, and sometimes there is no real winner. A
mediated settlement, while not necessarily leading to total satisfaction on
both sides, can enable the parties better to understand the other's point of
view and occasionally to offer or to accept an apology. Particularly in a small
community, where trading and even personal relationships between the litigating
parties may continue, the ability to settle a disagreement in private without
creating lasting wounds is, in my view, an important positive factor in favour
of mediation."
And in Hurst v. Leeming (6),
Lightman, J. observed ([2003] 2 Costs L.R. 153, at para. 11):
". .. [T]he starting point
must surely be the fact that the mediation process itself can and does often
bring about a more sensible and more conciliatory attitude on the part of the
parties than might otherwise be expected to prevail before the mediation, and
may produce a recognition of the strengths and weaknesses by each party of his
own case and of that of his opponent, and a willingness to accept the give and
take essential to a successful mediation. What appears to be incapable of
mediation before the mediation process begins often proves capable of satisfactory
resolution later."
(iii) The prospects of a mediation
succeeding is not the only consideration. In Bespoke, Bailhache, Bailiff said
([2005]JRC098, at para. 9):
"The fundamental principle in
determining whether or not to penalise a party in costs for refusing to engage
in mediation is whether the successful party acted unreasonably in so doing.
The question whether mediation had a realistic prospect of success is a factor
in that equation, but only one of several. The character of the litigants may
be relevant. The costs to be incurred in preparing for mediation may be
disproportionate to the costs of preparing for trial, particularly if the offer
to mediate is made at a late stage of proceedings. Again, if mediation is
proposed late in the day, there may well be an unacceptable delay in the final
resolution of the dispute. All these matters are to be taken into
account."
To similar effect are the
observations of the English Court of Appeal in Halsey (5) ([2004] 1 W.L.R.
3002, at para. 25).
(iv) Unreasonable belief in the
merits of one's case is not a reason for refusing to engage in some form of
ADR. Commenting on Lightman, J.'s observation in Hurst that belief by a party
that he has a watertight case-the frame of mind of so many litigants-is no
justification for refusing to engage in mediation, the Court of Appeal in
Halsey said (ibid ., at para. 19):
"In our judgment, this
statement should be qualified. The fact that a party unreasonably believes that
his case is watertight is no justification for refusing mediation. But the fact
that a party reasonably believes that he has a watertight case may well be
sufficient justification for a refusal to mediate."
(v) The jurisdiction is one that
should be exercised with a degree of caution, not least because it is never
going to be possible for a court to be privy to all the considerations that
affect a party's unwillingness to mediate without that party waiving privilege
and because, as Judge Coulson, Q.C. observed in Nigel Witham Ltd. v. Smith (10)
([2008] EWHC 12 (TCC), at para. 32), trying to work out when the best time
might be to attempt ADR or mediation is a common difficulty for parties. But,
carried too far, such considerations would have the effect of rendering the
entire jurisdiction nugatory. In the end, the court has to act on the
circumstances as they appear, on the evidence, to be.
(vi) The burden is on the party
seeking an award of indemnity costs to satisfy the court that the behaviour of
the other has been unreasonable.”
33. In Halsey v Milton Keynes General NHS Trust
[2004] EWCA Civ 576, cited with approval in Café
de Lecq above, the Court of Appeal held that in
deciding whether to deprive a successful party of some or all of his costs on
the grounds that he has refused to agree to ADR, it must be borne in mind that
such an order is an exception to the general rule that costs should follow the
event. The burden is on the unsuccessful party to show why there should be a
departure from the general rule and requires it to establish that the successful
party acted unreasonably in refusing to agree to ADR. Factors which may be
relevant to the question of whether a party has unreasonably refused ADR will
include (but are not limited to) the following: (a) the nature of the dispute;
(b) the merits of the case; (c) the extent to which other settlement methods
have been attempted; (d) whether the costs of the ADR would be
disproportionately high; (e) whether any delay in setting up and attending the
ADR would have been prejudicial; and (f) whether the ADR had a reasonable
prospect of success.
34. The Court in Halsey rejected submissions
that there ought to be a presumption in favour of mediation. However, judicial thinking in England
Wales has moved on in last 20 years.
In Churchill v Merthyr Tydfil County Borough Council [2023] EWCA Civ 1416, the Court of Appeal held that Dyson LJ's statement
in Halsey to the effect that "to oblige truly unwilling parties
to refer their disputes to mediation would be to impose an unacceptable
obstruction on their right of access to the court" was not a necessary
part of his reasoning and that the Court can:
“74.(ii)…lawfully stay
proceedings for, or order, the parties to engage in a non-court-based dispute
resolution process provided that the order made does not impair the very
essence of the claimant's right to proceed to a judicial hearing, and is
proportionate to achieving the legitimate aim of settling the dispute fairly,
quickly and at reasonable cost.”
35. Churchill was
followed in DKH Retail Limited & Ors v City Football Group Limited
[2024] EWHC 3231 (Ch) where the English High Court ordered entrenched parties
in a commercial dispute to mediate, which they did successfully,
notwithstanding the defendant’s view at the hearing that mediation had no
realistic prospects of success.
In so doing, the Court noted that:
“38…in many cases the
parties' positions in the litigation are diametrically opposed and it may
easily be said that each party requires a judicial determination. But
nonetheless the parties come through ADR to recognise the desirability of
settling for less than their strict legal rights and compromising their
positions. Experience shows that mediation is capable of cracking even the
hardest nuts. The process sometimes succeeds in cases where the parties appear
at first to have intractable differences…The claimants are also right to
say that the dispute is self-contained and that a mediation would be able to
focus on possible solutions rather than raking over historical grievances.
39. I see some force in the defendant's
submission that it is late in the day to be seeking an order, but it may also
be said that there is some advantage in the parties' positions having been
crystallised through pleadings and the service of witness statements. It is
indeed sometimes an objection to mediation that it is premature, proposed at a
stage when the parties' positions are unknown. That cannot be said here.
40. There is also some force in the
submission of counsel for the defendant that these are commercial parties with
experienced solicitors and that if there was realistically to be a settlement,
one would have expected it already to have been reached. But that argument does not do full
justice to experience, which shows that bringing the parties together through
mediation can overcome an entrenched reluctance of parties to negotiate, even
where sincere. The purpose of mediation is to remove roadblocks to settlement.
I am unable to accept the submissions of the defendant that a mediation here
has low prospects of success and that adjudication by a court is necessarily
required. The range of options available to the parties to resolve the dispute
through mediation goes beyond the binary answer a court could provide. There
may be solutions other than yes or no.”
36. In my judgment, the reasoning in Churchill
applies with equal vigour in Jersey and there is no reason why the Court could
not, if so minded and in accordance with the Overriding Objective and in
particular Royal Court Rules 2004 1/6(6)(e), order parties to
participate in alternative dispute resolution. However, the fact that the Court has the
power to order parties to attend ADR, does not mean that that is its only
power; the Court can also take a party’s failure to engage in ADR into
account when determining costs. As
was noted in Gore v Naheed [2017] EWCA 369 (at paragraph 49), a failure
to engage in ADR, even if unreasonable, does not automatically result in a
costs penalty; it is simply a factor to be taken into account by the Court when
exercising its discretion as to costs.
Discussion
37. The Defendant, JTC, wishes to discontinue the
proceedings against the Gaurang Parties, who submit that they have therefore
prevailed and should, in the usual way, have their costs.
38. As to the basis of those costs, issuing
proceedings but not pursuing them to a conclusion and abandoning them, could
amount to unreasonableness such as to justify an award of costs on an indemnity
basis, as reflected in the decision of the Court of Appeal in Dick v. Dick
(née Naranjo) [1990] JLR N.2c where it held that:
“A
party who institutes proceedings against another but subsequently withdraws
them before they are due to be heard may properly be ordered to pay costs on an
indemnity basis to compensate that other party.”
39. However, as Commissioner Thompson held in Sheyko
v Consolidated Minerals Limited [2023] JRC 099 “the starting
point was not indemnity costs but an exercise of discretion.” 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”
40. In this case, JTC was not the plaintiff; it was a defendant to the claims brought
by the Plaintiffs and as such, was not in sole control of the litigation. Accordingly, I think that the fact that
it eventually discontinued, having settled with other parties, is less
indicative of unreasonable litigation conduct on its part than might have been
the case had JTC been, for example, the sole plaintiff.
41. JTC submits that it had no option but to join
all of the relevant family members to the proceedings given that it was the
Family Agreement which lay at the heart of this dispute. Accordingly, it submits that such that
its actions cannot be categorised as being out of the ordinary or unreasonable
such as might justify an award of costs on the indemnity basis. Whilst I readily accept that joining the
Third Parties and keeping them in as parties was an option for dealing with
these proceedings, I cannot accept that it was the only option, given that:
(i)
JTC appear
to have concluded by November 2021 that a discontinuance was appropriate for
the Gaurang Parties, albeit at that stage it was offered as part of a global
settlement with all of the other parties; and
(ii) a resolution was ultimately achieved without
involving the Gaurang Parties.
42. In my judgment, JTC’s actions in continuing
to litigate against the Gaurang Parties for a further 3 years after it
recognised that a discontinuance might be appropriate, could in theory amount
to unreasonableness such as to justify an order for indemnity costs. However, whilst in an ideal world, it
might have been desirable for JTC to try to bank the discontinuance offered by
the Gaurang Parties, I do not think that the failure so to do, or its continued
litigation against the Gaurang Parties, can be regarded as unreasonable in
circumstances where:
(i)
JTC was
the Defendant to proceedings brought by the Plaintiffs;
(ii) the Plaintiffs, and the others parties which
included the Second and Third Defendants and the twelve Third Parties, were not
seemingly willing to settle; and
(iii) the proceedings were being actively managed to
a conclusion by both Master Thompson and the Deputy Bailiff.
43. Advocate Nicholls submits that his clients made
an offer to discontinue with payment of their costs on 15 June 2021, which
position was eventually conceded by JTC on 8 October 2024. Accordingly, he submits that the Gaurang
Parties have matched the offer they made a long time ago and should have their
costs from the date of that offer on an indemnity basis. However, as the Royal Court held in Pirrwitz v AI Airports International Limited
[2013] (1) JLR N.10, whilst an offer is highly relevant to the issue of costs;
It is not, however, necessarily
relevant to the basis on which the costs should be assessed and a court can,
for example, award costs on the standard basis even if a party beats a
Calderbank offer by a considerable margin (Flynn v. Reid, 2012 (2) JLR 226,
considered).
44. If costs are to be awarded on an indemnity
basis, the Gaurang Parties must establish unreasonableness on the part of JTC
and for the reasons set out above, I am not satisfied that JTC’s
litigation conduct was unreasonable.
45. As to the Gaurang Parties’ costs, this is
not a case where they raised issues or allegations either on which they failed
or which they raised improperly or unreasonably, such as might justify
depriving them of all or part of their costs or ordering them to all or part of
the unsuccessful party's costs following Elgindata. However, JTC submits forcefully that the
Gaurang Parties’ intransigent litigation conduct, and in particular, their
refusal to engage with mediation, was unreasonable and they should be deprived
of their costs as from the date of that refusal in August 2021. Further, it submits that whilst the
Gaurang Parties may have reasonably considered that they had a strong case,
their refusal to discuss that case in front of the other parties at mediation
was itself unreasonable.
46. There is no doubt that Advocate Nicholls and
his clients refused to attend the mediation scheduled for October 2021 and that
they did not in fact attend. That
mediation was unsuccessful, albeit that a resolution was eventually reached
without the involvement of the Gaurang Parties. I cannot see any proper basis for
finding that as a result of that non-participation by the Gaurang Parties in
October 2021, they should be deprived of their costs accruing over the
following 3 years of litigation.
47. It is also not the case that there was no
engagement on the part of the Gaurang Parties. Firstly, they made an offer of
settlement in June 2021. Thereafter
they agreed to participate in a mediation provided it was scheduled
expeditiously. When that proved not
to be possible, they declined to participate, albeit without giving any reasons
beyond stating that they did not see that the proposed delay in mediating was “in
any way consistent with the overriding objective.” Refusing to participate in these terms
was plainly unreasonable given the absence of any, or any proper,
explanation. I would respectfully
remind practitioners of the guidance set out in the Jackson ADR Handbook which
was referred to in PGF II SA v OMFS Company 1 Limited [2013] EWCA Civ 1288, where Briggs LJ held (at paragraph 30) that:
"The ADR Handbook, first
published in 2013, after the period relevant to these proceedings, sets out at
length at para 11.56 the steps which a party faced with a request to engage in
ADR, but which believes that it has reasonable grounds for refusing to
participate at that stage, should consider in order to avoid a costs sanction.
The advice includes: (a) not ignoring an offer to engage in ADR; (b) responding
promptly in writing giving clear and full reasons why ADR is not appropriate at
the stage based if possible on the Halsey guidelines; (c) raising with the
opposing party any shortage of information or evidence believed to be an
obstacle to successful ADR together with consideration of how that shortage
might be overcome; (d) not closing off ADR of any kind and for all time in case
some other method than that proposed or ADR at some later date might prove to
be worth pursuing. That advice may fairly be summarised as calling for
constructive engagement in ADR rather than flat rejection, or silence. It is
apparent from the footnotes that the authors drew heavily on the first instance
decision in the present case ... "
48. However, notwithstanding this refusal to
participate, Advocate Nicholls did in fact speak to the mediator, and made a
further substantive offer, in October 2021.
49. In my judgment, this is not a case of a simple
refusal to engage in settlement discussions but rather a series of
communications and/or negotiations between parties to highly contested
litigation which, with the benefit of hindsight, look somewhat intemperate and
rather intransigent. However, in my
judgment, it is difficult to criticise Advocate Nicholls’s position as
being unreasonable in circumstances where:
(i)
his letter
of 15 June 2021 set out a detailed explanation of his clients’ position;
(ii) JTC had accepted by November 2021 that a
discontinuance might be appropriate;
(iii) JTC eventually indicated in October 2024 that
it would pay the Gaurang Parties’ costs taxed on a standard basis; and
(iv) a resolution was reached between all parties
without the participation of the Gaurang Parties.
50. In my view, the strongest point that can be
made against the Gaurang Parties is that the nature of this litigation
concerned a family dispute, and arose from the Family Agreement. If it was to be resolved, it required
the engagement of the family and in particular all of those family members who
were directly or indirectly involved with the Family Agreement. That included the Gaurang Parties. Even if they maintained during the
mediation or without prejudice discussion a refusal to contribute to any settlement,
their presence alone might have had a beneficial and intangible effect on the
other members of the family such that settlement might have been achieved
earlier either at a mediation or in the aftermath thereof. These were in effect, the sentiments of
the Deputy Bailiff set out at the end of his Act of Court dated 19 February
2024 at paragraph 19
above and
reflect the subsequent comments of the English High Court in DKH Retail
Limited & Ors v City Football Group Limited set out in paragraph 35
above. However, a failure to
engage in a mediation does not of itself result in a costs’ penalty; it
is but one factor to take into account.
51. As to the other factors set out in Halsey:
(i)
I think it
difficult to speculate as to the merits of the case. There has not been any trial in these
proceedings and there will not be one.
Although the Gaurang Parties submit that the merits were on their side,
Master Thompson did not strike out the whole of the Third Party Claim, and the
Deputy Bailiff was of the view that the claims were sufficiently arguable to
give directions for a 5 week trial.
(ii) It is evident from the correspondence that
numerous attempts at settlement were attempted by various parties, including
the Gaurang Parties.
(iii) I do not think, and it is not submitted that,
the costs of ADR or any potential delay in ADR are relevant.
(iv) As to whether the ADR had a reasonable prospect
of success, it did not succeed in 2021 despite the best efforts of the other
parties, and when the matter settled 3 years later, it was as a result of
discussions between Counsel other than Advocate Nicholls. It cannot therefore be said that the
failure of the Gaurang Parties to attend was a tangible impediment to
settlement.
52. Approaching this matter cautiously given that
it is my only substantive involvement in a highly contested claim which has
been extant for some 5 years:
(i)
I am not
satisfied that the litigation conduct of JTC has been unreasonable such as
would justify an order for costs against it on the indemnity basis; and
(ii) I am not satisfied that the behaviour of the
Gaurang Parties has been unreasonable such that they should be deprived of all
or part of their costs.
53. In my judgment, the appropriate order is for
JTC to pay the costs of the Gaurang Parties, of and incidental to the Third
Party Proceedings, to be taxed on a standard basis if not agreed.
Payment on Account of Costs
54. The principles to be applied when considering a
payment on account of costs are well known and set out, for example, by
Commissioner Bailhache in MB & Services Ltd v United Company Rusal PLC
[2020] JRC 151:
“11. In relation to the
amount of the interim payment, the principles are clear from case law, as the
parties seem to agree. In Crociani v Crociani [2014] (1) JLR 503, Beloff JA said:-
"16. In my view, the
achievement of justice, to which all exercises of discretion under procedural
rules aspire, would usually require that a party who is, pursuant to a court
order, entitled to his costs, should be paid on account a percentage of the
amount he is likely to recover on taxation calculated on a conservative basis
to avoid any real risk of over payment".
12. In Marange Investments
(Proprietary) Limited v Le General de Carrière
et des mines sarl [2013]
JRC 119A, Clyde-Smith, Commissioner said this at paragraph 44:-
"The Court should not
therefore, seek to conduct a taxation or detailed view of the successful
party's costs but adopt "a rough and ready" approach in order to arrive
at a figure which the successful party "will almost certainly
collect".
15. In Francis v Jersey Financial
Services Commission [2018] JRC 064A, Sir Michael Birt, Commissioner, said this
at paragraph 27:-
"I respectfully agree with
observation of the Court of Appeal at paragraph 16 in Crociani
(see paragraph 18 above) that the achievement of justice will usually require
that a party entitled to his costs should be paid on account a percentage of
the amount he is likely to recover on taxation, calculated on a conservative
basis to avoid any real risk of overpayment. I further agree that, in respect
of an order for standard costs, the starting point will be to order an interim
payment of 50% of the costs claimed by the successful party on the standard
basis, i.e. Factor A and Factor B applied to the number of hours worked. This
does not require a full bill of taxation ..... "”
55. In this case, the Gaurang Parties have produced
a single page schedule of costs claiming:
(i)
costs of
£76,221.75 up until 15 June 2021, calculated on the basis of the
appropriate Factor A rates together with a 50% Factor B uplift;
(ii) costs of £98,550 from 16 June 2021 to
date on the basis of Advocate Nicholls' commercial rate multiplied by the
number of hours; and
(iii) disbursements for counsel and eDiscovery
providers in the sum of £23,201.16
56. No details have been given of the work carried
out and Mourant, for JTC, submit that not only is the amount excessive but in
the absence of any relevant details, the Court cannot properly carry out any
rough and ready assessment.
57. In my judgment, the Court has sufficient
information, in terms of its knowledge of the proceedings, its experience of
taxations generally, and the schedule of costs, to carry out a rough and ready
assessment to determine the figure which the Gaurang Parties "will
almost certainly collect”, and I reject JTC’s submission that
there should be no order for a payment on account. To do so would run contrary to the
interests of justice identified by Beloff JA in Crociani
(and cited with approval in MB & Services Ltd above).
58. Applying a broad-brush approach:
(i)
this
litigation has been hotly contested for a number of years and was proceeding to
a 5 week trial in November 2024 when it settled in October 2024;
(ii) the Factor B uplift of 50% claimed by the
Gaurang Parties for their standard costs does not appear unreasonable;
(iii) Advocate Nicholls’ commercial rate will
have to be reduced to reflect the award of costs on the standard basis as
opposed to the indemnity basis, which gives a total for the post-June 2021
costs of £90,337.49;
(iv) little substantive detail has been provided in
relation to any of the figures claimed for costs and following Procom (Great
Britain) Ltd v Provincial Building Co. Ltd [1984] 1 WLR 557 (which was
cited with approval in Montague Goldsmith AG (in liquidation) v Goswick
Holdings Limited [2020] JRC 245B), the Court is entitled to discount those
costs significantly:
“Furthermore, if very little
information is put before the court upon which it can estimate costs, then
again it will be reasonable to make a large discount…”
(v) the absence of substantive narrative in the
schedule is likely to obscure numerous, potentially significant, matters of
detail relating to the bill that will have to be considered on taxation;
(vi) Advocate Nicholls is the only fee earner who
appears to have been involved since June 2021 and notwithstanding that his firm
may be small in terms of the number of fee earners available, I think it
unlikely that all of the tasks for which he has charged time would have
reasonably required partner-level involvement;
(vii) whereas in many cases, a figure of 50% of the
sum claimed is an appropriate sum to award for the purposes of an interim
payment, in this case, I think that a lesser percentage is appropriate, and I
order 40% of the sum claimed, namely £75,904,
to be paid by way of an interim payment on account of costs.
Costs of the Application
59. For the assistance of the parties, my
provisional views on the costs of this application are that:
(i)
whilst I
accept that the application could have been dealt with on the papers, given
that the summons required consideration of the complex factual and procedural
background to the proceedings and that nearly 2,000 pages of material were
filed for this hearing, it was not unreasonable for Advocate Nicholls to
request a physical hearing and I was greatly assisted by the informed
submissions of Counsel;
(ii) neither party has prevailed in that:
(a) I have ordered that the Gaurang Parties should
recover their post-15 June 2021 costs on a standard basis, as opposed to the
indemnity basis claimed;
(b) I have declined to deprive the Gaurang Parties
of their post-18 August 2021 costs as sought by JTC.
(iii) subject to any further submissions, I would be
minded to make no order for the costs of and incidental to the application to
discontinue.
Authorities
Trusts (Jersey) Law 1984.
Patel
v JTC Trust Company Limited and Ors [2022] JRC 089.
Patel
v JTC Trust Company Limited and Ors [2022] JRC 150.
Patel
v JTC Trust Company Limited and Ors [2023] JRC 009.
Patel
v JTC Trust Company Limited [2023] JRC 152.
MB
and Services Limited and Golovina v United Company Rusal Plc [2020] JRC
099.
Pell
Frischmann Engineering Limited v Bow Valley Iran Limited and Others [2007]
JLR 479.
Café
De Lecq Limited v R.A. Rossborough (Insurance
Brokers) Limited [2012] (2) JLR 155.
Halsey
v Milton Keynes General NHS Trust [2004] EWCA Civ
576.
Churchill
v Merthyr Tydfil County Borough Council [2023] EWCA Civ
1416.
DKH
Retail Limited & Ors v City Football Group Limited [2024] EWHC 3231
(Ch).
Royal Court Rules 2004.
Gore
v Naheed [2017] EWCA 369.
Dick
v. Dick (née Naranjo) [1990] JLR N.2c.
Sheyko
v Consolidated Minerals Limited [2023] JRC 099.
JFSC
v AP Black (Jersey) Limited [2007] JLR 1.
Pirrwitz v AI Airports International Limited [2013] (1)
JLR N.10.
PGF
II SA v OMFS Company 1 Limited [2013] EWCA Civ
1288.
MB
& Services Limited and Golovina v United Company Rusal PLC [2020] JRC 151.
Procom (Great Britain) Ltd v
Provincial Building Co. Ltd [1984] 1 WLR 557.
Montague
Goldsmith AG (in liquidation) v Goswick Holdings Limited [2020] JRC 245B.