Guernsey Law Reports 2007–08 GLR 323
SHAHAM v. LLOYDS TSB OFFSHORE TREASURY LIMITED and FOOKS (as Administratrix of the Estate of RON)
ROYAL COURT (Collas, Deputy Bailiff): June 25th, 2008
Civil Procedure—costs—discretion of court—principles governing exercise of discretion—“costs follow event” no longer conclusive principle but starting point from which court may easily depart if necessary—to be more prepared to adopt issue-based approach, making separate costs orders for different issues
The intervenor, the administratrix of a deceased’s estate, sought costs from the plaintiff in the Royal Court in respect of an action in which her intervention had been successful in recovering assets for the benefit of the estate.
The plaintiff, the deceased’s housekeeper and friend, had claimed funds from the defendant bank, on the basis that during his lifetime the deceased had transferred his account at the bank into their joint names and she had become entitled to them by survivorship. The Jurats found as a fact that the account remained in the sole name of the deceased at the time of his death and it followed that the funds passed to the intervenor on behalf of his estate. The issues on which the Jurats required direction are reported at 2007–08 GLR 297.
The intervenor maintained that costs should follow the event and, since the estate had succeeded in securing the funds, the plaintiff should pay the estate’s costs. The plaintiff submitted in reply that, as the intervenor had failed on three issues pleaded and succeeded on two, this was therefore an appropriate case for the making of an issue-based costs order. The two principal matters on which she had failed and which required consideration were (a) the assertion that the deceased had been acting under the plaintiff’s undue influence, and (b) the claim that the proposed transfer into joint names was intended to be only a matter of “administrative convenience.” Considerable time had been devoted to the undue influence issue, though much of the evidence on it was also relevant to the main issue of the deceased’s intentions in relation to the funds; and, although the “administrative convenience” issue had not been argued in court, preparation time had been devoted to it by counsel.
Held, ordering costs to be paid by the plaintiff on an issue-based basis:
(1) An issue-based approach to costs was appropriate in this case
2007–08 GLR 324
because the intervenor had not succeeded on all the points she had pleaded but time had nonetheless been spent on preparing to argue and dealing with them. It was no longer the case that the “costs follow the event” principle was conclusive, since it now had to be regarded simply as a starting point from which the court could readily depart when it felt it was necessary to make separate costs orders to reflect the outcome of different issues (paras. 6–8; paras. 10–12).
(2) The Royal Court had a wide discretion under the Royal Court Civil Rules 1989, r.48 and now the 2007 Rules, r.82 and, since it had always followed the practice of using the English rules for guidance, it should now be guided by the English “change of practice”—which had, in fact, already taken place before the Civil Procedure Rules came into force in England—and be more prepared to focus on the outcome of separate issues in making costs orders (para. 6; paras. 10–12).
(3) The undue influence issue was a case in point. It had appeared at first that it would turn out to be a discrete issue and likely to be the subject of an issue-based order for costs—yet as the hearing progressed it became clear that much of the evidence on it was not related solely to the unsuccessful issue itself but was directly relevant to the principal issue of the deceased’s original and ultimate intentions and actions. The Jurats had found that although he had genuinely intended to make the account into a joint account, they were undecided whether or not he continued with this intention until his death—the transfer of the funds into joint names therefore never took place and the allegation of undue influence became redundant. It was true, just the same, that the examination and cross-examination of the plaintiff would have been more restricted if the undue influence issue had not been raised. The “administrative convenience” issue was in fact a discrete issue, since it had been raised in the pleadings and, though not argued in court, preparation time had been devoted to it by counsel. It was therefore a suitable candidate for an issue-based order (paras. 13–18).
(4) Overall, the undue influence issue was a good indicator of how suitable an issue-based approach to costs might be. As the evidence on it was, however, relevant to more than one issue, the single issue of undue influence could not be isolated and dealt with by a separate award—and a better solution would be to make a percentage reduction in the costs the intervenor would otherwise have been awarded. In the absence of detailed information about the costs incurred and without having been able to conduct a detailed analysis of the time spent in incurring them, the court would be compelled to make an estimate of this percentage reduction, which it concluded should be 20%. The plaintiff would therefore be ordered to pay 80% of the intervenor’s costs on a recoverable basis (paras. 18–22).
Cases cited:
(1) A.E.I. Rediffusion Music Ltd. v. Phonographic Performance Ltd., [1999] 1 W.L.R. 1507; [1999] 2 All E.R. 299; [1999] C.P.L.R. 551;
2007–08 GLR 325
[1999] E.M.L.R. 335; [1999] R.P.C. 599, dicta of Lord Woolf, M.R. applied.
(2) National Westminster Bank plc v. Kotonou, [2007] C.P. Rep. 22; [2007] EWCA Civ 223, referred to.
(3) Shirley v. Caswell, [2000] Lloyd’s Rep. P.N. 955; [2001] 1 Costs L.R. 1, referred to.
(4) Summit Property Ltd. v. Pitmans, [2002] C.P.L.R. 97; [2001] EWCA Civ 2020, dicta of Longmore, L.J. considered.
R.I.C.E. Harris for the plaintiff;
N.J. Barnes for the intervenor.
1 COLLAS, DEPUTY BAILIFF: This judgment follows a trial before myself and three Jurats of the Royal Court concerning a bank account held at the defendant bank, which was once in the names of the late Dr. Ron and his mother. Following the death of his mother, sole ownership of the bank account passed to Dr. Ron. Shortly after his mother had passed away, Dr. Ron died unexpectedly.
2 The plaintiff alleged that during the period between the death of his mother and his own death, Dr. Ron transferred the bank account into the joint names of himself and the plaintiff. The finding of the Jurats was that at the time of Dr. Ron’s death, the account belonged to him alone and hence passed to his estate on his death.
3 The intervenor has applied for an order for costs against the plaintiff on a recoverable basis. The plaintiff argues that the intervenor should not recover all her costs but that, instead, I should make an issue-based costs order as the intervenor did not succeed on all issues pleaded by her. Advocate Harris, on behalf of the plaintiff, alleges the intervenor failed on three of the issues pleaded by her, namely:
“(a) Whether Dr. Ron had intended to make a gift of the funds in the account to the plaintiff, his housekeeper.
(b) If the account was transferred into the joint names of Dr. Ron and the plaintiff, the intervenor alleged he was acting under undue influence.
(c) If the account was transferred into their joint names, then the intervenor argued in the alternative that it was only done as a matter of administrative convenience.”
4 Advocate Harris says the two issues upon which the intervenor succeeded were:
(a) Was documentation signed by Dr. Ron and the plaintiff when they attended a meeting at the defendant bank in Guernsey on November 4th, 2002 sufficient to assign the benefit of the account into their joint names?
2007–08 GLR 326
This was an issue pleaded by the plaintiff on which the plaintiff failed as a matter of law.
(b) Did the defendant bank impose conditions as to documentation required to be produced before it would transfer the account into their joint names? If so, the Jurats found such conditions were not fulfilled and hence the transfer was never effected.
5 I am not concerned in this judgment with the defendant’s costs.
6 When awarding costs at the conclusion of proceedings, the Royal Court has a wide discretion under r.48 of the Royal Court Civil Rules 1989 and now under r.82 of the Royal Court Civil Rules 2007. In exercising that discretion, the Royal Court looks for guidance to English case law and at the principles in Part 44 of the Civil Procedure Rules. The commentary in the White Book explains that the CPR have led to a change of approach, or at least a change of emphasis in approaching costs decisions. 1 Civil Procedure 2006, para. 44.3.1, at 1137, commenting on r.44.3, says the following:
“Although this rule preserves the general rule that the unsuccessful party will be ordered to pay the costs of the successful party, Lord Woolf M.R. was anxious to move away from the position that any success is sufficient to obtain an order for costs. He therefore envisaged far more partial orders for costs which more accurately reflect the level of success achieved by the receiving party; see A.E.I. Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 W.L.R. 1507, CA.
As a result of the authorities since the decision in Elgindata (No.2), Re [1992] 1 W.L.R. 1207, CA it is no longer necessary to establish that a successful party has acted unreasonably or improperly in raising an issue in order for it to be deprived of its costs and ordered to pay the unsuccessful party’s costs of that particular issue. The issue based approach requires the court to consider issue by issue where the costs in each discrete issue fall: Summit Property Ltd v Pitmans [2001] EWCA Civ 2020.”
7 The White Book also states (op. cit., para. 44.3.8, at 1142) in relation to r.44.3(2) that “a Judge making an award of costs has essentially to determine whether to apply the general rule that costs follow the event, or award costs on an issue by issue basis.”
8 Counsel for both parties agreed there was a new approach, but Advocate Barnes interpreted it as being less far reaching than Advocate Harris suggested.
9 Advocate Barnes, on behalf of the intervenor, sought to distinguish National Westminster Bank plc v. Kotonou (2) on the grounds that, unlike
2007–08 GLR 327
the defendant in that case, the intervenor in the present case did not raise the undue influence issue improperly or unreasonably. He also distinguished it from Shirley v. Caswell (3), on the ground that in Shirley, extravagant claims had been made and points had been taken and issues tried which had no prospect of success. He relied upon a passage in a judgment of Longmore, L.J. in Summit Property Ltd. v. Pitmans (4) in which he held ([2001] EWCA Civ 2020, at para. 17):
“It is thus a matter of ordinary common sense that if it is appropriate to consider costs on an issue basis at all, it may be appropriate, in a suitably exceptional case, to make an order which not only deprives the successful party of his costs of a particular issue, but also an order which requires him to pay the otherwise unsuccessful party’s costs of that issue, without it being necessary for the court to decide that allegations have been made improperly or unreasonably.”
10 Advocate Barnes relied upon the reference to “a suitably exceptional case,” and argued that nothing in the present case, including the undue influence issue, made the present case exceptional. In my view, he placed too much emphasis on the requirement for the case to be suitably exceptional. The guiding principle is, I believe, to be found in the judgment of Lord Woolf, M.R. in A.E.I. Rediffusion Music Ltd. v. Phonographic Performance Ltd. (1) ([1999] 1 W.L.R. at 1522–1523):
“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 as you win, you are encouraged to leave no stone unturned in your effort to do so.”
11 I believe that principle should guide the Royal Court in exercising its discretion wherever possible. The fact that the Royal Court has a wide discretion both under the 1989 Rules and the 2007 Rules and the fact that the “change of practice” had already started in England before the Civil Procedure Rules came into force, entitle the Royal Court to adopt (if it has
2007–08 GLR 328
not already done so) that practice even in cases which are still governed by the 1989 Rules.
12 It follows, in my view, that the proper approach for me to adopt in the present case is to look at the intervenor’s success, or otherwise, on the issues raised at the hearing so as to decide whether to depart from the general rule that costs follow the event and make an issue-based order.
13 My initial view, at the conclusion of the hearing and before the parties had made any submissions, was that the undue influence issue had taken up a considerable amount of time at the trial. Before hearing submissions from counsel, I had indicated that this might be a case where an issue-based costs order would lead to the conclusion that each party should bear his own costs. I now accept I had over-estimated the amount of time devoted to the undue influence issue and it emphasizes how important it is to seek to distinguish between evidence that was only relevant upon an unsuccessful issue from evidence that would have been given in any event because it was relevant to another issue.
14 Much of the evidence relevant to the undue influence issue was relevant to decide what Dr. Ron’s intentions were. The Jurats had to decide what Dr. Ron intended as to the ownership of the account prior to a meeting at the defendant bank on November 4th, 2002. The Jurats unanimously decided that between August 31st and November 4th, 2002, Dr. Ron informed the plaintiff of his intentions (a) to transfer to himself and the plaintiff, joint ownership of the sums held in the bank account in Guernsey, and (b) to make that transfer to her by way of gift.
15 By a majority of 2 to 1, the Jurats held that those were Dr. Ron’s true intentions and that he had not expressed those intentions to the plaintiff merely to give her the impression of intending to make the transfer of ownership without intending to do so. In answer to a question as to whether Dr. Ron decided not to make that transfer of ownership to the plaintiff at any time after November 4th, 2002, one Jurat answered “Yes,” another Jurat answered “No” and another Jurat answered “Not proved.” So, as Advocate Barnes argued, although the Jurats unanimously decided it was Dr. Ron’s intention to transfer the ownership of the account to the plaintiff before the meeting at the bank, and by on or about November 13th, 2002, Dr. Ron knew he had to satisfy conditions before the account could be transferred, it can only be inferred that he either decided not to add the plaintiff to the account, or that he had neither decided to do so, or not to do so. The significance of this issue, he argues, is that the background to the transaction was always going to be relevant, whether or not a claim of undue influence was made.
16 I agree that it would not have been possible to ignore the background to the transaction. The most important evidence in the case was probably the evidence relating to the meeting at the bank on November 4th, 2002, at
2007–08 GLR 329
which three persons were present, the bank manager Mr. Samman, Dr. Ron and the plaintiff. Mr. Samman’s evidence of what was said was contradicted by the evidence of the plaintiff who could only tell the court what Dr. Ron explained to her occurred at the meeting, because her English was inadequate to understand directly.
17 It was inevitable that the plaintiff would give evidence as to why Dr. Ron wanted to transfer his bank account into joint names with himself and her (his housekeeper), thereby disinheriting his estate in the event of his pre-deceasing her. It was also inevitable that the plaintiff’s credibility would be an issue.
18 Having reflected very carefully, I am satisfied that much of the evidence would have been required in any event, but that the scope of the questioning would have been more restricted if undue influence had not been raised as an issue. So, in accordance with the new practice, I consider that an issue-based approach is appropriate in this case.
19 Another unsuccessful issue to be borne in mind is the “administrative convenience” issue raised in the pleadings. It was not pursued in court, but I accept Advocate Harris’s argument that some time would have been devoted to it in preparing for the hearing.
20 I further considered this is an appropriate case where the way to reflect success is by awarding a percentage reduction in the costs that the intervenor would have otherwise recovered.
21 How much of a percentage reduction should be allowed? I have not seen any detailed bills of cost as the advocates had not prepared detailed bills at the time of the hearing. Advocate Barnes gave me an indication that he considered he spent an equal amount of time on preparing for the trial as he did in appearing at the trial. Advocate Harris estimated that the time could be divided into three approximately equal parts—namely, preparation before trial; time in court; and preparation for each day’s hearing during the course of the trial.
22 Inevitably, without having conducted a detailed analysis of the time spent in incurring costs, I have to estimate a percentage reduction. After careful reflection, I consider that the appropriate reduction is 20%. I therefore make an order that the plaintiff shall pay to the intervenor 80% of the intervenor’s costs assessed on a recoverable basis.
Order accordingly.
2009
Law Report
None
Guernsey Law Reports 2007–08 GLR 323