IN THE SUPREME COURT ACTION NO. CL 23/06
TURKS AND CAICOS ISLANDS
(1) PRECISION DEVELOPMENTS LTD.
(2) MANDALAY RESORTS LTD. Plaintiffs
JEANETTE CARIBBEAN COMPANY LIMITED Defendant
Mr. James Thom QC and Mr. Stephen Wilson for the Plaintiffs
Mr. James Corbett QC and Mr. Tim Prudhoe for the Defendant
Hearing by telephone: 23 May 2007
1. I was asked by the parties to postpone settling the form of Order consequent upon my Judgment, and the exercise of my discretion as to costs, until I had heard further submissions following the handing down of my Judgment, which occurred on 22 February 2007.
2. Accordingly, a hearing took place by telephone on 23 May 2007, and occupied half a day. It related to costs and a stay. Once again I had the benefit of written and oral submissions.
3. Mr. Corbett, Queen’s Counsel for JC, asked that JC be awarded its cost on an indemnity basis, consequent upon Clause 3.1 of the Agreement, the relevant part of which states:
"Precision shall be solely responsible for and indemnifies JC and its subsidiaries absolutely in respect of all costs, liabilities or claims arising out of or on connection with the Proposed Development to include specifically....JC's legal and other fees necessarily incurred by JC in defending any actions taken against it or any subsidiaries arising out of the Proposed Development.... ”
4. He submitted that there were no words in this Clause limiting it to third party claims. Indeed the words “defending any actions” were all embracive. He said that here there was no disparity of bargaining power, and the parties walked into this agreement, including Clause 3.1 with their eyes open. He further argued that this litigation had “arisen out of the Proposed Development”, even though the option to purchase had not been exercised. Liabilities can arise both before and after purchase and development, hence the use of the word “Proposed” and the Clause bites whether or not the Agreement takes effect. Therefore, had his client lost, he accepted that the effect of the Clause would have entitled JC to be indemnified in respect of its costs by Precision, even though Precision would have had to resort to litigation to enforce its rights against JC, unless Precision could have argued that the costs were not necessarily incurred as the defence was doomed to failure.
5. Mr. Thom, Queen’s Counsel for Precision, did not seek to argue that the Clause could not apply if the option was not exercised, but submitted that it could not have been the intention of the parties that Precision would have to indemnify JC in unsuccessfully defending a claim brought by Precision against it. Its natural meaning was that it related the third party claims. Hence the opening words “Precision shall be solely responsible for” anticipated a situation in which both Precision and JC were the target of a costs claim. Any other interpretation offends common sense and entitles a party to take advantage of its own wrong, and could not have been “necessarily incurred.” If such an unfair situation was intended, this would have to be expressly stated.
6. Both counsel accepted that an agreement of the parties as to costs did not over¬ride the discretion of the Court. Mr. Thom referred to the fact that the Court’s discretion under Order 62 rule 3 (3) Civil Rules 2000 (tab 2 of the Plaintiff's skeleton) was given statutory effect by s.221 Civil Procedure Ordinance (tab 1 to Plaintiff's skeleton), which, he argued, put the Court in the same position as the High Court in England under s.51 (1) Supreme Court Act 1981. Both counsel referred to Gomba Holdings (U.K.) Ltd, v Minories Finance Ltd. (No. 2) (1993) Ch 171 and in particular to the principles enunciated by Lord Justice Scott, as he then was, at page 194A, namely that the Court always has a discretion, but where there is a contractual right to costs, the discretion should ordinarily be exercised to reflect that right. I note also that his Lordship remarked at 187H that it was difficult to contemplate that a mortgage deed would ever be construed as entitling a mortgagee to pay all costs, however improperly or unreasonably incurred, and considered that such a provision would be open to serious question on public policy grounds.
7. I cannot accept the interpretation of Clause 3.1 contended for by JC. Even if it can be contended that this litigation, in which the option was never exercised, arose from the Proposed Development, I am unable to find that it was the intention of the parties that JC could resist any claim brought against it by Precision in relation to this Agreement. I cannot, nor do I consider that an officious bystander could, accept that it was the intention that JC should be able to do this safe in the knowledge that such would involve JC in no expenditure and Precision in as much expenditure that JC wanted to incur. Such makes no commercial sense and encourages contractual disharmony, and I accept that such an intention would need to be spelt out in the clearest terms, rather than by the words “any actions.”
8. I therefore construe Clause 3.1 as being intended to relate to third party claims and shall disregard it when exercising my discretion on costs.
9. Mr. Thom accepted that normally costs should follow the event. He further accepted that, where a successful party had raised issues or made allegations which it had failed to establish, that did not mean that it had to pay the unsuccessful party’s costs on that issue, as long as it had been properly and reasonably raised. However, the Court was entitled to exercise its discretion to deprive the successful party of its costs in relation to issues that were not pursued/lost. Because this was a matter for my discretion, I could do this on an issue by issue basis, as is now favoured under the Civil Procedure Rules in England. However, he submitted that here the Court should exercise its discretion by ordering the losing party to pay only a percentage of the successful party’s costs, and in deciding how much that should be the Court was entitled to had to make a rough and ready assessment based on how much time and expense was taken up in dealing with such issues or allegations (see: In re Elgindata Ltd (No. 2) (1992) 1 WLR 1207. tab 4 of Plaintiffs skeleton, and in particular the Judgment of Nourse L.J. at 1216 A).
10. He submitted that those issues and allegations had not only been raised on the pleadings, but had had to be prepared and documentation, amounting to 43% of the total documentation, relating to them had had to be disclosed and considered and, in addition, had occupied a significant part of Precision’s opening in the two day first leg of a total hearing time of a 5 1/2 days, particularly in relation to Founding Member Agreements, and that justice required that this should be reflected in a reduction in the costs that Precision had to pay JC. The arguments that JC lost, abandoned or failed to argue are set out in paragraph 9 of his skeleton. He argued that the only sensible way of dealing with a reduction was by way of percentage. Here he contended for a 25% reduction, which he argued was realistic and reasonable, particularly if one takes into account that Precision will have to bear its own costs on meeting those issues. This would mean that Precision would end up paying 100% of its own costs and 75% of JC’s costs, which translates as 87.5% of the total costs of the proceedings.
11. Mr. Thom also urged that I should make no order as to costs in relation to the hearing on 23 October 2006, at which I reserved costs. On that occasion I had amended summonses before me (Trial Bundle A, tab 9), in which both parties were seeking injunctive relief, in respect of which Precision was successful on both applications. As for the costs of this hearing, he submitted that if he succeeds in his application for a percentage reduction and for the grant of a stay, each party should pay its own costs.
12. Mr. Corbett argued that a 25% reduction would constitute a very significant and unjustifiable burden on JC in having to defend this litigation, in which they had scored a resounding victory on every significant issue that was argued, which occupied more than a 75% proportion of the litigation. He also pointed out that Precision had abandoned some of its allegations, for example those relating to alleged impropriety by Mr. Prudhoe. He argued that on 23 October 2006 I used the hearing as an opportunity to make essential case management orders, and the costs incurred on that occasion should not be excluded from the order for costs that I make in the litigation generally. He submitted that the costs of the telephone hearing also flowed from and were consequent upon the original litigation, and should be in the case.
13. Costs are clearly a matter for my discretion, which must be exercised judicially, but is inevitably influenced by the feel of the Judge gained during the litigation, which feeling is unique to him. I stated in paragraph 3 of my Judgment that Mr. Thom had identified 16 issues raised on the pleadings in his opening, and how these had been reduced to four when the hearing resumed and Mr. Corbett had been instructed. I remember feeling then, not only relieved by this reduction, but also that the fact that a number of issues had been raised and dealt with in opening and had not been pursued should ultimately reflected in costs. I see no reason to depart form that view.
14. I consider that the justice of the case will be met if I award JC 80% of its costs on the standard basis, to be taxed if not agreed. I would have still have exercised my discretion to award this percentage, even if I had held that Clause 3.1 applied entitling JC to its costs on an indemnity basis.
15. The hearing of 23 October 2006 was largely taken up with case management and I made an extensive Order in relation to amendment of pleadings, disclosure, the preparation of trial bundles, service of affidavits and skeleton arguments, all of which were necessary to progress the case for trial (tab 11). I see no reason to exclude it from my costs order.
16. Mr. Thom said that it was only in relation to the removal of the caution that he was asking for a stay. This was needed to preserve the status quo pending the appeal, which is listed to take place in twelve weeks time. He submitted that without it the appeal would be nugatory, as otherwise JC may sell the land and the remedy of specific performance would no longer be available. His client had an unrestricted right of appeal, and to argue that specific performance should have been ordered, and in such a situation relied on Wilson v Church (No. 2) (1879) 12 Ch D 454, tab 6 to Plaintiff's skeleton, as authority. He submitted that damages would be an inadequate remedy and it would be impossible to calculate the loss to Precision from having lost the opportunity to develop this site. He had no instructions to give undertakings as to damages, but argued that there was no evidence before me to establish that any damage would flow during the next twelve weeks, especially in relation to any loss of a sale. He said that the correspondence produced by Shirley McNeely in her Fourth Affidavit, did not establish that a further delay of twelve weeks would put an offer by Northbridge to pay $36m, for the raw land at risk.
17. Mr. Corbett countered that, although Precision may have an appeal as of right, it was not entitled to a stay as of right. This was a purely commercial development where the opportunity for Precision to make a profit is alleged to have been denied. The calculation of this is simply a matter of forensic and factual evidence. He submitted that, in a case where the result had been so heavily in JC’s favour and where no undertaking as to damages is being offered, and JC has a buyer and is entitled to enjoy the fruits of its judgment, I should be slow to grant a stay.
18. Here I remind myself that this is not an application for security for costs in relation to the appeal, in respect of which I have no power. S.34 (1) (a) Court of Appeal (Practice and Procedure) Rules specifically empower a single Appeal Court Judge to hear an interlocutory application in relation to a pending appeal prior to and in anticipation of the session of the Court due to be held in August. Thus, there is machinery under its Rules that enables a party to seek such security from the Appeal Court before it incurs the costs or preparing such an appeal, if it believes that the appeal is doomed to failure.
19. I believe that I should grant a stay here, as I accept that the essential relief sought in this action was specific performance and that damages in relation to the option to purchase this land and develop this resort would be an insufficient remedy, and would in any event be extremely difficult, if not impossible, and very time consuming and expensive to quantify. I do not consider that JC will suffer any damage as a result of the caution being continued until the disposal of this appeal in August. Nor do the matters referred to in the affidavits of Shirley McNeeley and Sean Reid cause me to change that view. I shall therefore grant a stay conditional on expeditious pursuit of the appeal. For the avoidance of doubt, if any issue arises as to time for appealing, as there is no Judge of the Court of Appeal present in the Islands, I would exercise my power to extend the time for appealing under ss.19 (1) (a) and 20 (a) Court of Appeal Ordinance.
20. I therefore make the Order attached.
Christopher Gardner QC
Action No. CL 23/06
TURKS AND CAICOS ISLANDS
(1) PRECISION DEVELOPMENT LTD
(2) MANDALAY RESORTS LTD
- and -
JEANNETTE CARIBBEAN COMPANY LIMITED
UPON THE TRIAL of this Action and Counterclaim
AND UPON HEARING Mr. James Thom QC and Mr. Stephen Wilson for the Plaintiffs and Mr. Tim Prudhoe, for the Defendant on November 30, 2006 and December 1, 2006
AND UPON FURTHER HEARING Mr. James Thom QC and Mr. Stephen Wilson for the Plaintiffs and Mr. James Corbett QC and Mr. Tim Prudhoe for the Defendant on January 10, 2007 to January 13, 2007 inclusive
AND UPON FURTHER HEARING Mr. James Thom QC and Mr. Stephen Wilson for the Plaintiffs and Mr. James Corbett QC and Mr. Tim Prudhoe for the Defendant on 23 May 2007
AND UPON reading the written submissions of the Defendant filed on January 29, 2007 and 21 May 2007 and of the Plaintiffs filed on February 13, 2007 and 17 May 2007
AND UPON reading the evidence recorded on the File as having been read
UPON THE PLAINTIFFS’ CLAIMS
IT IS HEREBY ORDERED that
1. Each and every claim of the First and Second Plaintiff respectively as appears in the Amended Writ of Summons and/or the Re-Amended Statement of Claim be and is hereby dismissed
AND UPON THE DEFENDANT’S COUNTERCLAIM
2. IT IS DECLARED that the Defendant is at liberty to deal in the Land free from any interest alleged therein by either of the First or Second Plaintiff respectively
IT IS ORDERED THAT
3. The Plaintiffs shall forthwith remove or cause to be removed from the Land and thereafter shall not return or cause to be returned (except for the purposes of demolition of the show home erected thereon by the Plaintiffs or either of them) any plant, equipment, machinery and other moveable property including but not limited to advertising materials or hoarding thereon owned by or in the possession of or otherwise belonging to or in the control of the Plaintiffs or either of them or their respective servants or agents
4. The Registrar of Lands shall remove the caution dated April 3, 2006 in favour of the First and Second Plaintiff in respect of land title numbers 60905/198 and 60905/199 Leeward Going Through (“the Land”), save that this part of this Order shall be stayed pending determination of the Appeal herein, which appeal shall be expeditiously pursued.
5. The Plaintiffs jointly and severally shall pay 80% of the Defendant’s costs of these proceedings, including the costs of 23 October 2006 and 23 May 2007, to be taxed on the standard basis if not agreed.
6. There be liberty to either party to apply as to the implementation of this Order on the giving of 72 hours written notice to the other party (as to which service on the parties’ respective attorneys between 9am and 5pm shall be deemed to be good service)
BY ORDER OF THE COURT