Jp Morgan Chase Bank (Formerly Known as The Chase Manhattan Bank) (A Body Corporate) (Claimants) Others Springwell Navigation Corporation (A Body Corporate) (Defendant) and by Counterclaim
| Jurisdiction | England & Wales |
| Judge | MRS JUSTICE GLOSTER, DBE |
| Judgment Date | 21 November 2008 |
| Neutral Citation | [2008] EWHC 1186 (Comm),[2008] EWHC 2848 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2001–404 |
| Date | 21 November 2008 |
[2008] EWHC 2848 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mrs Justice Gloster, Dbe
Case No: 2001–404
Mark Hapgood Esq, QC, Adrian Beltrami Esq QC,
Ms Catherine Gibaud and James MacDonald Esq
(instructed by Clifford Chance LLP) for JP Morgan Chase Bank and
other JP Morgan Chase entities
Michael Brindle Esq, QC, Andrew Baker Esq, QC,
Nicholas Lavender Esq QC and Jonathan Davies-Jones Esq
(instructed by Reed Smith Richards Butler LLP) for Springwell Navigation
Approved Judgment
Hearing dates: 1 st October 2008
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mrs Justice Gloster
Post-judgment issues
Costs
Introduction
For the background to this application, the reader is referred to my judgment dated 27 May 2008 ( [2008] EWHC 1186 (Comm)) in relation to the pre-default claims (“the first judgment”), and to my judgment dated 25 July 2008 ( [2008] EWHC 1793 (Comm)) in relation to the post-default claims (“the second judgment”). In this judgment, I use the same abbreviations as in those earlier judgments.
This is my judgment in relation to Chase's application that Springwell should pay, on the indemnity basis, all or some part of Chase's costs of the action, including its costs of both the claim and the counterclaim, and its costs of the pre-default and post-default claims.
The dispute as to the basis upon which costs should be paid is now the only outstanding issue in relation to costs. The parties have agreed all other matters relating to costs, including interest on costs, deductions in respect of certain minor discrete issues in relation to which I have given judgment in Springwell's favour, and set-off of any judgment amounts against Springwell's costs liability to Chase.
Chase's costs are substantial. It has incurred actual costs of £24 million, together with interest of some £3 million. The total figure is approximately £27 million. I was informed by counsel that the difference between the standard and the indemnity bases is approximately 10–15%. I was also informed that, on the indemnity basis, a party can expect to receive approximately 80% of its actual costs, whereas, on the standard basis, that figure is approximately 60%. It will thus be seen that the sum involved in the present dispute is potentially in the region of £4 million.
Relevant legal principles
The starting point is CPR 44.4, which provides that costs are to be assessed on the standard or on the indemnity basis. CPR 44.3 sets out the circumstances to be taken into account when the court exercises its discretion as to costs. Not surprisingly, “the court must have regard to all the circumstances”, including:
i) the conduct of all the parties;
ii) whether a party has succeeded on part of his case even if he has not been wholly successful;
iii) any payment into Court or admissible offer to settle made by a party which is not an offer to which costs consequences under Part 36 apply.
The conduct of the parties includes the specific matters set out at CPR 44.3(5), inter alia: (a) conduct before, as well as during, the proceedings; (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; and (c) the manner in which a party has pursued or defended his case or a particular allegation or issue.
Under both bases, an award of costs is compensatory only. It is not penal, and the successful party will never recover more than its actual costs (and will normally recover less). Equally, as confirmed by CPR 44.4(1), the Court will not under either basis allow the recovery of costs which have been unreasonably incurred or are unreasonable in amount. The difference between the two bases is explained at CPR 44.4(2) and (3). Where the standard basis is applied, the Court will:
i) only allow costs which are proportionate to the matters in issue; and
ii) resolve any doubt as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party.
In contrast, where the indemnity basis is applied, the rule does not refer to proportionality and the Court will resolve any doubt in favour of the receiving party.
The appropriate approach to the issue whether costs should be awarded on the indemnity basis has been frequently and variously formulated in the Court of Appeal, and, indeed, in this court. It is, therefore, not necessary for me to add my own articulation of the correct approach. However, the parties relied on the following extracts from the authorities to support their respective arguments:
i) In Reid Minty v Taylor , May LJ at paragraphs 27–29 said the following:
“27. In my judgment, the judge here was wrong to constrain himself in the way that he did. He was, I think, implicitly guided by pre-CPR authorities which are no longer apt for the new procedural code in this respect. Under the CPR, it is not, in my view, correct that costs are only awarded on an indemnity basis if there has been some sort of moral lack of probity or conduct deserving moral condemnation on the part of the paying party. The court has a wide discretion under Rule 44.3 which is not constrained, in my judgment, by authorities decided under the rules which preceded the introduction of the CPR. The discretion has to be exercised judicially, in all the circumstances, having regard to the matters referred to in Rule 44.3(4) and Rule 44.3(5). The discretion as to the amount of costs referred to in Rule 44.3(1)(b) includes a discretion to decide whether some or all of the costs awarded should be on a standard or indemnity basis. Rule 44.4 describes the way in which an assessment on each basis is to operate, but does not prescribe the circumstances in which orders on one or the other of the bases is to be made.
28. As the very word 'standard' implies, this will be the normal basis of assessment where the circumstances do not justify an award on an indemnity basis. If costs are awarded on an indemnity basis, in many cases there will be some implicit expression of disapproval of the way in which the litigation has been conducted, But I do not think that this will necessarily be so in every case. What is, however, relevant to the present appeal is that litigation can readily be conducted in a way which is unreasonable and which justifies an award of costs on an indemnity basis, where the conduct could not properly be regarded as lacking moral probity or deserving moral condemnation.
29. The circumstances referred to in Rule 44.3(4) include any payment into court or admissible offer to settle which each of the parties may have made. But it seems to me that in the present appeal the letter of 1st September 1999 by itself, although relevant, may not take the case for indemnity costs very far. I do not see that there is much to be made of an analogy for defendants with Rule 36.21. That rule applies to claimants. There is no equivalent rule for defendants who must, in my view, look elsewhere for means of putting themselves in the strongest possible position as to costs.”
As May LJ indicated, all the relevant circumstances had to be taken into account.
ii) Mr. Michael Brindle QC, leading counsel for Springwell, relied on the following passage in the judgment of Simon Brown LJ (as he then was) in Victor Kermit Kiam II v MGN Limited at paragraph 12 (where the judge commented on the above passage in Reid Minty), to argue that the threshold for an award of indemnity costs remained a high one:
“I for my part, understand the Court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation,can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree. To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight.”
iii) However, as Mr. Mark Hapgood QC, leading counsel for Chase, pointed out, in Excelsior Commercial & Industrial Holdings Limited v Salisbury Hammer Aspden & Johnson & Another , Lord Woolf, CJ, having referred to Kiam, said as follows, at paragraphs 31 and 32:
“31. In the context of that case I see that those paragraphs set out the need for there to be something more than merely a non–acceptance of a payment into court, or an offer of payment, by a defendant before it is appropriate to make an indemnity order for costs. Insofar as that is the intent of those paragraphs, I have no difficulty with them. However, I would point out the obvious fact that the circumstances with which the courts may be concerned where there is a payment into court may vary considerably. An indemnity order may be justified not only because of the conduct of the parties, but also because of other particular circumstances of the litigation. I give as an example a situation where a party is involved in proceedings as a test case although, so far as that party is concerned, he has no other interest than the issue that arises in that case, but is drawn into expensive litigation. If he is successful, a court may well say that an indemnity order was appropriate, although it could not be suggested that anyone's conduct in the case had been unreasonable. Equally there...
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