Travelers Casualty and Surety Company of Canada v Sun Life Assurance Company of Canada (UK) Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CHRISTOPHER CLARKE |
| Judgment Date | 16 November 2006 |
| Neutral Citation | [2006] EWHC 2885 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2004 FOLIO 198 |
| Date | 16 November 2006 |
[2006] EWHC 2885 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
Mr Justice Christopher Clarke
Case No: 2004 FOLIO 198
Mr Christopher Symons QC, Mr Robert Howe & Miss Shaheed Fatima (instructed by Robin Simon LLP) for the Claimants
Mr Gavin Kealey QC, Mr Andrew Wales & Mr Philip Edey (instructed by Clifford Chance LLP) for the Defendants
Hearing date: 1 st November 2006
Approved Judgment
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
I now deal with the issues outstanding following the judgment that was handed down on Wednesday 1 st November namely (i) the form of the order; (ii) costs, including reserved costs, interest on costs, the basis upon which costs are to be ordered and interim payment; and (iii) permission to appeal.
Form of Order
I propose (i) to declare that the claimants are not liable to make any payment to the defendants in respect of the Claim under the policy; and (ii) to dismiss the counterclaim.
Costs
The claimant insurers have won. They have established that they have no obligation to Sun Life under the policy and have defeated a claim worth of the order of £31,000,000 less $25,000,000.
The starting point, therefore, is the general rule that the unsuccessful party will be ordered to pay the costs of the successful party. The Court may, however, make a different order. Mr Gavin Kealey, Q.C., on behalf of Sun Life, contends that this is a case in which that is exactly what the Court should do. Firstly, as he submits, Sun Life has incurred very large costs in proving its damages. Had I decided in its favour on liability, it would have recovered a very large percentage of its claim, of which the insurers have succeeded in reducing very little. Accordingly the insurers should pay most of the costs of dealing with quantum.
Secondly, although Sun Life has failed on liability, and, in particular on the central issue as to whether any of the warranty identified individuals knew of facts or information which could give rise to a Claim within the scope of the proposed coverage, they have on the way to victory failed on a number of issues. In those circumstances the Court, he submits, should adopt an approach whereby in relation to liability some of the costs of issues on which the insurers have failed are borne by them, so far as their costs are concerned, and paid by the insurers, so far as Sun Life's costs are concerned.
These proceedings were commenced by the insurers, following earlier communications, on 9 th March 2004. On 10 th March 2004 Robin Simon LLP, the insurers' solicitors, wrote a letter to Sun Life's then solicitors giving Sun Life the opportunity to withdraw its claim, on the footing that the insurers would bear their own investigation and litigation costs to date. Over a year later, following an unsuccessful mediation, on 25 th September 2005 Robin Simon wrote a letter indicating preparedness on the insurers' part to enter into a settlement whereby some part of the insurers' costs entitlement would be foregone.
Neither of these offers was such that the insurers are entitled to rely upon the provisions of Part 36 to obtain indemnity costs and an increased rate of interest as a result of Sun Life's failure to accept them. This is for a number of reasons, of which the principal is that in Mitchell v James [2004] 1 WLR 156 the Court of Appeal held that, in determining the applicability of Part 36, no account is to be taken as to any terms as to costs included in what purports to be a Part 36 offer. Under Part 36 the trial judge is to look to see whether, so far as presently relevant, the judgment against the defendant in relation to the substantive issues is more advantageous to the claimant than the proposal contained in the claimant's Part 36 offer. The proposal contained in the insurers' offer was, so far as the substance of the matter is concerned, that Sun Life should abandon its claim. The insurers' judgment against Sun Life is not more advantageous than that. The offer required Sun Life to capitulate and the insurers have not, and indeed could not, achieve a result more advantageous than capitulation. The rationale behind Part 36 is that of encouraging compromise. The Part 36 regime does not envisage the award of indemnity costs because the successful party had offered to "drop hands" and the unsuccessful party failed to agree.
But under Rule 44.3 (4)(c) it is legitimate and mandatory for the Court to take into account the insurers' offer of settlement in determining how to exercise its discretion. However, the refusal of a settlement offer will only rarely attract, under Part 44, not merely an adverse order for costs but an order for costs on an indemnity rather than a standard basis: Kiam v MGN Ltd (No 2) [2002] EWCA Civ 66; [2002] 2 AER 242 That, so the Court of Appeal has held, requires unreasonableness to a high degree.
The willingness of the Court to order a party, even a successful party, to be deprived of his costs of a particular issue on which he has lost, and to pay those of his opponent, is not, however, dependent on establishing that that party has acted improperly or unreasonably: Summit Property Ltd v Pitmans [2001] EWCA Civ 2020. If a party has acted improperly or unreasonably the Court will more readily make such an order. But, even if he has not, the Courts are now much more ready to make separate orders reflecting success on different issues than once they were: see Lord Woolf in AEI Rediffusion Music Ltd v PPL [1999] 1 WLR 1507.
In Fleming v The Chief Constable of the Sussex Police Force [2004] EWCA Civ 643 Potter, LJ, as he then was, described the rationale of the "issues" approach as being the necessity to "discourage litigation in respect of inessential issues, which are either bound to fail, or are irrelevant to the central and essential issues necessary to be decided between the parties in the resolution of the dispute". I do not, however, regard Potter, LJ, as having intended to state that it is only in respect of issues of that description that such an approach can be taken; particularly since, in the immediately succeeding paragraph, he referred to the AEI Rediffusion case as an exposition of principles too well known to require to be set out in detail.
The Court is thus given a wide discretion and enjoined to take into account a number of factors including those specified in CPR 44.3. (4). The aim must always be to make an order that reflects the overall justice of the case.
The cases illustrate how this may work out in practice 1. If the successful claimant has lost out on a number of issues it may be inappropriate to make separate orders for costs in respect of issues upon which he has failed, unless the points were unreasonably taken. It is a fortunate litigant who wins on every point.
On the other hand, if a party raises a discrete issue which involves very substantial costs, and upon which he fails, justice may require that he should bear his costs and pay those of his opponent on the issue. CPR 44.3 (4) specifically provides that:
"(4) In deciding what order (if any) to make about costs the court must have regard to all the circumstances, including:
(a) the conduct of the parties;
(b) whether a party has been successful on part of his case, even if he has not been wholly successful".
In this respect there is the practical problem that it may be very difficult for the costs judge to work out what costs are properly attributable to an issue. Such difficulty may well mean that the appropriate order is one under CPR 44.3. (6)(a) – (c). CPR 44 .3. (7) enjoins a court which considers making an order for payment of the costs of an issue to make an order under one of sub-paragraphs (a) – (c) of 44.3. (6) if practicable.
Even if, in relation to a particular issue, it is appropriate to order the overall winning party to bear some of its costs or pay the overall loser some of his, the issue in question, such as quantum, may itself have contained a number of sub issues, in respect of which the proper incidence of costs is not straightforward. One sub issue on which the overall winner lost may have had significant monetary value but taken little time to determine; another may be one which was of much lesser value but took more time. Another sub issue may be one on which the overall winner won.
So far as the issues of liability are concerned, the insurers won the central issue of whether any warranty defined individual had knowledge or information of circumstances which could result in a Claim within the scope of the proposed coverage. But they lost on the following issues:
a) whether the applicable law was that of England & Wales or Ontario;
b) whether, as a matter of construction the words "within the scope of the proposed coverage" mean that the Claim must exceed the $25,000,000 retention;
c) whether the upshot of the Farquharson/Holmes conversations was that the parties agreed that the words were to have that effect or the effect contended for by the insurers. I call that, somewhat inaccurately, "the estoppel issue";
d) whether in order for there to be a breach of warranty, it was sufficient that at the time of the warranty facts existed which could give rise to a Claim exceeding $25,000,000;
e) whether, if some sort of...
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