Union Discount Company Ltd v Zoller and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice SCHIEMANN |
| Judgment Date | 21 November 2001 |
| Neutral Citation | [2001] EWCA Civ 1755 |
| Docket Number | CASE NO: A2/2001/0944 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 November 2001 |
[2001] EWCA Civ 1755
Lord Phillips M.r.
Lord Justice Schiemann And
Lord Justice May
CASE NO: A2/2001/0944
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM HH JUDGE HEPPEL Q.C.
SITTING AS A JUDGE OF THE HIGH COURT
ROYAL COURTS OF JUSTICE
STRAND, LONDON, WC2A 2LL
Guy Philipps (instructed by Denton Wilde Sapte for the Appellant) Mark Hubbard (instructed by Harkavys for the Respondent)
This is the judgement of the Court. It concerns the correctness of the Statement in Halsbury's Laws of England 4 th Ed Reissue Vol. 12( 1) (1988) Damages, Para 828 “Costs incurred in foreign proceedings cannot be recovered in an English action between the same parties”. For this proposition the learned editors cite The Ocean Dynamic [1982] 2 Lloyd's Rep 88, a decision of Robert Goff J
Union Cal Limited (“Union Cal”) entered into contracts with Robert Zoller & others to whom we shall refer collectively as Zoller. Each contract contained an Exclusive Jurisdiction Clause (“EJC”) nominating England.
For present purposes the complicated procedural position can be summarised as follows. Union Cal claimed that money was owing under the contract and sued Zoller in England. Zoller issued proceedings against Union Cal in New York. Union Cal successfully applied in the New York court to strike out the New York proceedings against it on the ground that, by reason of the EJC, the New York court had no jurisdiction. Thereafter Zoller served a defence and counterclaim in the English proceedings alleging misrepresentation by Union Cal. Union Cal raised a new claim (“the costs claim”) in the English proceedings against Zoller. This claim was struck out by HH Judge Peter Heppel Q.C. sitting as a judge of the High Court. Union Cal, with the judge's permission, appeal the correctness of that striking out of the costs claim.
The costs claim concerned Union Cal's costs incurred in the striking out proceedings in New York. In those proceedings Union Cal did not ask the New York court to award it costs because under the law of New York costs would not have been awarded in such circumstances. For the purposes of the proceedings before HHJ Peter Heppel, Zoller conceded that there were real prospects of Union Cal establishing at trial that
the EJC was effective as a contractual term breach of which sounds in damages
by issuing the US proceedings Zoller breached their contracts with Union Cal.
Were this aspect of the case to proceed to trial the defendants would argue:
that the exclusive jurisdiction clause was not binding on them by reason of the provisions of the Unfair Terms in Consumer Contracts Regulations 1994,
that upon its true construction the clause did not prohibit the defendants from proceeding in the USA,
that Union Cal could have applied for and obtained an order for costs before the New York Court, and
points regarding causation and mitigation of damage.
The Judge below, having considered The Ocean Dynamic [1982] 2 Lloyd's Rep 88, Walshaw v Brighouse Corporation [1899] 2 Q.B. 286, Berry v BTC [1962]1 Q.B. 306, Lonrho Plc v Fayed (No 5) [1993] 1 W.L.R. 1489 and Donohue v Armco Inc and others [2000] Lloyd's Rep. 579 held as follows
“… no proceedings may be brought before a civil court in England to recover costs incurred by a party successfully prosecuting or defending an action in the foreign court.”
The written submissions, outstandingly well formulated on behalf of the appellant by Guy Phillipps, correctly identify the issue in the present appeal as follows:
“whether the defendants are right to assert (in para. 14 of the Defence to Counterclaim) that:
As a matter of law the costs of litigation can not be recovered as damages for breach of contract by one party to the said litigation against another
or whether the true principle of law is, as Union Cal asserts (in para. 12 of the Amended Reply to Defence to Counterclaim) that:
“The costs of prior proceedings between the same parties may be recovered as damages for breach of contract if (as in the present case) the party seeking to recover the costs of the prior proceedings as damages could not in the circumstances of the prior proceedings have obtained an order for the payment of those costs as costs”
The appellant submits and the respondents accept that if the rule is as stated by the judge then this must be because of policy considerations. The judge proceeded on this basis but failed to identify the policy considerations in play in the present case apart from making reference to the cases to which we have already referred. The appellant submits that those cases do not identify any policy consideration which is applicable to the present case.
The leading decision in this court is Berry. That had no foreign element. It concerned the recoverability, in civil proceedings for malicious prosecution, of costs incurred in criminal proceedings by the claimant who had been unsuccessfully prosecuted but who had been awarded some of her costs but who had not been awarded her remaining costs. This Court held she could recover the remaining costs as damages. Its approach was, first, to recognise that in subsequent civil proceedings there are policy reasons which in some cases inhibit recovery as damages of all the costs reasonably incurred in prior civil proceedings, and, then, to hold that there was no policy reason in an action for malicious prosecution for extending to costs in prior criminal proceedings the rule which applied to prior civil proceedings. That is how it came about that there was a lengthy and considered judgment by Devlin LJ (with whom Ormerod and Danckwerts LJJ in their judgments agreed) about the reason for and nature of the rule in relation to prior civil proceedings.
The reasoning process of Devlin LJ appears from the following passages
(i) "[ Quartz Hill Consolidated Gold Mining Co. v Eyre (11 Q.B.D. 674] was a case in which the defendant presented a petition to wind up the plaintiff company. It was never served on the company and the defendant gave notice that he was withdrawing it, but the company nevertheless appeared to ask for its dismissal. It was dismissed by Hall V.C. without costs; I have no doubt that my brother Danckwerts was right when he said in the course of the argument, after looking at the report of the case in the Weekly Notes, that the reason why the plaintiff company was given no costs was because their appearance was considered to be unnecessary. The company brought an action for malicious prosecution and the damage they alleged was the expenditure of costs incurred in opposing the petition which they estimated at £30. The Court of Appeal held that the damage was not recoverable. Brett M.R. said: “The theory is that the costs which the losing party is bound to pay, are all that were necessarily incurred by the successful party in the litigation, and that it is right to compel him to pay those costs because they have been caused by his unjust litigation; but that those which are called “extra costs”, not being necessarily incurred by the successful party in order to maintain his case, are not incurred by reason of the unjust litigation.” Bowen L.J. said : “… the only costs which the law recognises, and for which it will compensate him, are the costs properly incurred in the action itself. If the judge refuses to give him costs, it is because he does not deserve them; if he deserves them, he will get them in the ordinary action; if he does not deserve them, he ought not to get them in a subsequent action.” (p.319)
(ii) The rule is not easy to apply with justice because it embodies a presumption, which the law finds it convenient and maybe necessary to make; but which it has to, and does in other contexts, admit not to be in accordance with fact. (p.320)
(iii) The reason for the rule is not that the costs incurred in excess of the party and party allowance are deemed to be unreasonable; it is that what is presumed to be the same question cannot be gone into twice. The rule appears to have been first laid down by Mansfield C.J. in Hathaway v Barrow (1807) 1 Camp. 151 where he put it on the ground that “it would be incongruous to allow a person one sum as costs in one court, and a different sum for the same costs in another court. If in the earlier case there has been no adjudication upon costs (as distinct from an adjudication that there shall be no order as to costs), a party may recover all his costs assessed on the reasonable, and not on the necessary, basis. If a party has failed to apply for costs which he would have got if he had asked for them, a subsequent claim for damages may be defeated; but that would be because in such a case his loss would be held to be due to his own fault or omission. In any case in which the legal process does not permit an adjudication, the rule does not apply.[Our emphasis]
(iv) … if as the result of a breach of contract – see Agius v Great Western Colliery Co. Ltd. [1899] 1 Q.B. 413 – or a tort – see The Solway Prince (1914) 31 T.L.R. 56 – a person brings unsuccessfully an action against a third party or loses an action brought by a third party, he may recover against the wrongdoer who has brought his contract or committed the tort the costs of the suit; and he will get all the costs he has reasonably expended. The wrongdoer may not argue that the plaintiff is entitled only to party and party costs, notwithstanding that that is all he could or would have got from the third party if he had been successful. Thus the reason...
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