A v B (Costs)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Colman |
| Judgment Date | 23 January 2007 |
| Neutral Citation | [2007] EWHC 54 (Comm) |
| Docket Number | Case No: 2005 FOLIO 683 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 23 January 2007 |
[2007] EWHC 54 (Comm)
Mr Justice Colman
Case No: 2005 FOLIO 683
IN THE HIGH COURT OF JUSTICE
QUEEN's BENCH DIVISION
COMMERCIAL COURT
Ms Clare Stanley and Mr Marcus Staff (instructed by Weil Gotshal & Manges) for the Claimant
Mr Graham Dunning QC and Mr James Collins (instructed by Allen & Overy) for the First Defendant
Mr Nicholas Lavender (instructed by Lewis Silkin) for the Second Defendant
Mr Shane Doyle QC (instructed by Masseys) for the Third and Fourth Defendants
Hearing dates: 8 December 2006
Judgment No.2
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.
If this Judgment has been emailed to you it is to be treated as 'read-only'.
You should send any suggested amendments as a separate Word document.
The Hon
Introduction
By a judgment dated 28 July 2006 this court ordered that proceedings brought by A against B should be stayed and that an order previously made giving permission to issue and serve proceedings outside the jurisdiction on C, D and Company E should be set aside. For the background to this dispute and for the nature of the claims advanced by A against the four defendants concerned reference should be made to my judgment [2006] EWHC 2006 (Comm).
All the defendants now apply for costs against A on an indemnity basis, for a payment on account, for an order for the payment of interest on the costs at 8 per cent from 9 May 2006 and an order debarring A from participating in the detailed assessment of the various defendants' costs if he fails to make an interim payment on account of costs by a specified date.
The basis of these applications for indemnity costs as distinct from costs on the standard basis is as follows.
As to B, it is submitted by Mr Graham Dunning QC that where proceedings are brought in the English courts in breach of an arbitration agreement costs should be awarded on an indemnity basis. This is because the damages which flow from the breach of that agreement are normally all the costs reasonably incurred by the party entitled to a stay of the proceedings. The damages recoverable for such a breach would not be calculated by reference to those principles of costs assessment under CPR 44.4(2) involving recovery only of such costs as were proportionate to the matters in issue and subject to a rule that any doubt which the court might have as to whether costs were reasonably incurred or reasonable and proportionate in amount should be resolved in favour of the paying party. Accordingly, the costs of the application to stay and thereby to obtain a remedy for the breach of the arbitration agreement should not be similarly limited but should instead be assessed simply on the basis of what costs were reasonably incurred.
Mr Dunning relied in support of this submission on a decision of the Court of Appeal in Union Discount Ltd v. Zoller [2001] EWCA Civ 1755 and on a decision of Cooke J. in Kyrgyz Mobil Tel Ltd v. Fellowes International Holdings Ltd [2005] EWHC 1314 (Comm).
It was decided by the Court of Appeal that where a party had incurred costs in successfully applying in New York to strike out proceedings against it brought in breach of an English jurisdiction clause but, due to a local costs rule, it could not obtain an order for costs in New York, it could recover as damages in English proceedings against the unsuccessful respondent to the New York application all costs reasonably expended in bringing the New York application. The English rule in Berry v. British Transport Commission [1962] 1 QB 306 precluding claims for damages in civil proceedings to recover unrecovered costs in prior English civil proceedings did not apply to a claim for malicious prosecution where the costs had been incurred in defending previous criminal proceedings and was not extended to the recovery as damages for breach of a jurisdiction agreement of all the costs reasonably incurred in striking out foreign court proceedings.
Quite clearly this decision is dealing only with the recoverability of damages by reference to reasonably expended costs: it does not indicate whether indemnity costs orders are justifiable in cases where in the same proceedings costs have been incurred in successfully applying to stay such proceedings brought in breach of an arbitration clause or foreign jurisdiction clause.
In Kyrgyz Mobil Tel Ltd v. Fellowes International, supra, Cooke J. was concerned with the costs of complex litigation located in the English, British Virgin Islands and Kyrgyzstan courts. Under the relevant agreement there was an LCIA arbitration clause. Fellowes International Holdings were not a party to that agreement but they were in a position to control the conduct of Kyrgyz Mobil Tel, who were a party, in the conduct of any arbitration. Fellowes caused Kyrgyz to ignore the arbitration agreement and start proceedings in the Kyrgyzstan court. In awarding costs against Fellowes in proceedings for an anti-suit injunction Cooke J. said at paragraphs 42 and 43:
“Taking all these matters into account as I do, and looking in particular at the terms of CPR 44 in relation to costs, I have come to the following conclusions. First, in my judgment, the correct approach where there has been a breach of a jurisdiction clause by a party in initiating proceedings in a non-chosen jurisdiction is that the costs should be awarded on an indemnity basis. The reason for that is plain. If a party has breached that agreement, then the damages which flow from the breach of that agreement are all the costs incurred by the party who successfully relies upon the choice of jurisdiction clause. In my experience, the Commercial Court in particular but courts generally in this country adopt such an approach.
This is not of course a straight breach of jurisdiction clause case because the position here is that the defendants, Fellowes, are not party to the relevant contract and the arbitration clause, as has been made plain on a number of occasions now. Nonetheless, the position is that what they did has been categorised or characterised as vexatious and oppressive on the basis that they could not possibly be in a better position than a party to that contract in circumstances where they relied on the contract in seeking relief in Kyrgyzstan. The starting point therefore must be that the claimants are entitled to indemnity costs in relation to this action, subject to any particular reasons which would detract from that.”
I am bound to say that I have not previously encountered the practice as to costs orders where there has been breach of a jurisdiction agreement said by Cooke J. to be that which is generally adopted by the Commercial Court and by courts generally. Nevertheless, the rationale which he describes certainly provides some sensible foundation for such a practice. Thus, if a costs order in favour of a successful applicant for a stay or for an anti-suit injunction directed to giving effect to an arbitration agreement or an English jurisdiction clause must, save in exceptional cases be confined to costs on the standard basis, there would necessarily be a part of the successful applicant's costs of the application which it had properly incurred but could not recover by such an order because of the restrictive process of assessment. This unindemnified portion of costs would then be loss which could only be recovered as damages for breach of the jurisdiction or arbitration agreement, if such a damages claim were permissible. Where the cause of action for relief enforcing the agreement by stay or injunction in the English court and the cause of action for damages for breach of that agreement are, as they normally will be, the same, the effect of those authorities such as Berry v. British Transport Commission, supra, referred to in Union Discount v. Zoller, supra, will be to prevent separate proceedings for damages by reference to unrecovered costs, notwithstanding the breach of the arbitration or jurisdiction agreement.
This would give rise to a fundamentally unjust situation. There can be no question but that the procedural consequence of conduct by a party to an arbitration or jurisdiction agreement which amounts to a breach of it and causes the opposite party reasonably to incur legal costs ought to be that the innocent party recovers by a costs order and/or by an award of damages the whole, and not merely part, of its reasonable legal costs. Against that background, it is necessary to ask whether there is any sustainable policy consideration which would require that unless there were some special circumstances, excluding the fact that it was an arbitration or jurisdiction agreement that had been broken, the successful party should have to forgo part of its costs or alternatively to bring a separate claim for damages to cover any shortfall on assessment of costs. The relevant considerations point very strongly indeed against either result. To forgo part of the loss would be unjust. To be placed in a position where the balance of the recoverable damages could not be quantified until after the costs had been formally assessed would involve delay in obtaining compensation properly due and a formalistic and cumbersome procedure which would in itself involve more costs and judicial time. Where the defendant who had been improperly impleaded in the English courts was outside the jurisdiction, no claim for damages could be brought in the English courts without submitting to the jurisdiction.
In my judgment, provided that it can be established by a successful application for a stay or an anti-suit injunction as a remedy for breach of an arbitration...
To continue reading
Request your trial
-
C v D
... ... Accordingly the law governing the arbitration itself [Lex Arbitri] is the English Arbitration Act 1996, as amended and supplemented, regardless of whether meetings and hearings take place elsewhere in the interests of saving costs or convenience.” ... 9 D raised four defences to C's claim for indemnification. The first related to the scope of Endorsement number 5 to the policy; the second related to late notice; the third related to misrepresentations and/or nondisclosure prior to the ... ...
-
Uber Technologies Inc. v. Heller, 2020 SCC 16
...921; Trainor v. Fundstream Inc., 2019 ABQB 800; Alberta Medical Association v. Alberta, 2012 ABQB 113, 537 A.R. 75; A. v. B. (No.2), [2007] EWHC 54 (Comm.), [2007] 1 All E.R. (Comm.) 633; Kyrgyz Mobil Tel Limited v. Fellowes International Holdings Limited, [2005] EWHC 1329, 2005 WL 6514129;......
- The Government of India v Cairn Energy India Pty Ltd
-
C v D
...permitted by that Act. In so holding he was following the decisions of Colman J in A v B [2007] 1 Lloyds Rep 237 and A v B (No. 2) [2007] 1 Lloyds Rep 358 in the first of which that learned judge said (para. 111):— “… an agreement as to the seat of an arbitration is analogous to an exclus......
-
WA Supreme Court awards indemnity costs for breach of agreement to arbitrate
...costs. The Supreme Court of Western Australia recently affirmed the principle determined in the English High Court case of A v B [2007] EWHC 54. The In Pipeline Services WA Pty Ltd v ATCO Gas Australia Pty Ltd [2014] WASC 10, Pipeline commenced proceedings against ATCO alleging breaches of ......