Worldwide: Insurance And Reinsurance - 3 March 2015

Last Updated: 9 March 2015
Article by Nigel Brook

Tchenguiz v Thornton UK

Commercial Court makes an adverse costs order because statement of case was too long

The Commercial Court Long Trials Working Party's recommendation that statements of case in the Commercial Court should be no longer than 25 pages was adopted by the Commercial Court Guide in 2009. Despite that long-standing requirement, the particulars of claim in this case were 94 pages long and were served without first requesting permission from the court to serve a statement of case which was longer than 25 pages. Furthermore, there were other breaches of the Guide, such as the inclusion of background facts and contentious phrasing.

The counsel who had drafted the particulars argued that the length of the document was necessary because of the serious allegations being made. That argument was rejected by Leggatt J: "It must be abundantly clear to anyone who is accused in a statement of case of fraudulent conduct that extremely serious allegations are being made against them. It is unnecessary to repeat the assertion that the person has been fraudulent again and again". He also rejected an argument that the omission of certain details would have led to the defendants seeking full particulars pursuant to CPR r18. Nor did it matter that the defendant himself had not objected.

The judge therefore struck out the particulars of claim (whilst disallowing the costs of drafting the particulars) and ordered fresh particulars, of no more than 45 pages, to be served within 21 days. He added: "I have shown this judgment in draft to the Judge in charge of the Commercial List, who endorses the principle that flagrant disregard of the guidance applicable to statements of case may lead to adverse costs orders". Although there would be some delay to the case because of this order, in the longer term the efficient conduct of the case would be assisted by fresh particulars.

Laporte v Commissioner of Police

Defendant penalised for refusing to mediate

The defendant won on every substantive issue in this case. However, it had refused to engage in ADR, in part because it believed that the claimant was imposing a pre-condition to mediation that the defendant's lawyer have instructions to "make a meaningful offer".

It is well established that there could be adverse costs consequences if a party unreasonably refuses to agree to ADR. A list of factors which may be relevant to this issue was set out in Halsey v Milton Keynes [2004]. Applying those considerations to this case, Turner J held that the defendant had been unreasonable and that, as a result, would be entitled to only two thirds of its costs. In particular, the judge held that:

a) It could not be said that a mediation would not have had a reasonable prospect of success. As mentioned above, the defendant had formed the view that the claimant would only have accepted a financial offer, which the defendant was unlikely to make, and so it believed that ADR was not appropriate. However, the judge noted that the claimant had never insisted on the making of a money offer as a pre-condition to ADR and "Simply because one side makes a prediction of what it might take to reach a settlement does not entitle the other side to treat such a prediction, without more, as a formal pre-condition. Tactical positioning should not too readily be labelled as intransigence".

b) Nor was this the sort of a case where a defendant would be reasonable in "taking a stand", whatever the costs risk of that approach.

c) This was also not a case where the claimant was seeking to litigate a point of legal principle; the claimant could have succeeded in obtaining some level of damages even if it had lost on the law.

Property Alliance v Royal Bank of Scotland

Whether a document should be disclosed in possible breach of obligation to foreign regulator

The issue in this case was whether the defendant could object to inspection of one of its disclosed documents on the basis that it believes it owes obligations to a foreign regulator and that it would be putting itself at risk of criminal contempt of a foreign court order.

The defendant has entered into settlements with a number of regulators and prosecuting authorities, including the US Department of Justice, with which it has a Deferred Prosecution Agreement. A footnote to that agreement provided that the document in question should be held in confidence and not made available to the public. Although no formal court order was drawn up, the defendant claims that a subsequent comment by a US District Judge meant the document had to be kept under seal.

Birss J rejected the argument that the document should not be inspected in the English proceedings. It was potentially of real significance and confidentiality is not a reason for refusing inspection. Furthermore, the risk of the defendant being found to be in criminal contempt by the US courts was, in this case, low. Reference was made to prior caselaw in which the risk of prosecution under a foreign law provided no defence to the making of an order for disclosure or inspection (and in both the cases referred to, a prosecution was held to be highly unlikely).

The judge held that the order to produce the document for inspection would take effect in four weeks from the date it was made. That would allow the defendant time to make an application to the US Court, should it wish to do so. The judge was of the opinion that the US Court would be likely to permit the defendant to fulfil its obligations to the English court. Not only would there be the usual procedural safeguards in the English proceedings, but the judge also required permission to be sought here before the document could be referred to in open court.

COMMENT: As mentioned, this case follows prior caselaw that the risk of prosecution under a foreign law for contempt is no reason to prevent inspection of a document, at least in circumstances where the risk of foreign prosecution is low. That therefore begs the question whether a court would still adopt the same stance when exercising its discretion where the risk of prosecution was shown to be significant (albeit not definite).

Barry v Butler

Whether a witness statement could be passed to a third party

CPR r32.12 provides that a witness statement can used only for the purpose of the proceedings in which it is served, unless the witness consents, the court gives permission, or it has been put in evidence at a hearing held in public. One of the issues in this case was whether witness statements served by both parties could be passed by the defendants to the Crown Prosecution Service.

Warby J held that CPR r32.12 does not require a party to obtain the court's permission where it seeks to pass its own witness statements to third parties (subject to any restriction imposed by the court). In any event, in such a situation, the party can normally obtains the witness's consent to disclosure of the statements. As for the claimant's witness statements, it was a "frail and insubstantial basis" to seek disclosure to the CPS just because the CPS had shown an interest in seeing those statements. It had not even been argued that the documents were necessary for the CPS's investigation. Accordingly, these could not be given to the CPS before trial.

Peak Hotels v Tarek Investments

Application for security for costs and the effect of an earlier payment into court

The defendants sought security for costs on the ground (inter alia) that there was reason to believe that the claimant company will be unable to pay the defendants' costs if ordered to do so. One of the points raised by the claimant was that the court should take account of an amount of USD 10 million which it was about to pay into court. That amount was to stand as security for payment of any damages pursuant to the claimant's cross-undertaking in damages (which it supplied whilst applying for injunctive relief from the court).

Henderson J said that that amount could not be treated as an asset of the claimant (so as to demonstrate the claimant's ability to pay an eventual costs order): " I am satisfied that the money standing in court cannot be regarded as an asset available to [the claimant] unless and until an application is made by [the claimant] for some or all of the money to be released to it, and the court accedes to the application. Mr Brisby QC submitted on behalf of [the claimant] that USD 10 million is now far in excess of any possible exposure of [the claimant] pursuant to the cross-undertakings, but the fact remains that no such application has yet been made".

The judge therefore decided to order security. He rejected a further argument advanced by the claimant that the defendants already had more than adequate security for costs because of the USD 10 million paid into court. There had been no proviso to the original order that this amount could be used for anything other than payment of damages pursuant to the claimant's cross-undertaking in damages.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Nigel Brook
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