Paul Pretlove (in his capacity as sole liquidator) v Koshigi Ltd

• Jurisdiction: British Virgin Islands
• Judge: Dill,Pearman,Jack, J
• Judgment Date: 05 December 2019
• Judgment citation (vLex): [2019] ECSC J1205-4
• Docket Number: Claim No: BVIHC (COM) 231 OF 2018
• Court: High Court (British Virgin Islands)
• Date: 05 December 2019

[2019] ECSC J1205-4

THE EASTERN CARIBBEAN SUPREME COURT

IN THE HIGH COURT OF JUSTICE

(COMMERCIAL DIVISION)

Claim No: BVIHC (COM) 231 OF 2018

In the Matter of Koshigi Ltd (In Liquidation)

Between:

Paul Pretlove (in his capacity as sole liquidator)

Applicant

and

[1] Koshigi Ltd

[2] Dmitry Kostygin

Respondents

Conyers, Dill & Pearman

Respondent to the costs application

Appearances:

Mr. Michael Fay QC and Mr. Shane Quinn of Agon Litigation for Mr. Pretlove, the BVI liquidator of Koshigi Ltd

Ms. Tameka Davis and Ms. Jane Fedotova of Conyers, Dill & Pearman for Conyers, Dill & Pearman

JUDGMENT ON THE COSTS CLAIM AGAINST CONYERS, Dill & Pearman

1 Jack, J [Ag.]: This matter came before me on 27 ^th November 2019, when I was hearing an application issued on Mr. Pretlove's behalf, in his capacity as liquidator of Koshigi Ltd (“Koshigi”), a BVI company. At the same time my attention was drawn to an application issued by Conyers, Dill & Pearman (“Conyers”) on 19 ^th November 2019.

2 This latter application was issued on behalf of Mr. Dmitry Kostygin, the second respondent, and, also purportedly on behalf of Koshigi itself. Conyers did not have Mr. Pretlove's authority to act on behalf of Koshigi. I dismissed the application of 19 ^th November 2019 on substantive grounds. At the conclusion of that hearing, however, Mr. Fay QC appearing for the liquidator, sought the costs of the 19 ^th November application against Conyers personally, on the ground that they acted without the authority of a client for whom they purported to act, namely Koshigi. That application took Ms. Davis of Conyers by surprise, so I adjourned consideration of the costs application against Conyers personally to Friday 29 ^th November.

3 On 29 ^th November, I had the benefit of skeleton arguments from both Mr. Fay and Ms. Davis. After hearing oral arguments, I indicated to the parties that I found that Conyers had acted in breach of an implied warrantee of authority, but that no costs had been caused by that breach. I therefore held that Conyers were liable to Mr. Pretlove for nominal costs (or damages), which I assessed at $100. I indicated that I would give written reasons for my decision. These are those reasons.

4 I then heard argument on the costs of the costs application. I considered that Conyers should pay the costs of Mr. Pretlove's application against them. Although often the Court will not award costs in favour of a party who has recovered only nominal damages, this is by no means a universal rule. Bringing proceedings in the name of a client for whom a firm of legal practitioners has no authority to act is extremely serious. A costs award was in my judgment necessary to show the Court's disapproval of what occurred. I summarily assessed the costs of the application in the sum of $3,500. The total payable by Conyers to Mr. Pretlove was therefore $3,600.

5 The background to this matter is set out in my written judgment on 29 ^th November 2019. The judgment was given in respect of the current case of Koshigi, and a related case Re Svoboda Corp; Pretlove v Svoboda Corp 1. So far as material to the current application, the relevant facts are that on 1 ^st May 2019 Adderley J appointed Mr. Pretlove as the liquidator of Koshigi. On 3 ^rd May 2019, he made a further order which permitted Mr. Kostygin, as the sole shareholder and director of Koshigi, to prosecute an appeal in Koshigi's name against the order of 1 ^st May 2019. That order did not permit Mr. Kostygin to act in the company's name for any other purpose. Accordingly, Conyers did not have authority to act on Koshigi's behalf in making the 19 ^th November application.

6 The law in relation to legal practitioners who act without authority is set out in Yonge v Toynbee. 2 It is a harsh decision. In August 1908, Toynbee retained Wontner & Sons as his solicitor to act in the defence of an action which was expected to be brought against him. Unbeknownst to them, Toynbee subsequently suffered a nervous breakdown and was certified as a lunatic. They nonetheless proceeded to defend the proceedings brought against Toynbee.

7 Buckley LJ held that a solicitor's personal liability for costs arises:

“(a) if he has been fraudulent, (b) if he has without fraud untruly represented that he had authority when he had not, and (c) also where he innocently misrepresents that he authority where the fact is either (1) that he never had authority or (2) that his original authority has ceased by reason of facts of which he has not knowledge or means of knowledge. Such last-mentioned liability arises from the fact that by professing to act as agent he impliedly contracts that he has authority, and it is immaterial whether he knew of the defect of his authority or not.”

8 Ms. Davis sought to distinguish the facts there from the current case on the basis that Mr. Pretlove and his advisors knew full well that Mr. Kostygin had no authority to act for Koshigi. Therefore, she argues, there can have been no detrimental reliance on any implied representation that Conyers were entitled to act for Koshigi.

9 I do not find that an attractive argument. Whatever the other side's knowledge of the want of authority of the solicitor, that other side cannot simply ignore procedural steps taken by a legal practitioner who acts without authority. On the contrary, they will do what the liquidator has done here, namely draw the legal practitioner's and the Court's attention to the want of authority. Costs will inevitably be incurred in doing so. Buckley LJ speaks of an implied contract. It is this implied contract which gives rise to liability for breach of warrantee of authority. An actionable misrepresentation is not required. As the...