Sumitomo Mitsuitrust (UK) Ltd v Spectrum Galaxy Ltd
| Jurisdiction | British Virgin Islands |
| Judge | Jack, J |
| Judgment Date | 13 July 2021 |
| Neutral Citation | VG 2021 HC 46 |
| Docket Number | CLAIM No: BVIHC (COM) 2018/0172 |
| Court | High Court (British Virgin Islands) |
EASTERN CARIBBEAN SUPREME COURT
IN THE HIGH COURT OF JUSTICE
(COMMERCIAL DIVISION)
CLAIM No: BVIHC (COM) 2018/0172
Mr. Peter McMaster QC and Ms. Laure-Astrid Wigglesworth of Appleby (BVI) Ltd for the Claimants
Mr. Tim Prudhoe, with him Mr. Merrick Ricardo Watson of Kobre & Kim (BVI) LP for the Defendant
Jack, J [Ag.]: On 14 th April 2021 I gave judgment in this matter dismissing the claimants' claim. This judgment deals with the orders consequential to that substantive decision. I shall use the same nomenclature as in the earlier judgment.
The three issues which are controversial are:
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(a) What order for costs I should make? Mr. McMaster QC for ZAM submits there should be a substantial deduction to reflect the issues on which, he says, ZAM succeeded. Mr. Prudhoe for Spectrum disputes that an issue-based approach is appropriate. Further, he says that I should take a letter of 29 th September 2019 into account, either under CPR 35.15 or under Calderbank principles. 1
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(b) What payment on account should I make?
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(c) Are ZAM entitled to set off any costs order I make against them against a judgment obtained in this Court against the defendant for US$4 million on 5 th March 2014 by the first claimant?
CPR 64.6 provides:
“(1) Where the court, including the Court of Appeal, decides to make an order about the costs of any proceedings, the general rule is that it must order the unsuccessful party to pay the costs of the successful party.
(2) The court may however order a successful party to pay all or part of the costs of an unsuccessful party or may make no order as to costs.
(3) This rule gives the court power in particular to order a person to pay –
(a) costs from or up to a certain date only;
(b) costs relating only to a certain distinct part of the proceedings; or
(c) only a specified proportion of another person's costs.
(4) The court may not make an order under paragraph 3(a) or 3(b) unless it is satisfied that an order under paragraph 3(c) would not be more practicable.
(5) In deciding who should be liable to pay costs the court must have regard to all the circumstances.
(6) In particular it must have regard to –
(a) the conduct of the parties both before and during the proceedings;
(b) the manner in which a party has pursued –
(i) a particular allegation;
(ii) a particular issue; or
(iii) the case;
(c) whether a party has succeeded on particular issues, even if the party has not been successful in the whole of the proceedings;
(d) whether it was reasonable for a party to –
(i) pursue a particular allegation; and/or
(ii) raise a particular issue; and
(e) whether the claimant gave reasonable notice of intention to issue a claim.”
CPR 35.15 provides:
“(1) The general rule for defendants' offers is that, if the defendant makes an offer to settle which is not accepted and in –
(a) the case of an offer to settle a claim for damages – the court awards less than 85% of the amount of the defendant's offer;
(b) any other case – the court considers that the claimant acted unreasonably in not accepting the defendant's offer;
the claimant must pay any costs incurred by the defendant after the latest date on which the offer could have been accepted without the court's permission.
(2) If a claimant makes an offer to settle and in –
(a) the case of an offer to settle a claim for damages – the court awards an amount which is equal to or more than the amount of the offer;
(b) any other case – the court considers that the defendant acted unreasonably in not accepting the claimant's offer;
the court may, in exercising its discretion as to interest take into account the rates set out in the following table:
Net amount of damages Rate of interest
not exceeding EC$ 100,000 15% per annum
for the next EC$l50,000 12% per annum
for the next EC$500,000 10% per annum
in excess of EC$ 800,000 8% per annum
where ‘ net’ means the amount of damages on the claim less the amount (if any) awarded on any counterclaim.
( Example
One year since the offer. Damages – EC$400,000;
The court might award –
15% on the first $100,000 for one year ($15,000);
plus 12% interest on the next $150,000 for one year ($18,000);
plus 10% interest on the remaining $150,000 for one year ($15,000);
a total of EC$48,000 interest on damages.)
(3) The court may decide that the general rule under paragraph (1) is not to apply in a particular case.
(4) In deciding whether the general rule should not apply and in considering the exercise of its discretion under paragraph (2), the court may take into account the –
(a) conduct of the offeror and the offeree with regard to giving or refusing information for the purposes of enabling the offer to be made or evaluated;
(b) information available to the offeror and the offeree at the time that the offer was made; (c) stage in the proceedings at which the offer was made; and
(d) terms of any offer.
(5) This rule applies to offers to settle at any time, including before proceedings were started.”
It is convenient to look at the arguments in relation to CPR 35.15 first. Kobre & Kim's letter of 23 rd September 2019 on behalf of Spectrum said:
“[W]e invite your clients to withdraw their claims and pay our client $150,000.00 which is roughly half our client's legal costs incurred to date.”
It then gave 21 days for acceptance and drew attention to Spectrum's reliance on the letter is relation to CPR 64.6 and 35.15.
Mr. McMaster QC's first point is that this invitation to withdraw is not an “offer to settle” at all; it is an invitation to withdraw. CPR 35.15 is, he submits, directed at a situation in which a defendant is giving the claimant something in satisfaction of the latter's claim. A straight withdrawal gives the claimant nothing.
In my judgment “offer to settle” stands to be construed on ordinary common law contractual lines. If there is consideration for the offer, then that is sufficient to be an “offer to settle” under the Rules. Here the offer to accept what Spectrum asserts is less than its full costs is a valid offer, which (if accepted) would give rise to an enforceable contract at common law. That is sufficient, in my judgment, to make it an “offer to settle” for the purpose of CPR 35.15. Anything else would require the Court to investigate the adequacy of the consideration, which is not relevant at common law.
Mr. McMaster QC's second point is that CPR 35.15(1)(a) does not apply. I agree. This case not about damages and Kobre & Kim made no offer for Spectrum to pay ZAM damages. As to CPR 35(1)(b), he submits that ZAM did not act unreasonably in rejecting Spectrum's offer. ZAM had a reasonably arguable claim for many millions, albeit, one which it lost. Spectrum's offer gave it nothing except a reduced liability for costs.
Mr. Prudhoe pointed out that ZAM would have done better, had it accepted Spectrum's offer. That is true, but is not necessarily sufficient to invoke the Part 35 costs consequences. The Eastern Caribbean CPR has a different schema for offers to that in Part 36 of the English CPR. The main incentive for a party to accept an offer under the English Rules is that if the party making the offer beats it at trial, the other side are liable for indemnity costs rather than standard costs. The Eastern Caribbean Rules make no distinction between indemnity and standard costs. The English Rules cannot be transposed unthinkingly to the Caribbean; the Eastern Caribbean CPR must be interpreted on their own wording. It is significant that under the latter Rules the costs consequences of CPR 35.15(1)(a) only kick in when damages are awarded at less than 85 per cent of a relevant offer. This suggests that “unreasonably” in CPR 35.15(1)(b) must be construed fairly narrowly. Failing to beat a CPR 35.15 offer is a necessary precondition for the Court to exercise its discretion under Part 35, but it is in my judgment by no means sufficient.
In the current case, the Court has in my judgment to look at the position as it was at the time ZAM rejected the Part 35 offer. At that time, ZAM had an arguable case against Spectrum worth many millions of dollars. Now, it is true, as Mr. Prudhoe argues, that various of the claims, like the contractual causes of action, were barred by limitation. However, the position in relation to misrepresentation was much less clear. Indeed Spectrum's case that there was no actionable misrepresentation was put forward on a factual basis, rather than on the basis (which I accepted) that the law of this Territory was as it was before the enactment in England of the Misrepresentation Act 1967. 2 I also held that a breach of contract which was barred by limitation could not give rise to an actionable claim of unfair prejudice. That point was not, however, firmly established in the case law.
I have to stand back and consider whether ZAM acted unreasonably in rejecting Spectrum's offer of 23 rd September 2019. In my judgment it did not. Spectrum's offer gave ZAM a reduction in its exposure to costs of at most $150,000 (assuming Spectrum could establish a claim to the full $300,000 in costs at that stage on a taxation). In return ZAM would be abandoning a claim worth millions, if it succeeded. The benefit to ZAM from Spectrum's offer was (put against the value of ZAM's claim) negligible. There must in my judgment be some real and substantial benefit (as opposed to a notional benefit) to a party before the rejection of a Part 35 offer can be considered to be unreasonable.
I turn then to my consideration of my discretion under CPR 64.6. I am...
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