Law report - costs in judicial review

The Corporation of Hamilton v The Ombudsman for Bermuda [2014] SC (Bda) 1 Civ

The Corporation had been unsuccessful in its contested application to seek leave to commence judicial review proceedings. The Ombudsman sought her costs of the leave application.

The Ombudsman was seeking her costs in connection with the leave application. Justice Hellman noted that previous Bermudian cases on costs in these circumstances did not appear to have been fully argued and did not refer to relevant authorities such as Mount Cook Land Ltd v Westminster City Council  [2004] CP Rep 12, which is that costs should not be awarded on unsuccessful leave applications other than exceptionally.

However, the judge pointed to exceptional circumstances in this case: the Ombudsman had a constitutional duty to publish her report on the Corporation as soon as she was able. It was reasonable for her to be actively involved in the leave application from the earliest stage in order to pre-empt any court order which might prevent her from publishing her report (at [26]). Furthermore, the Corporation had delayed in applying for leave anyway, and it was relevant for the Ombudsman to raise this delay point at the earliest opportunity (at [27]).

The decision is also notable for pointing to the possibility of interim awards on account of costs (at [53]) on the basis that if the successful party is ultimately found to be entitled to a lesser sum she must refund the difference. This is a potentially useful device for obtaining swift payment of costs in litigation, otherwise costs can take many months after the case itself to be resolved.

Law report - court and collection fees

Acorn Services Ltd v Dill [2013] SC (Bda) 33 App

The Plaintiff had been awarded judgment for rent arrears, including collection and legal fees attainable under the lease. The Plaintiff had appealed on the grounds that the Magistrate had not awarded the full collection fees under the lease.

Kawaley CJ held that the collection fees were a contractual claim which the Plaintiff was entitled to. The clause in the contract did not put a penalty on the Defendant, but merely reflected the costs that the Plaintiff had suffered in order to collect on the debt [10]-[13].

Law report - two sets of costs and judicial review

Kentucky Fried Chicken (Bermuda) Limited v Minister of Economy, Trade & Industry [2013] SC (Bda) 35 Civ

This judgment concerned what happens when an applicant has failed to obtain the relief they were seeking in judicial review proceedings where there is more than one respondent.

Kawaley CJ noted that this was strangely not something which had been raised before in a considered judgment in Bermuda [5].

The general position is that only one set of costs would be awarded as an applicant should not have to pay for duplication of effort. There is an exception when a second respondent has a separate interest on an issue which is not dealt with by the first respondent.

The Chief Justice took the route of allowing costs to both respondents, but only one set of costs for each issue, depending on whether the issue was one properly for the Minister or for the BIU to respond to, so as to avoid duplication of costs [7]-[10].

The Chief Justice indicated that, in future, the proper time to raise the issue of paying two sets of costs is early in the proceedings, in order to allow the parties to focus on who should play an active role in the proceedings [11].

law report - "nominal" damages and costs

Williams v the Bermuda Hospital Board [2013] SC Bda 15 Civ

The Plaintiff had been awarded damages of $2,000 against the Hospital, the Defendant, and awarded the costs of the action. Hellman J had described the damages as "nominal"

The Defendant had applied to overturn the order for costs, on the grounds that when a Plaintiff has succeeded in obtaining only nominal damages, the usual costs order is that the Defendant is entitled to their costs.

Hellman J considered authority which indicated that nominal damages meant something which were not real damages at all, but which gave an entitlement to a judgment or verdict because your rights have been infringed [3]. This was not the same as small damages
Comment - for example, if somebody trespasses momentarily on your land you might be entitled to sue them and win, as your rights have been infringed, but as you have not suffered any real damage, the court would probably award legal costs to the trespasser.

Hellman J clarified that, when he used the term "nominal damages", he was not using it in its strict legal meaning, but was using it in the sense of "small" damages [4].

The Defendant submitted further that the Plaintiff had only obtained 1-2% of the amount claimed. However, the solution for a Defendant who believes a Plaintiff will only obtain a percentage of his claim is to pay the amount into court to protect itself from paying costs [9].

Further, when making a costs order, the Court is entitled to consider the effect that the award would have on the award of damages [11]. If it is the court's view that a party is entitled to a small award of damages, but then awards costs against the Plaintiff, then the result will be that the plaintiff is in debt to the Defendant.

Law report - claiming indemnity costs from other side

Femi Bada v Capcar Enterprises Ltd [2013] SC Bda 13 Civ

Comment - this case will be particularly interesting for landlords and tenants, as leases in Bermuda often contain an indemnity clause such as this.

The parties had had a contract dispute, and it was a term of the contract that the Appellant agreed to fully indemnify the Respondent for all legal costs incurred in enforcing the terms and conditions.

The outcome of the legal action was that the Respondent discontinued its claim against the Appellant and agreed to pay its legal costs to be taxed on a full indemnity basis.

Kawaley CJ held that this type of indemnity clause is designed to create a legal entitlement to compensate a party for all of its costs falling within the scope of the clause [17]. This differs from usual costs taxations, where all costs are considered on the basis of whether it is reasonable for the other party to pay them.

To deprive a party of their full costs would require exceptional circumstances, for example if the bill included time that was not spent, or did not reflect the terms on which the attorney was hired, or was clearly grossly inflated [22].

Law reports - costs of petition for segregated accounts company

Gottex v New Stream [2012] SC (Bda) 66 Civ

The Plaintiffs had successfully obtained an order to put the Defendant into receivership, with liberty for the Plaintiffs to apply for their costs

The point arose as to whether the costs should be paid only out of the general account or out of the segregated accounts (including the Plaintiff's own segregated account).

Kawaley CJ held that provided the litigation was linked to a segregated account, then it may be liable for costs. In the present case, the managers of the segregated accounts had pro-rated the company's costs to each account, and it was more likely than not that the directors had approved of such allocation. The company's bye-laws provided for such pro rating. There was no rational basis for inferring that the company would embark on litigation with such commercial significance without considering who might foot the bill.

Kawaley CJ also held that the costs should be pro rated also against the Plaintiff's own segregated accounts. All of the accounts are accounts of the company. The action had been brought against the company, challenging the validity of a transaction purportedly entered into by the company on behalf of all share classes. The costs therefore are expenses which were contemplated to be allocated across all accounts. This is part of the bargain that an investor makes when setting up a segregated account.

Unlike shareholders, segregated accounts do not have a seperate legal personality to the company but is merely an extension of the company's personality.

There might be circumstances where an account owner could claim that litigation charges were improperly charged, which might be a claim against the managers or directors.

The Chief Justice was careful to say that his findings were subject to refinement in future cases, given that this was a very novel area of law.

Law Report - Litigants in person - costs and case management

Junos v Minister of Tourism & Transport [2012] Bda SC 55 Civ

Another judgment relating to litigants who represent themselves. See here for the previous judgment in Junos' ongoing litigation.

The applicant was attempting to clarify the rules for litigants in person ("LIPs") claiming their costs when successful.

Kawaley CJ held that a distinctive case management approach may be required with LIPs to ensure that their fair trial rights are adequately met [7]. The court has to tread a line between efficient case management where LIPs are unaware of court procedures and may lack the mutual trust that opposing lawyers share; and ensuring that LIPs feel their case is heard fairly [8].

The court will often have to devote more time to hearing a LIP's side of the case, as they often do not present it in the most effective manner. If their case is ultimately unmeritorious, the other side will recover the costs of the increased amount of time required. If the LIP is successful, the other side has the comfort that the LIP recovers costs on a reduced rate to make up for the increased time spent [9].

Where a LIP has suffered financial loss in preparing his case he will be able to recover 2/3rds of what an attorney would have charged [14]

Where a LIP has suffered no loss in preparing the case, they will be able to recover a discretionary rate of no more than $50 per hour. The time allowed is based on how long it would have taken an attorney to do the work, uplifted to allow for the LIP's inexperience. However, it is still subject to the cap of 2/3rds of what an attorney may charge for the item. [14]

Great care is required in applying the English rule that lawyers cannot charge for research time in the Bermudian context, taking into account the lack of local academic and vocational legal qualifications and the limited availability of practicioners' texts. [19]

Law report, claiming costs when you represent yourself

Junos v Minister of Tourism and Transport [2012] SC (Bda) 46 Civ (31 August 2012)

A judgment of particular interest to unrepresented litigants (litigants in person or "LIPs") and parties facing a successful LIPs.

The following principles might be drawn in considering legal costs to be awarded to a LIP who was unemployed and / or did not suffer any pecuniary loss from representing herself:

In respect of any one item, regardless of how many hours a LIP spent working on it, the maximum that can be recovered is two thirds of what a solicitor could have recovered [7].

The starting point is how long a LIP spent working on an item, rather than a presumption that they will get two-thirds of what a lawyer could claim [8] (the presumption may apply, though, when the LIP has suffered loss from the time spent working on her case)

It might be appropriate to allow a LIP more time than would be allowed to a lawyer with administrative support [9]

Kawaley CJ declined to make any ruling at this stage on whether the $50 maximum rate for LIPs should be reduced and said it was a matter for the Registrar.

Comment - lawyers will be pleased to discover that these rules don't apply to LIPs who are themselves practising attorneys. A practising attorney is always able to recover their full costs (London Scottish Benefit Society v Chorley (1884) 13 QBD 872; In the matter of the Elcome Trust [2010] SC (Bda) 3 Civ)

Law report - arbitration clause covering individuals

Buchanan v Lawrence [2012] Sc (Bda) 38 Civ (27 July 2012)

The plaintiff had paid membership fees to The Finest Golf Clubs of the World Limited. He subsequently met with the defendant, a director of the company, who allegedly agreed to personally refund the fees.

The plaintiff brought a claim against the defendant for the failure to refund. The defendant relied on an arbitration clause in the agreement with the company, which covered disputes between the club, its officers, directors, affiliates, and any club member, relating to the rules and regulations and transactions arising out of them.

Kawaley CJ held that the correct test is that proceedings should be stayed when there is a prima facie case that the dispute is caught by the arbitration clause [5]-[6].

In this type of case, there is no clear distinction between a claim against a director as a director and in his personal capacity, when the Defendant's involvement was due to his position as a director [8].

In terms of costs, Litigants were also warned that the court was likely to follow the judgment of Colman J in A v B (No 2) [2007] EWHC 54 (Comm), in that a party who has been found to have deliberately ignored an arbitration clause would have costs awarded against them on the indemnity basis [10]-[11].