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Court of Appeal in Jersey orders first ever interim payment on account of costs

14 July 2014

In Crociani, Foortse, BNP Paribas Jersey Trust Corporation Ltd & Appleby Trust (Mauritius) Ltd v Crociani & O'rs [2014] JCA 095 ("Crociani"), the Jersey Court of Appeal has awarded an interim payment on account of costs to the successful Respondents to the Appeal. This is the first time that such an order has ever been granted in the Bailiwick's history before the Court of Appeal.

On 7 April 2014, the Court of Appeal dismissed the Appellants' appeal against the decision of the Royal Court to refuse the Appellants’ application to stay the Jersey proceedings on the ground of forum non conveniens. Click here to read our previous briefing on this decision. Having ordered the unsuccessful Appellants to pay the Respondents' costs following the dismissal of the appeal, the Court of Appeal was asked by the Respondents to order a payment on account of costs.

After hearing submissions, the Court of Appeal ordered the Appellants to pay the Respondents a payment of £60,000 on account of costs, which is believed to be one of the highest orders ever made in the Jersey courts (representing one third of the costs sought by the Respondents). The Crociani ruling issued on 17 April 2014, the last ever judgment to be handed down by the Honourable Michael Beloff QC in the Jersey Court of Appeal, confirms several noteworthy points about this emergent costs jurisdiction.

Statutory or inherent jurisdiction?
In their written submissions, the Appellants contended that the Court of Appeal had no jurisdiction to make an order for an interim payment on account of a costs liability.

The Court of Appeal disagreed and found that the statutory rules were wide enough to confer jurisdiction to include an order for interim costs, Article 16, Court of Appeal (Jersey) Law 1961 stating that, "The costs of and incidental to all proceedings in the Court of Appeal under this Part shall be in the discretion of the Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid." The Court of Appeal also noted that the Royal Court's jurisdiction to make such orders was also based on statute, in particular Article 2(1), Civil Proceedings (Jersey) Law 1956.

In these circumstances, as the Court of Appeal made clear, there was no need to rely on the "concept of the inherent jurisdiction of the Court" (as had sometimes been cited in the past by the Royal Court) to justify the conclusion that the power to order an interim costs payment exists in Jersey. Albeit doubting the need to resort to the inherent jurisdiction to ground the correct legal basis for the court's power to make payments on account, the Court of Appeal nevertheless endorsed the approach of the Royal Court in making such orders since they first made their appearance in Centre Trustees (C.I.) Limited and Langtry Trust Co. (C.I.) Ltd v J. Van Rooyen, N. Van Rooyen and Pabst [2009] JRC 133.

Having established conclusively that there is a statute-based power to make orders for interim payments on account of costs in Jersey, the Court of Appeal went on to consider whether there existed a presumption in favour of such orders being made (such a presumption existing in England and Wales, pursuant to Civil Procedure Rule 44.2(8), as introduced in 2013). The Court of Appeal expressed the view that the achievement of justice, to which all exercises of discretion under procedural rules aspire, would usually require that a party, who is, pursuant to a court order, entitled to its costs, should be paid on account a percentage of the amount he is likely to recover in costs on taxation, calculated on a conservative basis to avoid any risk of overpayment. In other words, an order for a payment on account of costs should be made in the normal course of events. The Court unsurprisingly declined to set down any exhaustive list of circumstances where it would not be appropriate to follow "the normal course". Instead the Court of Appeal stressed that in every case the Court, in the exercise of its discretion, will axiomatically consider all the material circumstances which bear on the justice of making or refusing an interim order and in what amount.

In Marange Investments (Proprietary) Ltd v La Générale des Carrieres et des Mines S.A.R.L. (2013) JRC 119A ("Marange"), the Royal Court has previously provided important guidance as to the overall approach and correct procedure for making an application for a payment on account of costs. Pursuant to this guidance, the court should not seek to conduct a taxation of, or carry out a detailed review of, the successful party's costs, but rather it should adopt a "rough and ready" approach in order to arrive at a figure which the successful party will "almost certainly collect."

In Marange, the Royal Court made clear (in a passage cited by the Court of Appeal in Crociani) that, in terms of the correct procedure, where costs have been awarded on an indemnity basis, when considering a payment on account, the court should work from the fees of the lawyers at the charge out rates claimed and the court should be provided with a summary of the time of the fee earners and the rates claimed to enable any serious issues as to rates or quantum to be raised. On the other hand, where costs have been awarded on the standard basis, then the court should be provided with a summary of the costs claimed by the applicant for a payment on account, setting out those costs at the taxation rates applying Factors A and B.

Subsequent to the decision in Marange, the Plaintiffs in the Crociani proceedings had successfully applied for a payment on account of costs on the standard basis in the Royal Court (see Crociani & O'rs v Crociani, Foortse, BNP Paribas Jersey Trust Corporation Ltd & Appleby Trust (Mauritius) Ltd [2013] JRC 250). This application was advanced by supplying the court and the paying party with a summary of the costs sought setting out the fixed 'Factor A' rates claimed and a 50% Factor B 'uplift' to the time of the fee earners, in addition to the disbursements. Importantly, this approach was specifically endorsed by the Court of Appeal in Crociani, which itself made an order for payment on account based on a costs schedule following an identical format. The Court of Appeal noted that the Royal Court (when making an interim payment on account of costs) had specifically considered and rejected the submission that a costs summary in this format did not allow any useful response to be made by the paying party. The Court of Appeal's decision therefore conclusively settles any doubts as regards what the applicant must do to formulate an application for payment on account of costs, whether it is on the standard basis or the indemnity basis.

The future
The question of whether there ought to be an interim payment on account of costs and, if so, how much remains a matter in the court's discretion. However, in light of the Court of Appeal's decision in Crociani, it is now clear that where an order for costs has been made in one party's favour, an interim payment on account of those costs should usually follow if applied for, unless there is good reason not to do so. The Crociani decision endorses the approach of the Royal Court and highlights the increasing frequency and routineness of such orders in the Jersey courts (see for example: Café de Lecq Limited v R.A Rossborough (Insurance Brokers) Limited [2012] (2) JLR 155 (Commissioner Page); Dalemont Limited v Senatorov & O'rs [2013] JRC 209 (Bailhache QC, Deputy Bailiff); Marange (Commissioner Clyde-Smith)).

Notwithstanding its conclusion, the Court of Appeal expressed the view that it would nonetheless be preferable for the Court of Appeal (Civil) Rules 1964 and the Royal Court Rules 2004 to be amended so as to make specific reference to an order for interim payment on account of costs and to forestall further debate about when, in what circumstances and on what basis it should be ordered and, in particular, whether a provision akin to the one introduced into the English Civil Procedure Rules in 2013 (Rule 44.2(8)) ought to be adopted in Jersey. Time will tell whether this suggestion will be adopted but, in the meantime, Crociani provides much welcome guidance to practitioners in this important procedural area.

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