Sagicor and Windsor Village v Crawford Adjusters and Hurlstone Parties - Ruling

¶ IN THE GRAND COURT OF THE CAYMAN ISLANDS HOLDEN AT GEORGE TOWN, GRAND CAYMAN CAUSE NO: 78 OF 2006 BETWEEN: (1) SAGICOR GENERAL INSURANCE (CAYMAN) LIMITED (2) THE PROPRIETORS OF STRATA PLAN NO. 151 (KNOWN AS WINDSOR VILLAGE) -AND- Plaintiffs (1) CRAWFORD ADJUSTERS (CAYMAN) LIMITED (2) BOULD PATERSON LIMITED (3) ALASTAIR PATERSON (4) HURLSTONE LIMITED (5) HURLSTONE GENERAL CONTRACTORS LIMITED (6) JOHN HURLSTONE (7) ROBERT HURLSTONE Defendants
IN THE GRAND COURT OF THE CAYMAN ISLANDS CAUSE NO. 573 of 2008 BETWEEN: (1) HURLSTONE LIMITED (2) HURLSTONE GENERAL CONTRACTORS LIMITED (3) JOHN HURLSTONE (4) ROBERT HURLSTONE -AND- (1) SAGICOR GENERAL INSURANCE (CAYMAN) LIMITED (2) THE PROPRIETORS OF STRATA PLAN NO. 151 (KNOWN AS WINDSOR VILLAGE) Plaintiffs Defendants Coram: The Hon. Mr. Justice Henderson Appearances: Mr. Michael Roberts instructed by Mr. Nick Dunne of Walkers for the 1st and 2nd Plaintiffs Mr. Thomas Lowe, Q.C. instructed by Mr. Chris McDuff of Thorp Alberga for the 4th to 7th Defendants Mr. Graham Hampson of Hampson and Company for the 1st and 3rd Defendants Heard: September 15 & 16, 2011
RULING Introduction

¶ [1] After giving Judgment in this pair of consolidated actions on February 14, 2011 I have conducted a hearing on costs. Each side in the action has claimed indemnity costs against the other. Facts An understanding of the procedural history is necessary. Sagicor General Insurance (Cayman) Limited ("Sagicor") and the Proprietors of Strata Plan No. 151 ("Windsor Village") commenced an action ("the original action") in fraud and conspiracy in 2006 under Cause number 78/06 against all seven defendants. Sagicor then obtained a Mareva injunction against the fourth to seventh defendants (collectively, "the Hurlstone parties"). Its request for a similar injunction against the first to third defendants (collectively, "the Crawford parties") was dismissed. Windsor Village did not associate itself with the injunction application. Ruling – Sagicor General Insurance (Cayman) Ltd et al v. Cravford Adjusters (Cayman) Ltd et al Cause Nos. 78 of 2006 and 573 of 2008 09.12.11

¶ [4] At the outset of the original trial in December, 2008 the plaintiffs abandoned their claims entirely. I dismissed the claims and awarded indemnity costs to the Hurlstone and Crawford parties. At the request of the Hurlstone parties I then ordered an inquiry for the purpose of assessing their damages ("the damages inquiry") arising from the Mareva injunction pursuant to the usual undertaking given by Sagicor. 5 6 7 8 5. Well before the start of the damages inquiry, the Hurlstone parties started a fresh action under Cause number 573/08 ("the new action") against Sagicor and Windsor Village claiming damages for the torts of abuse of process and malicious prosecution of a civil action. Essentially, they said that the original action was based upon facts known by Sagicor to be false and motivated by malice, a circumstance which entitled them to damages quite apart from their separate entitlement arising from the undertaking. 14 15 16 6. The Crawford parties amended an existing counter-claim in the original action to advance a claim for damages for abuse of process and defamation on essentially the same grounds as the Hurlstone parties were relying upon in the new action. I consolidated the two actions and heard all of the claims at the same time as the damages inquiry. 20 21

¶ [7] After a lengthy trial, I awarded the sum of $7,078,064 to the Hurlstone parties as general damages to which they were entitled because of the harm caused by the Mareva injunction and a further $100,000 as aggravated damages. 5 8. I held that the claim of abuse of process had not been made out because an overt act “not within the scope of the process” had not been established. I found that there was no justification for an extension of the law to embrace a new tort of malicious prosecution of a civil action. I dismissed the counter-claim of the Crawford parties and, in effect, the claim of the Hurlstone parties in the new action. 12 Positions of the Parties

¶ [9] The Hurlstone parties say that they are entitled to their costs of the damages inquiry and of the trial of the new action because they were “in form and substance” one single proceeding in which they were the successful parties. They also say they were successful on all of the issues of fact in the new action and, because Sagicor extended the duration of the trial unreasonably, the Hurlstone parties should receive an award of indemnity costs.

¶ [10] The Crawford parties say that they had “no alternative but to continue the proceedings which Sagicor had commenced” to “show the world that there was not a shred of truth” in the fraud and conspiracy allegations; it was “essential” that
this be done so that Mr. Paterson could “clear his good name”. They claim the costs of their counter-claim from Sagicor, the successful party, on the indemnity basis. Sagicor accepts that it has a liability for costs in the damages inquiry but says they should be on the standard basis and reduced to reflect its own success on some individual issues. It claims an entitlement to costs in the new action and says these should be on the indemnity basis because the new claims “were legally and factually misconceived from the start”. It argues that most of its time at trial was devoted to refuting the new claims. Sagicor claims its costs of the counter-claim from the Crawford parties on the indemnity basis because the claim was “legally and factually flawed” and had no chance of success. Costs ordinarily are awarded to the successful party because they “follow the event”. The permissible exceptions are summarized in Re Elgindata Ltd. [1992] 1 WLR 1207 (CA) at page 1214: The principles are these. (i) Costs are in the discretion of the court. (ii) They should follow the event, except when it appears to the court that in the circumstances of the case some other order should be made. (iii) The general rule does not cease to apply simply because the successful party raises issues or makes allegations on
which he fails, but where that has caused a significant increase in the length or cost of the proceedings he may be deprived of the whole or a part of his costs. (iv) Where the successful party raises issues or makes allegations improperly or unreasonably, the court may not only deprive him of his costs but may order him to pay the whole or a part of the unsuccessful party’s costs. Of these principles the first, second and fourth are expressly recognised or provided for by rules 2(4), 3(3) and 10 respectively. The third depends on well established practice. Moreover, the fourth implies that a successful party who neither improperly nor unreasonably raises issues or makes allegations on which he fails ought not to be ordered to pay any part of the unsuccessful party’s costs.

¶ [14] In Elgindata the petitioners were minority shareholders complaining of unfairly prejudicial conduct and seeking a compulsory order that their shares be purchased. Many of their complaints were not established but they did succeed in obtaining the requested order. The trial judge was held to have erred when he apportioned his award of costs according to the individual issues upon which the petitioners failed and succeeded. Overall, there was just 1 “event” – the petitioners’ success in obtaining the order – so they were entitled to all of their costs.

¶ [23] Difficulty may be encountered in identifying the “event” or, as in the present case, determining whether a trial resulted in one event or two. Some guidance is found in the decision of the Privy Council in Seepersad v. Persad & another [2004] UKPC 19 at page 389: The Court of Appeal gave the appellant only half costs of his amount of the award for pain and suffering and loss of amenity. In so ordering it must have treated the assessment of damages under this head as if it were a separate issue on which the appellant had lost, while succeeding on the other issues. In the Board’s view this
was an erroneous approach. The award of costs in Trinidad and Tobago is in the discretion of the court, as is usual in most common-law jurisdictions. The general rule which should be observed unless there is sufficient reason to the contrary is that costs will follow the event. Where the party who has been successful overall has failed on one or more issues, particularly where consideration of those issues has occupied a material amount of hearing time or otherwise led to the incurring of significant expense, the court may in its discretion order a reduction in the award of costs to him, either by a separate assessment of costs attributable to that issue or, as is now preferred, making a percentage reduction in the award of costs; see, for example, Re Elgindata (No 2) [1992] 1 WLR 1207. The Court of Appeal’s order was predicated upon the proposition that the assessment of damages for pain and suffering and loss of amenity was a separate issue from the assessment of the other heads of damage. This was an incorrect assumption. An issue for these purposes must be something so distinct and separate in itself that the decision of it constitutes an ‘event’. The ‘event’ was the quantum of damages to which the appellant was entitled and he succeeded on his appeal in obtaining a higher award than Lucky J had given him; even though one head was decreased, another was increased and one which the judge had omitted was added to the total. The Board accordingly consider that the Court of Appeal had insufficient ground for reducing the award of costs made to the appellant and that he should have been awarded full costs in that court, without separating out any element attributable to the cross-appeal, which was only a means of putting in issue the quantum of all the items of damage in the judge’s award.

¶ [31] Apportionment between the Two Actions 32 33 16. Was the result of my decision one event or two? Mr. Lowe said in argument that the new action was brought primarily to meet the anticipated argument from Sagicor that damage caused by the Mareva injunction could be the subject of compensation only if the injunction was the sole cause. That argument was made and rejected so, in the result, the new action proved to have been unnecessary.
2 17. When the new action was initiated I consolidated the proceedings. In describing his justification for the new action at that time, Mr. Lowe said no more than 3 “there might also be overlapping damages arguments”. He observed that his claim on abuse of process was “the same” as that of the Crawford parties and referred to the “added dimension” of the Mareva injunction. 4 5 6 7 8 18. In the opening skeleton argument of 47 pages submitted by the Hurlstone parties, the first 21 pages are devoted to the damages inquiry and the balance to the new action. In the closing argument of the Hurlstone parties the facts material to the two actions are for the most part addressed together but there is a separate 20-page section on the law which is relevant only to the new action. A reply to Sagicor’s closing argument also contains a short separate section relevant only to the new action. Sagicor’s arguments addressed the two actions separately. I am satisfied that the new action was not simply a hedge against the possibility of an adverse ruling on the Mareva causation issue but a separate and distinct action which lengthened the trial (and counsel’s preparation for it) to an extent which was more than trivial. Fairness requires that the result of the new action be treated as a separate event. 19 20 21 19. It follows that the Hurlstone parties are entitled to their costs of the damages inquiry and Sagicor is entitled to its costs of the new action. The overall cost
must be apportioned. The apportionment will be based upon the time spent upon each of these two subjects.

¶ [20] My assessment is complicated by the fact that much of the Hurlstone parties’ evidence and argument was equally material to the claim for aggravated damages in the damages inquiry (which succeeded) and to the new action (which failed). Where evidence or argument was material to both claims, the Hurlstone parties are entitled to recover their costs unless they “caused a significant increase in the length or cost of the proceedings”, that is the third principle set out in Elgindata, supra. The time analysis presented in argument by Sagicor seems to assume erroneously that evidence relevant both to aggravated damages and to the new action must be attributed to the latter. The damages inquiry resulted in an award of $100,000 in aggravated damages to John and Robert Hurlstone. Although this award pales in comparison to the compensatory damages award of $6,938,064 (plus an additional $70,000 for loss of personal reputation), much of the evidence led by the Hurlstone parties was in support of the aggravated damages claim and not the compensatory claim. The former occupied more trial time than the latter. I proceed on the basis that it would be wrong in principle to deprive the Hurlstone parties of any part of their costs simply because trial time was distributed disproportionately between the lengthy dispute over aggravated damages and the relatively succinct argument about compensatory damages. Ruling – Sagicor General Insurance (Cayman) Ltd et al v. Crawford Adjusters (Cayman) Ltd et al Cause Nos. 78 of 2006 and 573 of 2008 09.12.11

¶ [22] The Hurlstone parties presented lengthy evidence and argument in support of the proposition that the Mareva injunction had been obtained by material non-disclosure. I found against them with respect to most of their many complaints but did agree that three of their allegations had merit. Because there had been three instances of material non-disclosure I made my aggravated damages award. 6 The fact that a large majority of their complaints about the obtaining of the injunction were not persuasive cannot of itself reduce their entitlement to costs. 7 In the words of Elgindata, “the general rule does not cease to apply simply because the successful party raises issues or makes allegations on which he fails”. 10 The only ground for a reduction in the Hurlstone parties’ costs of the damages inquiry would be a conclusion that they “caused a significant increase in the length or cost of the proceedings”. 13 14 15 23. To arrive at my decision I have reviewed the list of witnesses and the arguments of counsel to estimate the percentage of trial time taken up with matters relevant only to the new action. All of the witnesses called by the Hurlstone parties gave evidence which was not only relevant to the new action but influenced my decision on the damages inquiry and led to the award of aggravated damages. 19 However, the time devoted during argument to the new action was substantial and must be apportioned. I am satisfied that an appropriate reduction from the overall cost to reflect time spent only on the new action is a reduction of 15%.
Indemnity Costs

¶ [24] Costs may be awarded on the indemnity basis if the court is “satisfied that the paying party has conducted the proceedings, or that part of the proceedings to which the order relates, improperly, unreasonably, or negligently”: Grand Court Rules, O. 62 r. 4(11). 7 8 25. I am not persuaded that the Hurlstone parties caused any significant increase in the length or cost of the new action or conducted it improperly, unreasonably or negligently. That proceeding was inherently difficult and all parties laboured under the difficulty in more or less equal measure. The fact that the claim was novel and not very likely to succeed is not, in and of itself, a justification for awarding costs on the indemnity basis. 14 15 26. The same conclusion applies to the counter-claim advanced by the Crawford parties. Although it was a novel and difficult claim it was not advanced improperly, unreasonably or negligently. Sagicor is not entitled to indemnity costs. 18 19 20 27. Similarly, I am satisfied that Sagicor did not cause any significant increase in the length or cost of either the damages inquiry or the new action and did not conduct them improperly, unreasonably or negligently. The documents contained in what has been called the X file were disclosed by Sagicor towards the end of the trial
but that is because it took the position they were privileged. My ruling to the contrary was made after most witnesses had given evidence. When disclosure of these documents was made, it was incomplete. Mr. Dickson, a former Sagicor attorney, referred while giving evidence to documents which should have been, but were not, disclosed but I am not satisfied that his failure to disclose these documents at the appropriate time was the fault of Sagicor. Costs of the Counter-claim Sagicor was the successful party in the trial of the counter-claim. Ordinarily, it would be entitled to its costs on the standard basis because costs follow the event. Sagicor can be denied part or even all of its costs if I am satisfied that it caused a significant increase in the length or cost of the proceedings. I am not satisfied of that, for reasons which are essentially the same as those given above. I accept that I have a broader jurisdiction as well. I am entitled to deny costs to a successful party, or even to award costs against it, where the justice of the case demands that. This broader jurisdiction is exercised only rarely, and only in the clearest of cases. Some examples are given in the White Book (Supreme Court Practice, 1999, Vol. 1, para. 62/2/11): A successful party may be deprived of his costs if he presents a false case or false evidence, or acts oppressively in the action (Baylis Baxter Ltd v. Sabath [1958] 1 W.L.R. 529; [1958] 2 All E.R. 209, CA). See also Anglo-Cyprian Trade Agencies Ltd. v. Paphos Wine Industries Ltd. [1951] 1 All E.R. 873 and Jones v.
McKie and Mersey Docks and Harbour Board [1964] 1 W.L.R., 960, CA; [1964] 2 All E.R. 842, CA, where a successful defendant was deprived of costs and in Hobbs v. Marlowe [1978] A.C. 16; [1977] 2 All E.R. 241 the costs of a successful plaintiff were cut because the action had been continued not for the benefit of the plaintiff, but so that the A.A., of which he was a member, could recover full costs, but in Smith v. Springer [1987] 1 W.L.R. 1720; [1987] 3 All E.R. 252, the Court of Appeal allowed an appeal against striking out proceedings where there had been an offer to pay the claim in full but a refusal to pay costs. In Cable v. Dallatruca (1977), 121 S.J. 795 a successful defendant was deprived of half the costs of the hearing because of his solicitor’s failure to secure a copy of his expert’s report in accordance with O.38, rr.36 and 40; and in Blue Bell Inc v. Palmer International Ltd (1980) 130 New L.J. 5948, CA, the plaintiffs were deprived of their costs of a motion because before its issue they knew that steps were being taken by the defendants to remedy the complaint; and see also Knight v. Clifton [1971] Ch. 700; [1971] 2 All E.R. 378, CA, where it was held that the court had jurisdiction to award costs of a proceeding against a wholly successful defendant but such order should only be made in exceptional cases. In Polydor Ltd v. Sandu (1980) 130 New L.J. 18, the Court of Appeal held that the judge erred in principle when he made no order for costs as a result of considering an issue which did not fall to be considered. A trial judge who wished to reflect disapproval of the way in which a plaintiff (who recovered more than nominal damages) had conducted the litigation, by ordering him to pay the defendants’ costs, erred in principle. In that case justice could be done by making no order as to the costs of the action (Gupta v. Klito (1989) The Times, November 23, CA). In argument, the Crawford parties cited Ottway v. Jones [1955] 1 WLR 706 (CA) and Knight & another v. Clifton & others [1971] 1 Ch 700 (CA). Ottway involved a landlord and tenant dispute governed by the “very special provisions” (p. 714) of the Rent Acts. The plaintiff proved the facts he was asserting and established an entitlement to possession. The court however exercised a discretion to withhold the relief because it seemed to be overly harsh
in the circumstances. An order that the successful defendant pay the costs of the unsuccessful plaintiff was upheld by the Court of Appeal. The court observed that in the “ordinary case” such an order would not be a proper exercise of judicial discretion.

¶ [32] In Knight, the plaintiffs were unsuccessful in establishing their allegation that the third defendant had breached an injunction and committed a civil contempt. The trial judge awarded costs against the successful defendant, who then appealed. The Court of Appeal reversed the costs order because it was “not a proper exercise of judicial discretion”. The third defendant conceded on the appeal that he was not claiming his costs from the plaintiffs, a fact which was noted with approval by two members of the court.

¶ [33] The decisions in Otrway and Knight confirm that I have jurisdiction to award costs to an unsuccessful party but it is a jurisdiction to be exercised only in “the most exceptional cases” (per Russell, LJ, in Knight at p. 713) or in “occasional rare cases” (per Sachs, LJ, ibid.). An order which simply denies a successful party its costs is more common but still exceptional. The argument of the Crawford parties emphasizes that their unsuccessful counter-claim was brought within the confines of the original action. They say that my dismissal of the fraud and conspiracy claims and the resulting newspaper publicity was insufficient to repair the damage to reputations caused by the
publicity about the original allegations. They assert that Mr. Paterson had “no choice” but to proceed with a trial to restore his reputation in the community. “There was no hearing before a judge at which matters could be investigated and the assertions against Mr. Paterson could be judicially and objectively shown to the world to have been malicious and utterly false”: Crawford Parties’ Argument, para. 14. They assert (correctly) that the Crawford parties were successful on a number of the individual factual issues but could not establish that the present state of the law gives them an entitlement to damages. They cleared most of the hurdles but stumbled at the finish line. The trial of the counter-claim occurred subsequent to the dismissal of Sagicor’s claims in the original action and can only be viewed as a separate event. The only counter-claim which was extant before my dismissal of Sagicor’s claims was a claim for unpaid fees. The abuse of process and malicious prosecution claims were advanced after the dismissal; in fact, the dismissal was itself an important element in the factual matrix supporting the new claims. There is no air of reality to the assertion that trial of the claim and counter-claim constituted a single event. In my judgment dismissing the original action I awarded indemnity costs to the Crawford parties and said that: From the failure of these plaintiffs to prosecute their case, I infer that they have never been in possession of a body of evidence capable of establishing fraud or conspiracy.

¶ [37] One of my reasons for awarding indemnity costs was the unjustified and unfair reputational damage suffered by Mr. Paterson. My finding quoted above was intended to assist in repairing the damage. 5 38. My judgment in the original action received at least as much media attention locally as did the commencement of the action. After my judgment, Mr. Hampson (Counsel to the Crawford parties) was quoted as saying: Mr. Hampson spoke about the judgment in favour of the plaintiffs after Wednesday’s proceedings. 6 ‘On Alastair’s behalf, I can say we are greatly pleased that his reputation emerges unscathed as a result of today’s action,’ he said. 7 ‘No doubt we’ll have further comment once the matter is concluded.’ 8 9 10 11 12 13 14 15 16 39. Viewed against this background, the assertion that the Crawford parties had no choice but to proceed as they did is unconvincing. Moreover, when Mr. Todd, Q.C., sought leave to amend his counter-claim he made no reference to what is now advanced as the primary justification for it. The counter-claim was introduced as a claim for substantial damages based upon a novel cause of action. 20 It was a speculative venture which failed. Mr. Paterson’s reputation was restored by my judgment in the original action, aided by the ensuing publicity. I see no justification for an award of costs to the Crawford parties. 24 25 40. A substantial majority of the facts asserted by the Crawford parties and denied by Sagicor were decided in favour of the former. On the other hand, the propositions of law in dispute were resolved in Sagicor’s favour, as were a few of the factual
questions. A balancing of these factors does not justify depriving Sagicor of its costs.

¶ [41] There can be no doubt that Sagicor’s conduct before and during the original action was worthy of censure. They have been censured, and indemnity costs were awarded against them. That book is closed. At this juncture, Sagicor is entitled to be treated like any other litigant in any ordinary proceeding. It is entitled to its costs of the new action on the standard basis.

¶ [42] One of the many unusual aspects of this proceeding is that the three witnesses of substance called by the Crawford parties (Mssrs. Paterson, Hampson and Harrigan) all gave evidence relevant to both the aggravated damages claim in the damages inquiry and the new action. Several other witnesses called by the Crawford parties gave only brief evidence. All witnesses called by Sagicor gave evidence of relevance to both actions. In these circumstances, and for reasons given above, I consider that Sagicor is entitled to recover from the Crawford parties a sum representing only 15% of the cost of the proceeding overall. Order For these reasons, I find that Sagicor must pay 85% of the costs and disbursements of the consolidated trial to the Hurlstone parties on the standard basis and the latter must pay 15% of Sagicor’s costs and disbursements to it on
the standard basis. The Crawford parties are jointly and severally liable with the Hurlstone parties for the payment of 15% of Sagicor’s costs and disbursements. Dated this 9th day of December, 2011 Henderson, J. Judge of the Grand Court