Adam Cole
Partner
Guernsey
BX v T Limited and AX and JX and CX and OX and PX and QX [2024]GRC066 (27 September 2024)
In a recent supplementary judgment on costs, Lieutenant Bailiff of the Royal Court of Guernsey, Hazel Marshall KC (the "Judge"), considered inter alia the recovery of foreign lawyers' costs in hostile proceedings in Guernsey. More specifically, it was the recoverability of fees charged by English solicitors and English counsel (noting that this was almost invariably the case when it comes to the costs of external or foreign lawyers in Guernsey proceedings). The somewhat restrictive reaffirmation of the principal that such costs are not normally recoverable save in very exceptional circumstances will be of relevance to parties engaged in large scale litigation not only in Guernsey, but in the Channel Islands as a whole where such decision is of persuasive value.
The anonymised judgment was handed down on 27 September 2024 and followed judgment in the substantive claim in which Walkers acted for the beneficiaries of the relevant trust in successfully opposing applications for disclosure of information pertaining to a Guernsey trust by non-beneficiaries. For context, the main judgment has been anonymised and is not addressed in any detail in this article but can be found here: https://www.guernseylegalresources.gg/CHttpHandler.ashx?documentid=85521 (alternatively, search [2024] GRC036).
Fees for external lawyers
The starting point is to consider the Court's jurisdiction to award costs and in this regard, the judgment refers to the Royal Court Civil Rules 2007 (the "RCCR"), as elaborated by the amended Royal Court (Costs and Fees) Rules 2012. In the present case, there were no issues with the jurisdiction of the Court to make costs orders however, it was noted that in the absence of an actual bill of costs, any orders would be based upon general principles only.
The Judge dismissed the suggestion that one of the applications was intended to be administrative, commenting that "…it is perfectly plain that these Applications are appropriately treated as hostile litigation. They were each an Application made by a stranger to the W Trust for orders which cut across the ordinary administration of the trust" [13]. The Judge also added that any suggestion otherwise was "naïve" since it was "quite obviously likely to be or become contentious and costs orders are appropriately made on that basis".
In considering the question of fees for external lawyers, the Judge examined some well-known and often cited Guernsey judgments, including:
Ladbrokes plc v Galaxy International Ltd (Guernsey Judgment 11/2009)
In this case, LB Southwell identified five examples as to when it could be reasonable for a costs order to include, as proper disbursements, recovery of a party’s costs incurred in instructing foreign (almost inevitably English) counsel or solicitors to assist in a matter being litigated in Guernsey. These were summarised by the Judge in the present case as being [40]:
(i) a need for specialist expertise not available in Guernsey;
(ii) continuity of material knowledge, from external lawyers already well immersed in and acquainted with the detail of material facts;
(iii) a need for research into foreign law not readily able to be carried out in Guernsey, for substantive purposes;
(iv) efficiency by obtaining the “very best” legal advice in a complex case; and
(v) obtaining practical resources (in particular voluminous document management) unavailable in Guernsey.
The Judge then went on to acknowledge (as was considered in the Rusnano case referred to below) that the above were 'examples of their time', commenting that [51] "…the examples given in the Ladbrokes case by LB Southwell were given in 2008. Since that time, the development of the internet has hugely increased the availability of research tools and the accessibility of materials in other jurisdictions, and this reduces any need to consult persons actually practicing in the relevant jurisdiction, as a means of access to such materials. LB Southwell’s examples therefore need to be applied with this in mind".
Taking this further, the Judge went on to state [52]:
"Thus, resort to foreign lawyers for “specialist expertise” (example (i)) is likely to be justified only rarely, except (naturally) where a material issue is an issue of the relevant “foreign” law itself (example (iii)). Even then the Court of Appeal apparently considered that the appropriate course was to limit the recovery of such fees to the maximum which would be the available recoverable rate in Guernsey: see Rusnano at [47], regarding advice as to service in the foreign jurisdiction. Where the foreign law is relevant only to assist as to what Guernsey law might be, Guernsey advocates should be well able to carry out the necessary research. Similarly, arguments of continuity and efficiency in conducting the clients’ affairs (LB Southwell’s example (ii)) justify only the fees for effecting such actual continuity, and again, on such limited basis as to rates (see (Rusnano at [48])".
Against the above background, the Judge rejected the submission that it was standard and reasonable for the involvement of foreign (English) lawyers. In her view, the issues involved in the present case were entirely matters of Guernsey law, were not complex, did not justify expertise in English law and did not involve large scale commercial litigation.
CRGF GP Ltd v Fonds Rusnano Capital SA [2023] GCA064
It was noted that since the Ladbrokes case, the recoverability of foreign lawyers’ costs had been reconsidered very much more recently, and with limiting effect, by the Court of Appeal in CRGF GP Ltd v Fonds Rusnano Capital SA [2023] GCA064 ("Rusnano").
In applying this to the present case, it was submitted that this was purely a "Guernsey case, with no principles of English law involved and no English connections". In these circumstances, the Court of Appeal stated in Rusnano that "Guernsey Advocates are, or should be, capable of conducting research into English law insofar as it might be of assistance in ascertaining what Guernsey law is or ought to be in a case governed by Guernsey law and principles".
Taking those submissions further, reference was also made to the decision of the Guernsey Court of Appeal in Re the M Trusts [2023]GCA085. The Judge in the present case noted that in that case, it was held that [p.47] "…the mere fact that a point was a novel one in Guernsey law did not justify resort to English counsel and solicitors for advice, and emphasised that it would only be in a very exceptional case that it might reasonably be thought that a Guernsey Advocate might be regarded as insufficiently qualified to be able to advise".
The Judge distilled the test for whether costs should be recoverable as follows [50]: "The only matter I have to consider is the extent to which it was reasonable for A and J, and for T, to instruct English counsel or solicitors in order to be able to deal, properly, with the Applications being made against them or their interests in this jurisdiction". The key consideration is therefore whether instructing external lawyers "goes beyond adequate legal representation and advice obtainable locally" in which case, it would be a luxury for which their opponents cannot reasonably be required to indemnify them.
Recoverable rates in Guernsey
Another point which was considered was whether the fees charged by foreign lawyers should be limited, as to recovery, to the rates laid down as the recoverable rates in Guernsey. Consideration of this point follows the Ladbrokes case [at 22], as endorsed by the Guernsey Court of Appeal in Rusnano [at 41] (both referred to above).
The relevant part of the judgment in the present case restated the following [57]: “…Litigants in Guernsey are in the great majority of cases, entitled to anticipate that if they lose and are ordered to pay costs on the recoverable basis, they will not have to pay costs relating to the use of external lawyers well in excess of those appropriate for Guernsey Advocates and their employees".
However, the Judge distinguished the present case from Rusnano on the following basis [59]: "I have noted, of course, the example in Rusnano but in view of the fact that the advice obtained was from an associate firm, it seems to me that the limitation there imposed can be regarded as the particular court’s discretionary impression of what would be a fair and reasonable result on the particular facts".
The Judge also stated, obiter, that it did not seem to her to be appropriate to blindly limit work which could not be done by a Guernsey Advocate at all, to the recoverable rates in Guernsey.
Litigation involving multiple jurisdictions
It was also noted that whilst the proceedings involved multiple jurisdictions (namely Jamaica, the Bahamas and, possibly, the USA), there was no "intrinsic connection to England" and that any suggested interplay between the jurisdictions was not relevant to the recovery of costs incurred with English solicitors or counsel. In these circumstances, the Judge stated [62]:
"It appears to be, rather, a particular firm of solicitors and their choice of counsel having been instructed in a general co-ordinating or supervisory role with regard to litigation in other jurisdictions. That, on its own, does not, in my judgment, justify allowing the costs of such external lawyers to be recovered in hostile litigation, concerning only one minor and pretty discrete aspect of it all. A and J’s choice of how they structure their “global team” having lawyers conducting or overseeing affairs globally from a completely unrelated jurisdiction, is entirely a matter for them if they wish, and can afford, to do so. The question for me is how far Guernsey’s policy on recoverable litigation costs should require an opponent faced with such a situation to contribute to the opposing parties’ legal expenses incurred in, or because of, operating such a system".
Conclusion
In her judgment, the Judge stated [62]: "The authorities seem to me to indicate that the policy operates restrictively, and really only on a “reasonable necessity” basis, and that this also must be applied according to the facts of the particular case, rather than being susceptible to the formulation of general rules".
The Judge then went on to reject any argument in the present case that would allow generally for the recovery of the costs of English lawyers' (even on the recoverable basis), adding, in any event, that "Any such order as I might be prepared to make will have to be more specific" [63].
In her closing comments in relation to consideration of foreign (English) lawyers' costs, the Judge concluded by saying:
[68]: "Lastly, I emphasise that I have taken this view - which those habitually engaged in large scale or complex commercial and/or cross-border disputes might regard as unreasonably constrained - principally because of my judgment that the particular piece of litigation here is of very narrow compass, is peripheral to the deep-seated disputes between the parties, and is free-standing, coupled with the sense, which I have referred to above, that Guernsey’s policy towards the recoverability of external lawyers’ fees in hostile litigation conducted in Guernsey is restrictive rather than expansive".
This judgment serves as a useful reference point in relation to the costs of English lawyers' which are not regarded as sufficiently specialist or necessary in the context of the matters in dispute, and/or (as is commonly the case) where English lawyers act as lead counsel in coordinating/supervising litigation in multiple-jurisdictions.
