Dixon v Jefferson Seal Ltd

CourtCourt of Appeal
JudgeCollins, Harman and Southwell, JJ.A.:
Judgment Date13 January 1998
Neutral Citation[1998] J.Unrep 6
Date13 January 1998
Collins, Harman and Southwell, JJ.A.:

A.D. Hoy for the appellant;

M. St. J. O'Connell for the first and second respondents;

N.M.C. Santos-Costa for the third respondent.

Cases cited:

(1) Abdel Rahman v. Chase Bank (C.I.) Trust Co. Ltd., 1984 J.J. 127, applied.

(2) Berkeley Admin. Inc. v. McClelland, [1990] F.S.R. 565.

(3) Cepheus Shipping Corp. v. Guardian Royal Exchange Assur. PLC, [1995] Lloyd's Rep. 647, dicta of Mance, J. applied.

(4) Dick v. Dick (née Naranjo), 1990 JLR N-2, applied.

(5) Jones (née Ludlow) v. Jones (No. 2), 1985-86 JLR 40, considered.

(6) Macmillan Inc. v. Bishopsgate Inv. Trust, Chancery Division, December 10th, 1993, unreported, considered.

(7) Main v. Laughton (1995), 20 Guernsey Law Journal 62, considered.

(8) Marie Claire Album S.A. v. Hartstone Hosiery Ltd., [1993] F.S.R. 692, considered.

(9) Munkenbeck & Marshall v. McAlpine (1995), 40 Con. L.R. 30.

(10) Preston v. Preston, [1982] Fam. 17; [1982] 1 All E.R. 41; [1982] FLR 331; (1981), 12 Fam. Law 57; 125 Sol. Jo. 496, applied.

Additional cases cited by counsel:

Eagil Trust Co. Ltd. v. Pigott-Brown, [1985] 3 All E.R. 119.

G v. G, [1985] 1 W.L.R. 647.

Civil Procedure—costs—indemnity basis—may award full indemnity costs of appeal proceedings if instituted, maintained and withdrawn at late stage for improper reasons, e.g. appeal unarguable and maintained only to pressurize other party

Civil Procedure—costs—indemnity basis—may award full indemnity costs if losing party's conduct of proceedings deceitful, in bad faith, with ulterior motive, oppressive or incurring disproportionate costs—insufficient that action strongly or unreasonably contested—oppressively pursuing unarguable appeal may be evidence of motives in conduct of lower court proceedings

The respondents sought an order for indemnity costs following their successful action against the appellant stockbrokers' firm for damages for negligent investment advice.

The respondents, who were private investors with little knowledge of the stock market, invested their money in various bonds on the advice of their stockbrokers, the appellant firm, seeking to earn interest from investments with a low degree of financial risk rather than high capital growth. The appellant, which was owned by a bank, advised the respondents to invest in a bond which, although giving a high return, was not a safe investment, a fact which the appellant knew but which it did not reveal to the respondents. The company issuing the bond subsequently became insolvent and the respondents suffered significant financial losses.

The respondents brought an action in the Royal Court for damages for negligence. During the proceedings, the appellant alleged that the first respondent had been contributorily negligent in advising the second respondent, his partner, to invest in the bond, and joined him as a third party to her claim. It also failed to submit all the relevant documents to the respondents, only supplying them at the last moment following several orders for further discovery, and falsely alleged that the respondents had agreed to a high-return investment strategy. The court (Hamon, Deputy Bailiff and Jurats Bonn and Gruchy) held that the appellant had been negligent and awarded damages to the respondents, in particular, dismissing the allegation of contributory negligence against the first respondent as patently false. These proceedings are reported at 1997 JLR 205. The Deputy Bailiff subsequently dismissed the respondents' application for the costs of the proceedings to be awarded on a full indemnity basis.

The appellant appealed against the finding of negligence and the first and second respondents cross-appealed against the refusal to award indemnity costs. Shortly before the hearing was due to take place, the appellant sought to withdraw the appeal, submitting that it wished to do so for "commercial reasons."

The first and second respondents submitted that (a) the appeal had clearly been unarguable and the appellant had only appealed at all in order to pressurize the respondents into a settlement; their costs occasioned by the appeal and the application for its withdrawal should therefore be awarded on an indemnity basis; and (b) the Deputy Bailiff had wrongly exercised his discretion in refusing to award the costs of the Royal Court proceedings on a taxed basis only, because the appellant's behaviour had clearly been intended to embarrass the respondents and to put improper pressure on them in the conduct of their case.

The appellants denied both these suggestions and submitted that the respondents could only obtain the costs both before the Royal Court and the Court of Appeal on a taxed basis.

Held, allowing the cross-appeal:

(1) The appellant's withdrawal of the appeal amounted to a recognition that it was unarguable. It was therefore clear that in seeking to withdraw at such a late stage, the appellant must have been attempting to use the appeal proceedings as a means of obtaining an advantageous settlement, either as to costs or otherwise. In particular, it had clearly attempted to use its strong financial position (i.e., being owned by a bank) to win a war of attrition against the respondents, who were of private means. This behaviour was both unreasonable and an abuse of the process of the court and would be punished by an award of the costs relating to the institution, maintenance and withdrawal of the appeal on a full indemnity basis (page 51, line 30 - page 53, line 26).

(2) The court would also award the costs before the Royal Court on an indemnity basis. Although the Deputy Bailiff had been entitled to exercise his discretion as he did and the court should be reluctant to overturn his decision, the appellant's improper institution, maintenance and withdrawal of the appeal amounted to a material change of circumstances since then, showing its conduct of the lower court proceedings in a new light and making it clear that indemnity costs had been appropriate. There had to be a special or unusual feature of the case for indemnity costs to be awarded. This was not confined to cases in which the losing party had been guilty of deception or had fought the action with an ulterior motive, but included cases in which it had acted oppressively, in bad faith or in such a way as to incur costs out of all proportion to the issues at stake, although it was insufficient that the case had been strongly or even unreasonably contested. The appellant's conduct of the proceedings as a whole, including the appeal, made this such a special case and the Deputy Bailiff's order would therefore be overturned (page 57, line 18 - page 61, line 13).

COLLINS, J.A.: The appellant, Jefferson Seal Ltd., is a relatively small firm of stockbrokers carrying on business in Jersey, although now forming part of a larger group, as will appear later. It was instrumental in the placing of at least £13.1m. of its clients' money into a bond issued by a Canadian insurance company, Confederation Life Insurance Co., in the years 1993 and 1994. This proved to be a disastrous investment in that in August 1994, the company was put under statutory control and then later put into liquidation. This has led to a wealth of claims against the appellant for damages for negligence, of which some have been settled but in relation to which we are told that some 40 claims still remain to be tried.

The management of these actions has been undertaken by the learned Deputy Bailiff who, in late 1996, ordered the trial of two groups of actions to take place in 1997. The first group included a number of private investors and, in particular, included the three respondents to this appeal, Mr. Dixon, Miss Richardson and Reeb Investments, the alter ego of Mrs. Beer. The second group comprised claims by a number of trust companies and the like and were and are to be separately considered in the light of the potential expertise in investment matters which may be alleged against them. The trial of the first group of actions was fixed for June 1997 and resulted in a finding in favour of these three respondents after a hearing running from June 24th to July 17th, 1997. Mr. Dixon recovered a sum of just under £200,000, Miss Richardson a sum of just under £90,000 and Reeb Investments a sum of just over £90,000. Each of those three respondents gave evidence and the appellant called three witnesses, the principal one being Mr. Brian Beadle, their Eurobond Manager. In addition, of course, both the appellant and the respondents called expert evidence.

In my view, resistance to the claim by the third respondent became unarguable once Mr. Beadle had volunteered and confirmed, on being asked to do so, evidence that Mrs. Beer wanted "something as stable, as secure as the bank deposits," in which she had previously lodged her funds. On any view, bonds issued by a Canadian insurance company which were subordinated to the policyholders who were also in effect the shareholders, it being a mutual company, could never have satisfied such a...

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