This one slipped under the radar a bit. The case itself is not extensive. Half-a-dozen paragraphs. Indeed it’s not really a case; it’s the government of Denmark withdrawing from the case, because it is going to adopt a judgment that came earlier in the year – and which got ignored.
The earlier judgment is the case of M.S.S. v Belgium and Greece. Application number 30696/09. Decided in January. Which, potentially, drives a coach and horses right through EU law on conflict of laws.
I’ve mentioned the Italian Missile on here before. The argument that has not, as yet, been applied in the English courts is whether it is contrary to human rights legislation for a matter in the Italian courts being left for the Italian courts to decide, on the basis that the Sun might become a white dwarf before the matter gets decided. After all, the Convention on Human Rights grants access to justice. And justice delayed is justice denied.
The problem is that the EU orders all domestic courts to treat all court systems equally; a fiction that is convenient for Eurocrats but dreadful for those who have to deal with said courts. Where is the incentive for improvement? After all, the Court of Exchequer worked out a quick and accurate system for contract claims because the Common Law courts were achingly slow – and the court fees were appealing. Which ultimately led to reform of the Common Law courts. Took a few hundred years, admittedly, but still quicker than the average Italian case...
But does this EU fiction contravene human rights laws? One other well-established principle is that asylum seekers should seek asylum in the first safe country they get to. Unfortunately for one Afghan asylum seeker (an interpreter the Taliban were trying to kill for that supposed apostasy) that country was Greece. The lot of an asylum seeker in Greece is fairly dreadful; locked up 20 to a room, no toilet access, no bed. So he legged it to Belgium and sought asylum there.
The Belgians decided that the asylum seeker should have sought asylum in Athens and sent him back. Where he was detained in a room with 19 others, no toilet access, no bed. All pretty dreadful and all in breach of Greece’s international obligations.
So, the asylum seeker sued the Belgian and Greek governments for breaches of human rights. The Belgian government was somewhat aggrieved by this; the Belgians had complied with their international law duties, there was no obligation on the Belgian taxpayer to support someone who had arrived in Europe via Greece, after all. The problem was that the various conventions and treaties to which Belgium (and Greece) had signed up provided that asylum seekers should not be treated in a degrading manner – Greece certainly breached that – and that a seeker should not be deported to a country where such degrading treatment would be applied. Belgium had done that, albeit under international law...
So, a conflict of international laws. How to resolve? Fairly easily. The point of the legislation was to protect asylum seekers from adverse treatment. Administrative convenience of dumping everyone in the first safe country they reach is overridden by the requirement to treat properly. Belgium knew Greece treated asylum seekers shoddily; Belgium facilitated this treatment by delivering an asylum seeker right into Greek hands. Belgium was therefore in breach. It should have ignored international law giving Greece priority.
One dissenting judgment came from the British representative – Sir Nicholas Bratza – who pointed out that the decision in M.S.S. went against the court’s decision a few months before allowing repatriation to Greece. Then again, precedent (one might argue principle) has never borne weightily on the minds of European judges. As it is, however, perhaps the various articles giving power to decide civil cases to a court first seised may contradict human rights law; if a contract is in English, has English law provisions, an English jurisdiction clause and all damages are in England, why wait years for an Italian court? Your human right to justice may demand an English court take it back...
Wednesday 28 September 2011
Thursday 15 September 2011
Shovelar & others v Lane & others [2011] EWCA Civ 802: costs, costs and more costs
Six claimants, seven defendants. You just know when you see that that costs will be a problem. Throw in it’s a will dispute and you’ve got emotion as well.
Facts are, as so often, simple. In 1996 a widower married a widow. In 1999 they made mutual wills. Half to the widow’s sons, the other half split between all the other descendants. In 2001 the widow died. And then in 2003 the twice-widower changed his will; he cut out the widow’s children and grandchildren entirely. Needless to say the widow’s children and grandchildren – the Shovelars – sued the executors and widower’s descendants.
Mutual wills work like this. A marries B, they have children, and they build up a portfolio of assets. A worries that if he dies B will re-marry, have more children (or worse, step-children), and A’s children will be disinherited in favour of B’s new family (I cite the precedent of Cinderella). B has the same fear if she dies first. So they make mutual wills. A’s will says the same as B’s. There is a mutuality of interest there. What it means is that when one dies, it is unconscionable for the other to change their will. It would mean that the pre-deceased’s dying wish would not be fulfilled.
And this is pretty much the scenario here; the survivor changed his will, and the court decided that he could not do that. There were mutual wills, therefore the executors had to follow the previous will. The 2003 change was nugatory. (The executors, being smart, had not paid out the estate.)
The claimants won. They asked for their costs. The judge therefore went through the procedural history.
The starting point was easy enough; the claimants had won. The defendants should pay. The executors took a fairly limited part in the action, so they got their limited costs out of the estate first.
As for the rest, the judge looked at the usual factors to see whether she should be swayed from the initial starting point. And those all worked in the claimants’ favour. They had been open to mediation from the start. They suggested a stay in the case for alternative dispute resolution. They offered a without prejudice meeting when their costs were £25k. The defendants batted it off throughout. The only time they agreed to a mediation, they said it couldn’t take place because one of them was in the Caribbean.
There were, eventually, offers of settlement. The claimants offered to take £98k plus costs (later reduced to £84k). The defendants offered a split between the wills, which would have left the defendants receiving nearly £70k with the claimants paying £25k. Only right at the end, just before trial, when the claimants had gone to considerable expense to proving their claim, did the defendants offer a split – and that was subject to each side paying their own costs. The defendants came up with 1 witness statement at trial; they hardly had any costs...
So in terms of fighting the case the claimants had done everything the court likes – made offers, suggested settlement meetings, kept the other side informed of their costs. The defendants had done sweet nothing.
And at trial the claimants had done even more. They had beaten their offers.
So the costs should have been easy. The claimants get costs – with punitive interest/indemnity rates being paid. Because they had beaten their offers.
The problem that stuck in the judge’s throat was that they were HUGE. £160k costs for a £132k estate.
And that’s just the base costs. The claimants were working under a conditional fee. So take those costs and double them. Ouchie.
So the judge looked around for ways in which she could somehow lessen the blow. Firstly, those offers. They came too soon, she said. Before exchange of evidence. Defendants could not suss out how good those offers were. So unfair to award the indemnity costs and punitive interest.
Secondly, the defendants argued that the costs should come out of the estate. It wasn’t their fault that they were brought into the action; it was as a result of the change of wills. Really this was the estate’s fault. Ergo the costs should come out of the estate.
You can see the problem with this. The successful claimants would get nothing. It would cost them the thick end of two hundred grand to be proved right. Whereas the defendants would walk away being responsible for their own, nugatory, costs. There would be no incentive for early settlement. After all, the defendants could have said “OK, you win, we won’t make our claim” on day one. Not doing so would have meant the estate went to lawyers rather than the Shovelars.
So the judge ordered that the defendants bear the costs. Other than the executors – their fees would come out of the estate. As to the level of costs? The judge said that was a matter for assessment. Not for her. But she gave a strong indication by ordering only £30k to be paid on account – normally you’d get maybe half of what you’d expect to get on assessment.
Everyone appealed. The Court of Appeal took the opportunity to make a few statements.
1. This wasn’t a question over will validity per se; it was old-fashioned litigation. The claimants took up one position, the defendants another. In these circumstances loser pays. That had to be the result here.
2. Just how limited WAS the executors’ part in the action? They filed a defence and they cross-examined the claimants. They took an active part in the litigation and did not seek an indemnity BEFORE taking action, which is what any decent trustee should do. Therefore they were a party like any other. They do NOT get an indemnity from the estate; they are just as liable for costs as the other defendants.
3. The judge should not have ruled against the claimants’ offers. They were reasonable, done at reasonable times, and the claimants had behaved reasonably throughout. They were the poster children for reasonable litigants. OK, the offers were pretty early, but every litigation has to have parties taking a view at some stage, and the defendants made no move to accept when they saw the claimants’ case in full. If these claimants did not get the full indemnity consequences, who would?
So the appeal was disastrous for the defendants. Indemnity costs, interest (at 3.5% above base), executors just as liable. Even the amount on account was bumped up to £50k.
The Court of Appeal finished with a stark warning. Ward LJ said:
“Making those orders gives no pleasure. If the claimants are right in their assessment of their costs, then, even without a success fee, the costs incurred by them exceed the sum over which battle has been joined. The great British public must think that something has gone wrong somewhere if litigation is conducted in that way. I share that sense of horror. One answer has to be to engage in mediation constructively and at the very earliest stage. ... A thousand pities that that was not done but the awful costs consequences which have followed do lie at the defendants' door.”
Make love, not war.
Facts are, as so often, simple. In 1996 a widower married a widow. In 1999 they made mutual wills. Half to the widow’s sons, the other half split between all the other descendants. In 2001 the widow died. And then in 2003 the twice-widower changed his will; he cut out the widow’s children and grandchildren entirely. Needless to say the widow’s children and grandchildren – the Shovelars – sued the executors and widower’s descendants.
Mutual wills work like this. A marries B, they have children, and they build up a portfolio of assets. A worries that if he dies B will re-marry, have more children (or worse, step-children), and A’s children will be disinherited in favour of B’s new family (I cite the precedent of Cinderella). B has the same fear if she dies first. So they make mutual wills. A’s will says the same as B’s. There is a mutuality of interest there. What it means is that when one dies, it is unconscionable for the other to change their will. It would mean that the pre-deceased’s dying wish would not be fulfilled.
And this is pretty much the scenario here; the survivor changed his will, and the court decided that he could not do that. There were mutual wills, therefore the executors had to follow the previous will. The 2003 change was nugatory. (The executors, being smart, had not paid out the estate.)
The claimants won. They asked for their costs. The judge therefore went through the procedural history.
The starting point was easy enough; the claimants had won. The defendants should pay. The executors took a fairly limited part in the action, so they got their limited costs out of the estate first.
As for the rest, the judge looked at the usual factors to see whether she should be swayed from the initial starting point. And those all worked in the claimants’ favour. They had been open to mediation from the start. They suggested a stay in the case for alternative dispute resolution. They offered a without prejudice meeting when their costs were £25k. The defendants batted it off throughout. The only time they agreed to a mediation, they said it couldn’t take place because one of them was in the Caribbean.
There were, eventually, offers of settlement. The claimants offered to take £98k plus costs (later reduced to £84k). The defendants offered a split between the wills, which would have left the defendants receiving nearly £70k with the claimants paying £25k. Only right at the end, just before trial, when the claimants had gone to considerable expense to proving their claim, did the defendants offer a split – and that was subject to each side paying their own costs. The defendants came up with 1 witness statement at trial; they hardly had any costs...
So in terms of fighting the case the claimants had done everything the court likes – made offers, suggested settlement meetings, kept the other side informed of their costs. The defendants had done sweet nothing.
And at trial the claimants had done even more. They had beaten their offers.
So the costs should have been easy. The claimants get costs – with punitive interest/indemnity rates being paid. Because they had beaten their offers.
The problem that stuck in the judge’s throat was that they were HUGE. £160k costs for a £132k estate.
And that’s just the base costs. The claimants were working under a conditional fee. So take those costs and double them. Ouchie.
So the judge looked around for ways in which she could somehow lessen the blow. Firstly, those offers. They came too soon, she said. Before exchange of evidence. Defendants could not suss out how good those offers were. So unfair to award the indemnity costs and punitive interest.
Secondly, the defendants argued that the costs should come out of the estate. It wasn’t their fault that they were brought into the action; it was as a result of the change of wills. Really this was the estate’s fault. Ergo the costs should come out of the estate.
You can see the problem with this. The successful claimants would get nothing. It would cost them the thick end of two hundred grand to be proved right. Whereas the defendants would walk away being responsible for their own, nugatory, costs. There would be no incentive for early settlement. After all, the defendants could have said “OK, you win, we won’t make our claim” on day one. Not doing so would have meant the estate went to lawyers rather than the Shovelars.
So the judge ordered that the defendants bear the costs. Other than the executors – their fees would come out of the estate. As to the level of costs? The judge said that was a matter for assessment. Not for her. But she gave a strong indication by ordering only £30k to be paid on account – normally you’d get maybe half of what you’d expect to get on assessment.
Everyone appealed. The Court of Appeal took the opportunity to make a few statements.
1. This wasn’t a question over will validity per se; it was old-fashioned litigation. The claimants took up one position, the defendants another. In these circumstances loser pays. That had to be the result here.
2. Just how limited WAS the executors’ part in the action? They filed a defence and they cross-examined the claimants. They took an active part in the litigation and did not seek an indemnity BEFORE taking action, which is what any decent trustee should do. Therefore they were a party like any other. They do NOT get an indemnity from the estate; they are just as liable for costs as the other defendants.
3. The judge should not have ruled against the claimants’ offers. They were reasonable, done at reasonable times, and the claimants had behaved reasonably throughout. They were the poster children for reasonable litigants. OK, the offers were pretty early, but every litigation has to have parties taking a view at some stage, and the defendants made no move to accept when they saw the claimants’ case in full. If these claimants did not get the full indemnity consequences, who would?
So the appeal was disastrous for the defendants. Indemnity costs, interest (at 3.5% above base), executors just as liable. Even the amount on account was bumped up to £50k.
The Court of Appeal finished with a stark warning. Ward LJ said:
“Making those orders gives no pleasure. If the claimants are right in their assessment of their costs, then, even without a success fee, the costs incurred by them exceed the sum over which battle has been joined. The great British public must think that something has gone wrong somewhere if litigation is conducted in that way. I share that sense of horror. One answer has to be to engage in mediation constructively and at the very earliest stage. ... A thousand pities that that was not done but the awful costs consequences which have followed do lie at the defendants' door.”
Make love, not war.
Saturday 3 September 2011
Relational LLC v Hodges [2011] EWCA Civ 774: bridge across the Atlantic
There is a deep mutual suspicion between the English and American legal systems. The English courts cannot abide the punitive nature of American litigation. English damages are compensatory alone. There is no “reward” for insisting on your legal rights by way of doubling or trebling your dosh. The Americans find English law on libel unduly restrictive of free speech; the deplorably named Libel Terrorism Acts (“tourism” would have been better, but there is a breed of American that sees the two things as identical) that are finding their way through various states have the effect of barring English libel claims in the States.
The upshot is that there is no automatic recognition of judgments. I.e. you sue an American in England and win, you can’t automatically seize their American assets. You need to start again in the States, albeit with a judgment on your side as pretty powerful evidence. Similarly an American has the same problem in reverse with an English defendant.
This is what happened in the instant case. Fairly simple. Relational had a guarantee from a Florida resident, Mr Hodges, which was signed off under Illinois law. Mr Hodges seemingly legged it to Birmingham (West Midlands, not Alabama) when Relational sought to enforce the guarantee. He took a bit of tracing, and indeed claimed that he was in the boozer when the process server said they’d served him at home. The upshot was Relational scampered through to a default judgment in its favour in Illinois. Easily enforceable in the States, but Mr Hodges had no assets there. They were all in the UK.
So Relational sued in England based on their American judgment. Mr Hodges raised various defences – that he hadn’t fought the thing in Illinois (although, crucially, he did appeal), that a Florida judgment extinguished liability and so on – but the really important thing was that he sought security for costs. Given the US judgment was not enforceable in the UK, an English judgment in his favour – which would be for his costs – would not be enforceable in the US. A Mexican stand-off, to utilize a safe third country.
Relational offered to bung £25k into the English court, but the sting in the tail was that it would ask to have that set off against the amounts owed to it by Mr Hodges under the Illinois judgment. So essentially Mr Hodges could win the case, not owe the judgment in America, but would not get any benefit from winning; his legal costs would be swallowed up. Relational would just say “well, OK, we can’t enforce in England, so we’ll take it out of what we owe you.”
There’s a logic there but there’s also the point that Relational had won a legit case in a legit court. And the Court of Appeal was conscious of that. Was it really fair to make a party that had already won pay security? Wasn’t it more to protect English parties against oppressive suits, not ones that, on the face of it, had a very very good chance indeed of winning?
The Court of Appeal therefore dismissed Mr Hodges’ appeal against refusal, and made some more general comments. Longmore LJ said that it would not normally be appropriate to order security from a claimant suing to enforce a pukka foreign judgment. Because it’s up to the defendant to prove the overseas judgment was wrong; the burden of proof was reversed, and the defendant was really the claimant in those circumstances. Same would apply in cases like Mr Hodges’ case; although the Illinois court had granted a judgment without Mr Hodges’ case being considered, Mr Hodges did submit to jurisdiction by appealing. So the English courts ought not interfere too much with it.
It looks as if Mr Hodges’ best case would have been to leave the Illinois judgment untouched and not appeal at all. At least then he could deny Illinois had considered the full facts and he had never agreed to its scrutiny. But given the comments of Longmore LJ it looks to be a difficult argument – he still would have had the burden of showing the judgment was wrong, or fraudulent, or unfair. Difficult one.
The upshot is that there is no automatic recognition of judgments. I.e. you sue an American in England and win, you can’t automatically seize their American assets. You need to start again in the States, albeit with a judgment on your side as pretty powerful evidence. Similarly an American has the same problem in reverse with an English defendant.
This is what happened in the instant case. Fairly simple. Relational had a guarantee from a Florida resident, Mr Hodges, which was signed off under Illinois law. Mr Hodges seemingly legged it to Birmingham (West Midlands, not Alabama) when Relational sought to enforce the guarantee. He took a bit of tracing, and indeed claimed that he was in the boozer when the process server said they’d served him at home. The upshot was Relational scampered through to a default judgment in its favour in Illinois. Easily enforceable in the States, but Mr Hodges had no assets there. They were all in the UK.
So Relational sued in England based on their American judgment. Mr Hodges raised various defences – that he hadn’t fought the thing in Illinois (although, crucially, he did appeal), that a Florida judgment extinguished liability and so on – but the really important thing was that he sought security for costs. Given the US judgment was not enforceable in the UK, an English judgment in his favour – which would be for his costs – would not be enforceable in the US. A Mexican stand-off, to utilize a safe third country.
Relational offered to bung £25k into the English court, but the sting in the tail was that it would ask to have that set off against the amounts owed to it by Mr Hodges under the Illinois judgment. So essentially Mr Hodges could win the case, not owe the judgment in America, but would not get any benefit from winning; his legal costs would be swallowed up. Relational would just say “well, OK, we can’t enforce in England, so we’ll take it out of what we owe you.”
There’s a logic there but there’s also the point that Relational had won a legit case in a legit court. And the Court of Appeal was conscious of that. Was it really fair to make a party that had already won pay security? Wasn’t it more to protect English parties against oppressive suits, not ones that, on the face of it, had a very very good chance indeed of winning?
The Court of Appeal therefore dismissed Mr Hodges’ appeal against refusal, and made some more general comments. Longmore LJ said that it would not normally be appropriate to order security from a claimant suing to enforce a pukka foreign judgment. Because it’s up to the defendant to prove the overseas judgment was wrong; the burden of proof was reversed, and the defendant was really the claimant in those circumstances. Same would apply in cases like Mr Hodges’ case; although the Illinois court had granted a judgment without Mr Hodges’ case being considered, Mr Hodges did submit to jurisdiction by appealing. So the English courts ought not interfere too much with it.
It looks as if Mr Hodges’ best case would have been to leave the Illinois judgment untouched and not appeal at all. At least then he could deny Illinois had considered the full facts and he had never agreed to its scrutiny. But given the comments of Longmore LJ it looks to be a difficult argument – he still would have had the burden of showing the judgment was wrong, or fraudulent, or unfair. Difficult one.
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