A v B & Ors

Factual and Procedural Background

This opinion concerns a judgment dated 28 July 2006 in which the court ordered that proceedings brought by Plaintiff against Defendant B be stayed and that a prior order permitting service outside the jurisdiction on Defendants C, D, and Company E be set aside. The background involves claims advanced by Plaintiff against these four defendants relating to an arbitration agreement and its alleged breach. The defendants now seek costs on an indemnity basis, including interim payments and interest, following the court's decision to stay proceedings and set aside service outside the jurisdiction.

Legal Issues Presented

1. Whether costs should be awarded on an indemnity basis rather than the standard basis where proceedings are brought in breach of an arbitration or jurisdiction agreement.
2. Whether the conduct of Plaintiff and the circumstances of the case justify indemnity costs orders against Plaintiff in favour of Defendants B, C, D, and Company E.
3. The appropriateness of interim payments on account of costs and interest thereon.
4. Whether the conduct of Defendants B, C, and D in the proceedings justifies costs orders on an indemnity basis, including the effect of funding arrangements.
5. The extent to which costs attributable to undecided issues should be covered by indemnity costs orders.

Arguments of the Parties

Defendants' Arguments

• Defendant B, supported by counsel, argued that where proceedings are brought in breach of an arbitration agreement, costs should be awarded on an indemnity basis because damages flowing from such breach include all reasonable costs incurred by the party entitled to a stay.
• Defendants cited authorities such as Union Discount Ltd v. Zoller and Kyrgyz Mobil Tel Ltd v. Fellowes International Holdings Ltd to support the proposition that indemnity costs are appropriate in breach of jurisdiction or arbitration agreement cases.
• Defendants contended that Plaintiff's invocation of English jurisdiction was a breach of contract, justifying indemnity costs to fully compensate for the costs incurred.
• Defendants C and D argued that Plaintiff's conduct, including failure to disclose material information and pursuing overlapping litigation in multiple jurisdictions, warranted indemnity costs as a mark of judicial disapproval.
• Company E submitted that its joinder was unnecessary and that costs on an indemnity basis were justified given the circumstances.
• Defendants sought interim payments on account of costs and interest from 9 May 2006 at 8%.

Plaintiff's Arguments

• Plaintiff submitted that Defendant B should only recover costs on a limited basis related to jurisdictional issues and case management stays, arguing that B unnecessarily incurred costs reimbursed through funding arrangements.
• Plaintiff contended that the alleged non-disclosure of material facts by Defendants C and D did not justify indemnity costs.
• Plaintiff argued there was no arbitrable dispute, relying on a later Bahamas Supreme Court judgment to assert that the issues did not require arbitration.
• Plaintiff claimed that Defendants C and D's submissions duplicated each other and that costs should be awarded on a standard basis, not indemnity.
• Plaintiff alleged that Defendant C encouraged Defendant B to take an unnecessarily large and expensive part in the proceedings by funding his costs.
• Plaintiff questioned whether indemnity costs were appropriate given that some issues remained undecided and that the court's decision to set aside service was discretionary rather than on merits.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by reviewing the legal basis for awarding indemnity costs where proceedings are brought in breach of an arbitration or jurisdiction agreement. It accepted the rationale that such breaches cause the innocent party to incur all reasonable legal costs, which should be compensated fully rather than partially through standard costs assessment. The court noted prior authorities supporting this principle but acknowledged that the practice was not universally established.

The court then analyzed the conduct of each defendant and Plaintiff. Defendant B's participation was found justifiable and independent, given the personal allegations against him and the connection to the arbitration. The court rejected the notion that B acted in concert with other defendants or incurred unnecessary costs.

Regarding Defendants C and D, the court considered allegations of non-disclosure and duplicative submissions. It concluded that these did not amount to conduct warranting departure from indemnity costs orders. The court also rejected Plaintiff's argument that no arbitrable dispute existed, emphasizing that the issues before the court related to jurisdiction and not the merits of the underlying claims.

The court found that Plaintiff's conduct, including inconsistent positions, failure to comply with arbitration undertakings, and misuse of English courts to pressure Defendants, justified an indemnity costs order as a mark of judicial disapproval and compensation.

Company E, not party to the arbitration agreement but unnecessarily joined, was also entitled to indemnity costs due to the circumstances.

The court granted interim payments on account of costs with interest from 9 May 2006 at 8% to Defendants B and C, and indicated similar principles applied to D and Company E though precise amounts were not quantified.

The court acknowledged the possibility of exceptional cases where indemnity costs might not be appropriate but found no such circumstances here.

Holding and Implications

The court ORDERED that costs be awarded against Plaintiff on an indemnity basis in favour of Defendants B, C, D, and Company E. Interim payments on account of costs were ordered forthwith for Defendants B and C, with interest to run at 8% from 9 May 2006. Interest and interim payments were also contemplated for Defendants D and Company E, though amounts were not specified.

The decision ensures that parties who successfully enforce arbitration or jurisdiction agreements through stays or injunctions are fully compensated for reasonable costs incurred, reflecting judicial disapproval of breaches of such agreements. No new precedent was established, but the ruling clarifies the court's approach to indemnity costs in this context and confirms that funding arrangements do not affect entitlement to such costs. The court retains flexibility to depart from indemnity costs orders in exceptional cases, but none were found here.