Liebaers v Smith

• Jurisdiction: Cayman Islands
• Judge: (Smellie, C.J.)
• Judgment Date: 30 April 2008
• Court: Grand Court (Cayman Islands)
• Date: 30 April 2008

Grand Court

(Smellie, C.J.)

LIEBAERS and LIMBOURG

and

SMITH, QUARRY PRODUCTS LIMITED and HARRIS

H. Robinson for the plaintiffs;

Mrs. K. Reid for the first and second defendants.

Cases cited:

(1) Adams v. London Improved Motor Coach Builders Ltd., [1921] 1 K.B. 495; [1920] All E.R. Rep. 340, followed.

(2) Bailey v. IBC Vehicles Ltd., [1998] 3 All E.R. 570; [1998] 2 Costs L.R. 46; (1998), 142 Sol. Jo. (L.B.) 126, applied.

(3) Callery v. Gray (No. 2), [2001] 1 W.L.R. 2142; [2001] 4 All E.R. 1; [2001] CPLR 501; [2001] 2 Costs L.R. 205; [2002] RTR 11; [2001] Lloyd”s Rep IR 765; [2001] EWCA Civ 1246, considered.

(4) Coleman v. MacDonald, 1952–79 CILR 386, referred to.

(5) Dimond v. Lovell, [2002] 1 A.C. 384; [2000] 2 W.L.R. 1121; [2000] 2 All E.R. 897; [2000] RTR 243; [2000] CCLR 57; (2000), 97 L.S. Gaz. 47, referred to.

(6) Garbutt v. Edwards, [2006] 1 W.L.R. 2907; [2006] 1 All E.R. 553; [2006] 1 Costs L.R. 143; [2005] N.P.C. 122; [2005] EWCA Civ 1206, dictum of Arden, L.J. considered.

(7) Gundry v. Sainsbury, [1910] 1 K.B. 645; [1997] Costs L.R. (Core Vol.) 1; [1908–10] All E.R. Rep. Ext. 1170; (1910), 54 Sol. Jo. 327; 79 L.J.K.B. 713; 26 T.L.R. 321; 102 L.T. 440, not followed.

(8) Harold v. Smith, (1860), 5 H. & N. 381; 157 E.R. 1229; 29 L.J.Ex. 141; 6 Jur. N.S. 254; 2 L.T. 556, referred to.

(9) Parry v. Cleaver, [1970] A.C. 1; [1969] 2 W.L.R. 821; [1969] 1 All E.R. 555; [1969] 1 Lloyd”s Rep. 183; (1969), 113 Sol. Jo. 147; 6 K.I.R. 265, applied.

Legislation construed:

Grand Court Rules 1995, O.62, r.4(2): The relevant terms of this paragraph are set out at para. 20.

Practice Direction cited:

Practice Direction No. 1/2001, Guidelines Relating to the Taxation of Costs.

Civil procedure-costs-indemnity principle-if successful party”s litigation costs paid by third party, e.g. insurer, not precluded from seeking those costs from unsuccessful party-position unchanged if successful party has contractual obligation to repay third party, as unsuccessful party cannot benefit from contract to which not privy

Civil procedure-costs-taxation-costs ‘to be taxed if not agreed’-if dispute remains as to overall sum payable, costs not ‘agreed’ even if some items agreed-entire bill of costs to be taxed when partly disputed

The plaintiffs obtained judgment against the defendants in the Grand Court, which ordered the costs of the litigation to be taxed if not agreed.

The Grand Court gave judgment for the plaintiffs in their personal injury action against the defendants and ordered the costs to be taxed, if not agreed. The judgment and direction was upheld by both the Court of Appeal and the Privy Council. The plaintiffs then submitted their bill of costs, certifying expenditure of US$110,985.70. The defendants, however, only agreed to pay US$91,176.60, leaving US$19,809.10 in issue. The Clerk of Courts, as taxing officer, discovered that the plaintiffs had taken out legal expenses insurance under which the insurers were subrogated to the plaintiffs in respect of liability for costs and fees, and had in fact already paid most of their legal fees. The plaintiffs” attorneys asserted that, although the policy made no clear provision for the plaintiffs to recover costs and reimburse the insurers if they were successful in their action, it was clear to them and to the plaintiffs that this was the case. The Clerk of Courts then issued a costs certificate, certifying that the plaintiffs were not entitled to the costs claimed, as their insurers, who were not parties to the action, had already paid them. The plaintiffs applied for review of that decision, pursuant to O.62, r.30 of the Grand Court Rules.

They submitted that (a) the Clerk of Courts had no jurisdiction to embark on the taxation of the agreed portion of the costs and should therefore only have considered the sum of US$19,809.10 for taxation purposes; and (b) in any event, they were entitled to all of the costs they had claimed, as (i) although some of them had been paid by their insurers, they had a contractual agreement to repay their insurers, upon recovery of the costs from the defendants, and the liability to pay their costs was still

therefore theirs, pursuant to the governing principle that a successful party was entitled to recover only such costs as it was itself liable to pay; and (ii) in any case, that principle now extended to cases in which the successful party was not bound to repay its insurer, thus resulting in double recovery in some cases.

The defendants submitted in reply that (a) the Clerk of Courts had jurisdiction to review the entire sum submitted by the plaintiffs, and not just the sum of US$19,809.10, because as long as there was a dispute as to the overall amount due, there was no final agreement as to costs; and (b) the plaintiffs were not entitled to recover the costs because they had been paid by a third party, their insurers, and it was settled law that awards had to be limited to only such amounts as a successful party was itself liable to pay and the Clerk of Courts was unable to find any evidence that the plaintiffs had repaid, or were contractually obligated to repay, any sums to their insurers; the plaintiffs were not, therefore, themselves liable to pay their costs.

Held, allowing the application:

(1) The application for review of the Clerk of Court”s decision would be allowed, as the plaintiffs had established that they themselves were liable to pay their costs. However, the Clerk of Courts had had the jurisdiction to undertake taxation of the entire bill of costs submitted by the plaintiffs (and not just the US$19,809.10 in dispute) because, as long as there was a dispute as to the overall amount due, the costs had not been ‘agreed’ (paras. 17–19; para. 33).

(2) The governing indemnity principle stated that a successful party was entitled to recover only such costs as it was itself liable to pay to its attorneys, or otherwise, in respect of the action. However, a plaintiff could recover costs, notwithstanding that its liability to pay them had already been met by a third party. The fact that the plaintiffs” costs had been paid by their insurers, therefore, did not preclude their seeking costs from the defendants, and in any case it did not necessarily mean that their own liability ceased to exist; their attorneys, as officers of the court, had asserted that they were obliged to repay those costs to the insurers from the sums recovered from the defendants, and that assertion must suffice. Any obligation of the plaintiffs to repay their insurers was a matter of contract between them, and the defendants had no right to inquire into the nature of that contractual relationship. To allow them to do so would be tantamount to allowing them to benefit from a contract to which they were not privy, which the plaintiffs had the foresight to procure at their own expense, and to benefit from the payment of the plaintiff”s costs by someone else (para. 21; para. 23; paras. 29–33).

1 SMELLIE, C.J.: This is a review of taxation of costs undertaken by the Clerk of Courts, as taxing officer. The issue is whether the plaintiffs are entitled to recover their costs as successful parties against the defendants, in circumstances where the plaintiffs have effected insurance coverage for their attorneys” and their own litigation costs and their insurers have in fact already paid those costs. The matter is one of general importance not before specifically considered by our courts.

2 The plaintiffs, who are wife and husband, are Belgian nationals who, on a visit to Grand Cayman, were injured in a motor cycle accident on December 30th, 1997. On February...