A question of costs

In the offshore world a small litigation can have far reaching implications, as a decision made in the Jersey Court of Appeal last week shows.

In London there is the costs shifting rule where the losing party will pay the legal costs for both sides. In Jersey, however, the security for costs rule exists. This means that any non-domiciled claimant pursing a case against a Jersey-based company has to put down a deposit on the case to show its ability to pay the other side’s costs if they lose the litigation.

This rule was put in place so that Jersey residents would not have to pursue costs from losing parties in foreign jurisdictions.

Brick Court Chambers’ Jonathan Sumption QC, sitting in his capacity as president of the Jersey appeal court, effectively reversed that rule last week when handing down his judgment in the Leeds United vs AdMatch litigation.

Football club Leeds United filed a claim against Jersey-based company AdMatch in a bid to recover debts of £190,400 it alleged were owed to the club.

In response AdMatch’s owner Robert Weston argued that he was owed £1.43m for financial services supplied to the football club when it was going through financial difficulties.

Weston, who represented himself throughout the case, had successfully argued in Jersey’s Royal Court that Leeds United should put up £263,500 as security for costs before the case could proceed.

But during the appeal Sumption told Weston that in order for that costs ruling to be upheld he would need to demonstrate that Leeds United was “a slippery organisation, not good for its costs”.

While Weston claimed that Leeds United owner Ken Bates was a “vexatious litigant”, the football club’s advocate Philip Sinel, principal of Jersey-based firm Sinels Advocates, argued that the club’s financial figures showed that the club turned over £23.2m turnover last year and made a profit of £4.5m.

Ruling in favour of Leeds, Sumption found that there was no logical relationship between being resident outside of Jersey and having an inability or unwillingness to pay a successful defendant’s costs.

Going a step further, the court said an automatic order to provide costs in advance was a major impediment to the claimant’s access to justice and was in direct contradiction of the Human Rights (Jersey) Law 2000.

While Jersey is an offshore centre which attracts litigation because of the many thousands of offshore companies based in the jurisdiction, Sinel believes this is a case which will set new precedents for non-domiciled litigants.

“The removal of this type of protectionism is a big step forward, it goes a long way towards providing the island with a better and more accessible legal system,” he says.

Given that the debt was relatively small, added Sinel, Leeds showed “courage” in pursuing the case to the end because the “principles involved were enormous”.

Other litigants pursuing cases against Jersey-based companies had been put off by the security for costs principle, but a wave of litigation could now be heading Jersey’s way.