The Defendants, Robert Zoller and Others (“Zoller & co”) had brought legal proceedings against the Plaintiff, Union Discount Co. Ltd. (“Union”), in New York for breach of contract by Union (“ the Proceedings”). However, the contract in question contained a clause that the courts of England and Wales would have the exclusive jurisdiction to deal with any disputes arising under the contract. 

Union applied successfully to have the Proceedings struck out on the basis of the exclusive jurisdiction clause.  However, there is no jurisdiction in the New York courts to award costs against an unsuccessful party to litigation. Therefore, Union was left with a hefty legal bill for disposing of the Proceedings that had been started by the Zoller & co wholly in breach of the terms of the contract between them and Union. 

Accordingly, Union sued Zoller & co in the courts of England and Wales in order to claim the legal costs that it had expended in dealing with the Proceedings. The claim was based on the fact that Zoller & co had breached the terms of the contract by commencing legal action in New York for breach of the contract when the contract
contained a clause that specified that any legal disputes must be referred to the courts of England and Wales. 

Initially, Union’s claim was struck out on the basis that it did not disclose a cause of action.  However, the Court of Appeal overturned the decision stating that  “on the assumption that to bring suit in a foreign jurisdiction amounted to a breach of contract justice required that a party should receive the damages, which he had suffered by the breach of contract ” 

In this case the damages would be what Union had reasonably expended obtaining the strike out of the Proceedings. 

The Court of Appeal specifically provided that the statement in Halisbury’s Laws of England that “ costs incurred in foreign proceedings cannot be recovered in an English action between the same parties ” was too wide.  The Court of Appeal preferred the decision of Devlin J in the case of Berry-v-The British Transport Commission that 
“ where there was in the earlier action no prospect for obtaining costs although there had been no fault on the behalf of the successful party there was no policy inhibition on granting that party the amount of those costs as damages in a later action if the party had an appropriate cause of action “ 

This case should prove immensely useful to those contracting with parties in a non cost recovery jurisdiction such as America.  Provided the contract contains a choice of law and jurisdiction clause which nominates a cost recovery jurisdiction such as the Cayman Islands or England and Wales, it will be possible to avoid being dragged into expensive legal proceedings with no prospect of litigation cost recovery even if successful. _______________________________________________________________________

International Management Services Ltd
P.O. Box 61, 
Harbour Centre
George Town, 
Grand Cayman, 
Cayman Islands 

Phone:  345 949 4244 
Fax:  345 949 8635 
Email: ims@candw.ky

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