Choice of Jurisdiction Clause Enables Litigation Cost Recovery
The problem with being involved in litigation in the United States is that, even if you win, you are still liable for your own legal expenses. Things have now changed - it is possible, in certain circumstances, to recover your costs, if you win, when you are sued in the United States by suing for the costs in a jursidiction that allows for their recovery. Laura Hatfield from our litigation and dispute resolution department explains how a new case sets an advantageous precedent.
Robert Zoller and Others (“Zoller & co”) had brought legal proceedings against 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 Cayman entities 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. _______________________________________________________________________
Solomon Harris
Attorneys-at-Law
P.O. Box 1990 ,
Barclays House
George Town,
Grand Cayman,
Cayman Islands
Phone: 345 949 0488
Fax: 345 949 0364
E-mail: solomonharris@candw.ky
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