Union Discount Co Ltd v Zoller (Union Cal Ltd, Part 20 defendant)

Reasonable costs incurred in defeating foreign proceedings may be recovered as damages where those proceedings were brought in breach of an exclusive English jurisdiction clause, the foreign costs regime afforded no realistic prospect of recovery, and the foreign court made no adjudication upon costs.

The rule restricting recovery of litigation costs as damages prevents a second adjudication of the same costs. It does not bar recovery under an independent cause of action where no earlier adjudication was available. A possible failure to seek an anti-suit injunction concerns mitigation and quantum, rather than whether damages are recoverable in principle.

Contracts between Union Cal Ltd and Robert Zoller and others contained clauses conferring exclusive jurisdiction on the English courts. Union Cal sued in England, while Zoller began proceedings in New York. Union Cal successfully obtained their dismissal for want of jurisdiction but did not seek costs because New York law afforded no realistic prospect of such an award.

HH Judge Peter Heppel QC, sitting as a judge of the High Court, struck out Union Cal's English claim for its reasonable New York expenses. The appeal concerned whether costs incurred in earlier litigation between the same parties were incapable of recovery as contractual damages, or could be recovered where an independent breach caused them and the earlier court could not have awarded them.

1. Appeal allowed unanimously. Schiemann LJ delivered the judgment of the court. Assuming that commencement of the New York proceedings breached the exclusive jurisdiction clause, Union Cal had a legally sustainable claim for its reasonable expenses of obtaining their dismissal.

2. The restriction upon recovering costs of earlier civil proceedings as damages rests principally upon the need to prevent two adjudications of the same issue. It does not apply where the earlier legal process permitted no adjudication upon costs and the claimant has an independent cause of action for the loss. The reasoning in Berry v British Transport Commission [1962] 1 QB 306 supported recovery in those circumstances.

3. The Ocean Dynamic [1982] 2 Lloyd's Rep 88 did not establish an absolute prohibition. Its result was correct because the costs of the protective United States proceedings were caused by the claimant's own decision, rather than by the defendant's contractual breach. Its statement that costs cannot be recovered as damages had to be read in the absence of a separate cause of action.

4. Neither international comity nor res judicata barred the claim. Awarding contractual damages did not impose the English costs regime upon the foreign court. The New York court had made no costs adjudication, and the later contractual claim concerned a different issue.

5. The principle in Henderson v Henderson was inapplicable. Union Cal could not coherently assert in New York that the court lacked jurisdiction while also asking that court to determine damages for breach of the English jurisdiction clause.

6. A possible failure to seek an English anti-suit injunction raised mitigation and quantum only. It did not defeat recoverability in principle.

7. The decision was confined to foreign proceedings brought in breach of an exclusive jurisdiction clause where the foreign forum awarded costs only exceptionally, no costs were sought because doing so would have been pointless, and no costs adjudication occurred. The court left open cases involving partial foreign costs awards or incomplete recovery after a domestic stay.

The strike-out was reversed. The appeal was allowed with costs, subject to detailed assessment. Permission to appeal to the House of Lords was refused.

1. Court of Appeal: Allowed Union Cal's appeal and reversed the striking out of its claim for the reasonable expenses of defeating the New York proceedings. Permission to appeal to the House of Lords was refused.

2. High Court: HH Judge Peter Heppel QC struck out the claim on the basis that proceedings could not be brought in England to recover costs incurred in successfully prosecuting or defending foreign proceedings between the same parties.