Travelers Casualty and Surety Company of Canada & Ors v Sun Life Assurance Company of Canada (UK) & Anor

A costs order must reflect the overall justice of the case. The court may make issue-based orders against an ultimately successful party without finding impropriety or unreasonableness, particularly where a discrete failed issue generated substantial costs.

A settlement offer outside Part 36 remains a mandatory consideration under the general costs discretion. Its refusal will justify indemnity costs only rarely and where the conduct displays unreasonableness to a high degree. A Part 36 offer requiring complete capitulation cannot produce a judgment more advantageous than the offer merely because it contains favourable costs terms.

Permission to appeal requires a realistic, rather than fanciful, prospect of success.

The claimant insurers had established that they owed the defendants nothing under an insurance policy and had defeated a counterclaim worth approximately £31 million less a US$25 million retention. Following the substantive judgment, the court determined the form of the final order, the incidence and basis of costs, interest and an interim costs payment, and the defendants’ application for permission to appeal.

The costs questions included the effect of settlement offers, the parties’ divided success on liability and quantum issues, and reserved costs arising from parallel proceedings and competing anti-suit applications in England and Ontario. The central appellate question was whether the proposed appeal had a real prospect of success.

1. Disposition. The court declared that the claimant insurers were not liable to make any payment in respect of the claim under the policy and dismissed the defendants’ counterclaim. The insurers were the overall successful parties and were generally entitled to their costs.

2. The insurers’ offers did not attract the consequences of Part 36. When comparing a judgment with a Part 36 offer, costs terms in the offer are disregarded. An offer requiring the opposing party to abandon its claim amounted to a demand for capitulation, and the insurers could not obtain a substantive result more advantageous than capitulation. The offers nevertheless had to be considered under rule 44.3(4)(c) of the Civil Procedure Rules 1998.

3. The court possessed a wide discretion to make an order reflecting the overall justice of the case. An issue-based order did not require improper or unreasonable conduct. A successful party could be deprived of its costs, and required to pay its opponent’s costs, where it failed on a discrete and expensive issue. Practical difficulties in allocating costs to particular issues favoured the forms of order identified by rules 44.3(6)(a)–(c), where practicable.

4. The insurers were generally awarded their liability costs, but special orders were made concerning the failed estoppel issue. They had to bear specified costs relating to their witness and pay the defendants’ corresponding witness and attendance costs. The insurers also had to bear their own and pay the defendants’ attendance costs for the principal days of quantum evidence, reflecting the defendants’ substantial success on quantum while allowing for the insurers’ appreciable success and early settlement offer.

5. The defendants had continued parallel Canadian proceedings despite an unappealed English forum ruling, and had obtained an interim anti-anti-suit injunction which was later discharged. They then agreed to stay the Canadian proceedings, rendering the insurers’ English anti-suit application moot. This conduct constituted unreasonable litigious hardball. The defendants therefore had to pay the insurers’ reserved costs of the anti-suit application on the indemnity basis.

6. All other costs were awarded to the insurers on the standard basis, subject to detailed assessment. Interest was ordered at 1% above base rate from the dates the costs were paid. The defendants were ordered to make an interim payment of £1.75 million within 14 days.

7. Permission to appeal was refused. A real prospect of success meant a realistic rather than fanciful prospect. There was no realistic prospect of overturning the material factual findings or the conclusion reached upon them.

• High Court (Commercial Court): The court declared that the insurers had no liability under the policy, dismissed the counterclaim, made costs and interest orders, and refused permission to appeal.
• High Court: In July 2004 Mr Jonathan Hirst QC refused to stay the English proceedings or set aside permission to serve out, holding that England was the most convenient forum. No appeal was pursued.
• Ontario court: An interim anti-anti-suit injunction obtained by the defendants in May 2005 was discharged two days later. The defendants subsequently agreed to stay the Canadian proceedings pending judgment in England.