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Tonga Cable Ltd v DS Venture Ltd [2022] TOSC 95; CV 68 of 2019 (17 October 2022)

IN THE SUPREME COURT OF TONGA
CIVIL JURISDICTION

NUKU'ALOFA REGISTRY


CV 68 of 2019


BETWEEN:

TONGA CABLE LIMITED (“TCL”) Claimant

-and-

DS VENTURE LIMITED (“DSV”) Respondent


TCL’s claims for interest and costs of the claims phase


RULING


BEFORE: LORD CHIEF JUSTICE WHITTEN KC

Appearances: Messrs David KC, McCarthy and Edwards for DSV

Messrs McBride, Frawley and Bloomfield for TCL
Hearings: 16 August 2022, 21 September 2022
Submissions: TCL – 31 August 2022, 16 and 22 September 2022
DSV – 9 and 30 September 2022
Ruling: 17 October 2022


Introduction

  1. This is (expected to be) the final ruling in this long running proceeding.
  2. To recap:
  3. This ruling concerns events since then and final disputes in relation to costs and interest.
  4. On 22 October 2021, the parties filed a consent order in respect of TCL’s costs in the sum TOP$32,524. TCL subsequently made a claim on DSV for additional costs of the claims phase. DSV contended that the agreement underpinning the consent order was intended to settle all TCL’s costs of the proceeding.
  5. TCL also claims interest up to judgment. The parties remain in dispute about the applicable rate and period over which such interest should be allowed.

Interest

  1. On 31 January 2020,[3] it was ordered[4] that the interest rate to be applied in determining the amounts for the establishment of the limitation fund shall be 10% per annum. That rate was suggested by DSV at the time, without demurrer from TCL. The fund was then established in respect of DSV’s statutory maximum liability under the applicable Convention of TOP$859,403.82 plus interest of TOP$93,003.98, making a total limit of liability in sum of TOP$952,407.70.

Submissions

  1. In its original counterclaim,[5] TCL pleaded a claim for interest on any award of damages. TCL now seeks an order for interest on the amount of its admitted claim from 1 March 2019[6] to date at 10% per annum. It relies on the discretion conferred by s.5 of the Supreme Court Act which provides, relevantly,[7] that the Court shall have power to “make orders that interest accrue on debts and other moneys payable for such period and at such rates as the court considers appropriate, in accordance with rules of the Supreme Court”. TCL also submits that the said period for interest is appropriate because despite DSV’s acceptance of its claim in July 2021, DSV has not paid the claim and TCL “has been kept from recovering the funds owing to it to date”.
  2. DSV initially agreed[8] that interest is payable on the claim admitted against the fund. It submitted, however, that the Court has a discretion as to the period over which interest is ordered to be paid. In that regard, DSV submits thay TCL has conducted the proceedings in a manner which has caused considerable delay in bringing them to a conclusion and that this should be taken into account by the Court in any award of interest. More specifically, DSV contends that TCL prolonged the proceedings by delays in or caused by:

DSV submits that, all up, those delays should be reflected by reducing the period for interest to 18 months at 10% per annum.

  1. TCL denies[9] that it delayed the limitation proceeding, which it describes as DSV “seeking an indulgence”. TCL says that it only took a few months to consider its position once DSV presented its case for limitation and which occurred during the Covid-19 pandemic. TCL submits that it has been out of pocket since the incident in January 2019 and therefore it is entitled to be compensated by an award of interest.
  2. Following a directions hearing on 21 September 2022, in which I referred the parties to the decision in Luna'eva Enterprises Ltd v Manu [2020] TOSC 1 for a discussion on whether this Court has power to award prejudgment interest, further submissions were filed.
  3. In detailed submissions supported by a number of UK and New Zealand authorities, TCL fortified its position not only on this Court’s power to award pre-judgment interest but also in relation to the proposed rate of 10% per annum and the term, that is, from 1 March 2019 to date. Ultimately, after synthesising the relevant principles from those authorities, TCL submitted that:
  4. In equally helpful and erudite reply submissions, DSV further contended, in summary, that:

Consideration

  1. It is now common ground that the Court has power to award prejudgment interest and that interest should be awarded in this case. The only live issues are the rate and term.
  2. Having considered the parties’ submissions on this issue and the history of the proceeding, I agree:
  3. I consider that the appropriate rate here should reflect the commercial nature of the parties involved and the nature of losses to be compensated (mostly repair costs) and the commercial lending rates applicable here in Tonga (unlike investment rates as considered in Luna’eva). The instant case is distinguishable from Luna’eva which involved interest on default judgement for a debt. Acceptance of the rates submitted by TCL is fortified by the Tonga Development Bank’s current business lending rates being “from 10%”.[13] That rate is also consistent with DSV’s expectation and preparedness to provide for interest on the fund at 10%.
  4. While there is obvious merit in TCL’s submission that DSV could have stopped interest running by paying the agreed amount of TCL’s claim, I consider it was reasonable for DSV to await the outcome of Ezinet’s claim (the timing of which could not be controlled by either TCL or DSV) before proceeding to accept TCL’s final revised claim and distribution of the fund.
  5. Further, I consider that the period over which interest is to be calculated, as claimed by TCL (which, to date, is 43 months), should be reduced by reason of TCL delays in relation to:
  6. It must be accepted, however, that some of those delay periods ran concurrently with other events during the proceedings such as the progression of Ezinet’s claim, and which necessarily, and independently, prolonged the proceedings.
  7. Therefore, and without any attempt at surgical or mathematical precision, but in the informed exercise of the discretion required for such an assessment, I consider that the appropriate period over which interest is to be calculated is 2 ½ years (or 30 months).
  8. Accordingly, interest on the claim shall be allowed at US$59,690.[15]
  9. Although it was not directly addressed by DSV, TCL’s claim for interest on the agreed costs of the limitation proceeding (TOP$32,524)[16] should be allowed. However, for the reasons canvassed above, particularly in respect of the events of the last 12 months, I reduce that amount by half making a total of TOP$1,626. On current exchange rates, that equates to US$662.
  10. Interest post judgment is provided for by Order 30 rule 2 of the Supreme Court Rules, and in this case, will continue at the rate of 10% per annum until the judgment is satisfied.

TCL’s claim for costs of the claims phase

  1. On 29 September 2021, I refused Ezinet’s claim on the fund. In the final paragraph of that ruling, I stated that I would hear from DSV and TCL as to the form of final orders to be made for the administration and distribution of the limitation fund, “including TCL’s costs of the claims phase”.
  2. As noted above, on 22 October 2021, the parties filed consent orders in relation to orders for costs to that date. The orders the subject of the parties’ agreement were stated to be those made on 22 December 2020, 18 September 2020 and 31 May 2021. Order 8 of the principal orders on 22 December 2020 required DSV to pay TCL’s costs of and incidental to “the limitation proceedings” (up to and including 10 July 2020). By a process of set off between the various orders for costs, the parties agreed on a net amount payable to TCL of TOP$32,524.
  3. At the time of filing the consent orders, TCL had not made (nor even intimated) a claim for any additional costs of the claims phase. It was not until April 2022, that it did. Subsequently, directions were made for TCL to file a bill of costs claimed in taxable form.
  4. On 30 August 2022, TCL filed a bill of costs said to be in respect of the claims phase. Apart from a few lump sum items, the bill is based on the Tongan scale (or party/party) rates as determined by ruling dated 31 May 2021,[17] in respect of 509 items from 31 March 2019 to 29 August 2022, plus disbursements, totalling TOP$76,778.40.

Submissions

  1. DSV opposes TCL’s claim. The grounds for its opposition may be summarised as follows:[18]
  2. TCL refutes DSV’s objections and maintains that it is entitled to an order for its costs, as claimed, because, in summary:
  3. TCL also responded generally to the specific categories of objection raised by DSV and accepted none of them.
  4. During the hearing on 21 September 2022, Mr David KC rejected TCL’s criticisms of DSV failing to properly engage in timely settlement negotiations. He submitted that there can be no criticism of a ship owner who does not respond to offers in relation to individual claims until it has a limitation decree.

Consideration

  1. At the conclusion of that hearing, the parties agreed that I should determine whether costs on the claims phase are payable and, if so, to assess (or ‘tax’) the quantum of those costs. In agreeing to that course, the parties also acknowledged that unlike in a conventional taxation hearing before the Registrar (which in this case would likely have taken several days), I would necessarily be undertaking the task at a relatively high level with a broad-brush approach. In doing so, I have been informed by the relevant principles, the detail in the bill of costs, the submissions for and against the claim, my previous experience as a practitioner and my current experience of having managed, heard and determined the proceedings.
  2. The first issue is whether the consent orders as to costs dated 22 October 2021 effectively bar TCL from making the current claim for costs of the claim phase. In my view, they do not. A plain reading of the terms of that order, combined with a recollection of the expectation in relation to a future claim for costs of the claims phase recorded in the ruling on 29 September 2021 and the fact that the principal order referred to being that of 22 December 2020 (which effectively concluded the limitation proceeding and commenced the claims phase) expressly provided only for (limited) costs in relation to the limitation proceeding, clearly shows that the only costs being considered to that point were those of the limitation proceeding. It was those costs which the parties went on to debate before agreeing on the net figure of TOP$32,524. To that point, TCL had not raised any claim for its costs of the claims phase.
  3. Secondly, and for the reason advanced by TCL,[27] I do not accept DSV’s submission that there should be no award of costs because there was no reference or hearing process in respect of TCL’s claim. Unsurprisingly, the submission was unsupported by any direct authority. Once DSV refused TCL’s pre-litigation claim and embarked upon the limitation proceedings, TCL was always going to be required to present and prove its claim for damages whether for adjudication by the Court or to the satisfaction of DSV. It is therefore entitled to recover such costs as were reasonably necessary or proper to establish its claim.
  4. Thirdly, I do not agree with DSV’s submission that TCL should be denied any costs simply because its earlier claims were inflated. In my view, the appropriate approach to such conduct is to disallow or discount the claimed costs of any work performed in relation to aspects of TCL’s claim which it subsequently abandoned as being unsustainable and which should never have been claimed (i.e. other than for commercial settlement reasons). One example of that were the alleged customer (Digicel and TCC) credits.
  5. Fourthly, after having considered the submissions as summarised above and every item in TCL’s bill of costs, I agree with DSV, effectively, that TCL’s costs claim is manifestly excessive. In order to explain that assessment, and address the balance of DSV’s complaints and TCL’s submissions in defence of its claim, my key findings, observations and reservations are as follows.
  6. First and foremost, it is important to recall that the ultimate product of the costs claimed was a two page affidavit from Mr Panuve, TCL’s CEO, sworn 28 June 2021 which exhibited 50 pages of invoices and other documents evidencing TCL’s then claim of US$238,721.64, of which $233,853.63 represented repair costs. It is almost impossible to reconcile, from the information provided in the particulars of the work performed in the bill of costs, the costs claimed with that relatively modest and simple document. I do accept, however, that viewing that output in isolation is an unrealistic measure of other costs which might reasonably and necessarily be incurred, including, for example, to investigate the incident and damage suffered, to advise TCL on its claim and the process required to advance it and for appearances at hearings during the claims phase. On the other hand, the size and relative simplicity of Mr Panuve’s affidavit as the final presentation of TCL’s claim is relevant when considering proportionality.
  7. The amount of costs claimed can only be understood, at least in part, by recognition of the fact that a considerable number of items in the current bill of costs were also included in TCL’s bill of costs for the limitation proceeding. During the last hearing, Mr McBride accepted that fact but sought to explain it on the basis that those items had been included because they had not been accepted in the limitations proceeding. In my view, it does not necessarily follow that those items can all be characterised as costs of the claims phase. Pertinent examples include the many items expressly relating to the limitation proceeding and work in respect of TCL’s claim on its insurer.
  8. It is clear, in my view, that the approach taken by TCL has been to include all items of work for which it has been charged, albeit at the lower Tongan rates. Numerous items lack sufficient description by which any nexus between the work performed and the claims phase could be identified. On the contrary, and by way of example, the numerous items involving "strategy" (whether in relation to settlement or otherwise) must be regarded as falling outside the ambit of costs reasonably necessary for the presentation of what was a relatively simple claim.
  9. Numerous items, again by way of description only, appear to have involved more than one lawyer or operator performing work on the same task whether by way of perusing, reviewing, drafting or amending some document. While there may often be collaboration between solicitors in a firm on a particular task or matter, and between them and counsel briefed on the matter, the essential nature of the claim here for TCL’s costs of repairs and some minor consequential losses was so relatively straightforward as to render the number of persons recorded as performing on individual tasks (including the creation of simple documents) excessive. It is easier to understand the amounts claimed and work performed in relation to issues concerning the limitation proceeding and the comparative novelty of such proceedings in Tonga, but those costs have already been claimed and agreed separately and ought not have been included in the costs of the claims phase.
  10. Similarly, I consider the number of items for amending various documents, (even where, by their description, they appear relevant to the claims phase) including, in particular, reductions to TCL’s claims, to be inordinate and not something for which DSV should be required to pay.
  11. Claims for research (approximately 20) predominantly related to the relevant statutory framework pertaining to limitations proceedings and/or Tongan civil procedure including applications for costs at higher rates. Neither are relevant to the claims phase.
  12. Costs claimed in respect of work clearly relating to the limitation proceedings have been disallowed.
  13. Costs claimed for work which appeared to relate to both the limitations and claims phases have been apportioned and reduced accordingly.
  14. In response to Mr McBride’s somewhat understandable lament to effect that any further reduction in the claim for costs would result in a ‘farcical’ situation for TCL and run the risk of rendering the pursuit of its claim nugatory, it appears to me that much of that disappointment may be due to TCL engaging foreign lawyers, which it was most entitled to do (and which arguably the case necessitated, at least in relation to the limitation proceedings), but without making an application for costs at higher rates at the appropriate time in accordance with Order 47 rule 5 of the Supreme Court Rules and the Tongan authorities in relation to such applications. Had such applications being properly made, they would more likely than not have been granted. However, and for the reasons previously explained on this issue, TCL has incurred substantial costs which cannot be recovered under the Tongan procedural scheme. That unhappy outcome is all the more bemusing when TCL’s legal team comprised ten lawyers including local counsel. In that regard, and even though the bill of costs includes reference to consulting with Mr Bloomfield on matters such as the requirements for foreign lawyers to practice in Tonga on the case, it does not appear that he was asked for advice on the procedural requirements for applications for costs at higher rates which accounts for most of the deficit in TCL’s recovery prospects.
  15. TCL’s submission that it was forced to incur greater costs in relation to the claims phase because DSV refused to engage earlier in settlement negotiations cannot be accepted:
  16. Based on the aforesaid, I have considered all the items in the bill of costs. My assessments have been recorded in an additional column in the electronic version. A hard copy of the complete document will be provided to the parties as a form of annexure to this ruling.
  17. The resulting balance of amounts allowed is just over TOP$36,000. However, given the vicissitudes inherent in a task such as this, I consider it appropriate to round that up to TOP$40,000.

Result

  1. The parties have substantially agreed on the form of the final orders to be made which will be separately issued with this ruling which now provides the final insertions for those orders, namely, that DSV is to pay TCL:

NUKU’ALOFA
M. H. Whitten KC
17 October 2022
LORD CHIEF JUSTICE

[1] Admitted by TCL in its Statement of Defence [2].
[2] 1957 International Convention relating to the Limitation of the Liability of Owners of Sea-Going Ships, and Protocol of Signature.
[3] [4]
[4] Order 4.
[5] 17 January 2020.
[6] Even though its cause of action arose on 20 January 2019, the date the incident.
[7] Ss 5(2)(d)
[8] Submissions dated 9 September 2022.
[9] Submissions dated 16 September 2022.
[10] Bank of South Pacific.
[11] From 4% to 6.5%.
[12] By letter of guarantee dated 14 February 2020.
[13] https://www.tdb.to/Manufacturing.
[14] [6]
[15] 238,721.64 x 10% divided by 12 multiplied by 30.
[16] Memorandum 31 August 2022, paragraph 34(e).
[17] DS Venture Ltd v Tonga Cable Ltd [2021] TOSC 82.
[18] Submissions 9 September 2022.
[19] The Rijnstroom (1899) 8 Asp 538 at 539; The Alletta [1972]2 QB 399; UK Practice Direction 61 – Admiralty Claims at 2D-99.12.
[20] The Rijnstroom, ibid; The Empress Eugénie [1860] EngR 1077; (1860) 167 ER 66 at 68; The Eilean Dubh (1883) 5 Asp MLC 154 at 155.
[21] Orders 46 and 47 supported by practice directions 4/2003 and 1/2009, being all such costs, charges and expenses as are reasonably necessary or proper for the attainment of justice or for maintaining or defending the rights of any party and that unless there are exceptional circumstances, any costs of work done prematurely and not subsequently proving of use, incurred or increased as a result of negligence, mistake, or over caution, or any unusual expense, shall not be allowed.
[22] DSV’s objections to almost every item are detailed in an Excel spreadsheet version of the bill of costs. The original bill, in hard copy, was exhibited to the affidavit of Mr Bloomfield dated 31 August 2022. DSV’s objections were also explained in the affidavit of Mr William Edwards sworn 9 September 2022.
[23] Practice Direction 1 of 2009.
[24] Commerce Commission v Southern Cross Medical Care Society [2003] NZCA 248; [2004] 1 NZLR 491 (CA); Angus Group Ltd v Lincoln Industries Ltd [1990] 3 NZLR 82.
[25] Minutes of mention, 31 January 2020.
[26] Copies of the parties without prejudice communications between 28 November 2019 and 17 December 2020 were exhibited to the affidavit of Mr Bloomfield sworn 16 September 2022.

[27] Paragraph 27(h) above.
[28] US$59,690 on the claim plus US$662 on the agreed costs of the limitation proceeding.
[29] TOP$32,254 for the limitation proceeding and TOP$40,000 for the claims phase.

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