Saunderson & Ors v Sonae Industria (UK) Ltd

1. This is the judgment of the court.

2. We have to rule on the question whether the Defendant’s undertaking contained in Messrs Clyde’s letter of 11 July 2012 extends to the costs of the application for permission to appeal. We have considered written submissions from the Defendant dated 12 October and 1 November 2016 and from the Claimants dated 21 October 2016.

3. Both the Claimants and the Defendant accept, unsurprisingly, that the scope of the undertaking should be construed having regard to the natural and ordinary meaning of the words, its commercial context and the shared background knowledge that would have been available to the parties at the time the undertaking was given.

4. The fact that the Claimants have in the event procured ATE insurance to cover their potential liability to pay the Defendant’s costs of the unsuccessful application for permission to appeal is irrelevant to the proper construction of the undertaking of July 2012.

5. Equally irrelevant to the question of construction is the Defendant’s own understanding of the effect of its undertaking and/or the contents of Messrs Clyde’s letter of 18 December 2013. Insofar as the Claimants attempt to rely upon some form of estoppel that attempt fails. The letter of 18 December 2013 purports to do no more than to explain the effect of the undertaking, not to vary or to widen it. The words used in the letter must be understood in the context of the undertaking to which they relate. Thus the word “never” must be read in context and adds nothing to the proper construction of the words “the outcome of this litigation”.

6. “This litigation” is obviously capable of encompassing both the trial of the action and any appeal or appeals against the outcome thereof. However in the context of ATE insurance, which was the driver for the giving of the undertaking, we are satisfied that the parties would in July 2012 have had in mind only the proceedings at trial. We are satisfied that in the context of ATE insurance both insured and insurers draw a clear distinction between proceedings at first instance and appeals against the outcome of such proceedings. We do not know whether in July 2012 ATE insurance cover would have been available in respect of the risk of the Claimants’ liability to pay both the Defendant’s trial costs and the Defendant’s costs of an unsuccessful appeal and/or application for permission to appeal, but we think it likely that the parties would have regarded the question of ATE cover in respect of costs liabilities attaching to an appeal by the Claimants, or to an application for permission to appeal by the Claimants, as a question to be addressed only after the conclusion of the trial, or the relevant part thereof, and in the light of the outcome thereof and the terms of the judgment.

7. Accordingly, we do not consider that the Defendant’s undertaking given on 11 July 2012 by Messrs Clyde & Co extends to the Defendant’s costs of the Claimants’ unsuccessful application for permission to appeal. There is therefore no impediment to an order for costs in the Defendant’s favour.

8. For the avoidance of doubt, had we not reached this conclusion we would not have characterised the pursuit of the application for permission to appeal as in this context “unreasonable behaviour”. However that conclusion of itself reinforces our earlier conclusion. It would be extraordinary if the Defendant was to be taken to have underwritten the pursuit by the Claimants of an application for permission to appeal which the terms of the judgment demonstrated to be quite unrealistic.