Introduction
Trust disputes are increasing in volume and complexity, and an offshoot of that is an increase in costs and disputes over costs – who should pay them, where should they be paid from, and on what basis.
A theme which has been coming up in recent judgments and could be seen as somewhat divisive is whether in offshore proceedings the costs of foreign lawyers should be recovered from the unsuccessful party, or whether foreign lawyers are a “luxury”.
By foreign lawyers, what this article is referring to in this context, and in many cases involving trust disputes, is the costs of English (or London) lawyers.
Many will be familiar with the make-up of an international trust dispute – an individual amasses vast wealth, perhaps in their country of origin; that individual protects the wealth for future generations in offshore trusts; those beneficiaries of the second and even the third generation will, more often than not, live and work in the UK, or US, and retain private wealth advisers in England; over many years of providing advice those English lawyers develop a deep understanding of the origin of trusts, the family dynamics, and the businesses held within the trusts; but when trust disputes arise these are naturally dealt with in the jurisdiction of the offshore trust.
As a consequence, the question arises: should the English lawyers, who invariably play a fundamental role in the litigation, be able to recover their fees from the unsuccessful party?
While the answer might depend on whether it is put to an English lawyer, or an offshore lawyer, it will also depend very much on which offshore lawyer is giving the answer.
Each offshore jurisdiction has developed its own regime on the matter, but on the whole there seems to be a general trend towards a more protectionist stance for the preservation of the local legal profession.
Is this part of a wider global trend towards nationalism and de-globalisation, or an inevitable reaction to the way that offshore litigation has been conducted?
Overview of Jurisdictions
A brief introduction to the different approaches of some offshore jurisdictions is as follows:
In the BVI, it is an offence to perform the functions of a legal practitioner unless that person has been admitted to practice there. Anyone not admitted to the Roll is also not entitled to recover their fees.
The position in Cayman is slightly less restrictive. The general rule is still that the costs of foreign lawyers can’t be recovered, but foreign lawyers can be temporarily admitted as attorneys in Cayman, and there are three other exceptions. These are:
- expert evidence on foreign law issues,
- where costs are granted on the indemnity basis, and
- where the Cayman Court grants a dispensation. An example of this was the Grand Court decision of In the Matter of Grand State Investments Limited (FSD 11/2021, Parker J, 17 March 2023) where it was held that costs incurred by lawyers in Hong Kong and China were allowed to be recovered in the context of a winding up petition.
As a general note, the position in Cayman (and other offshore jurisdictions) is not that costs incurred by foreign lawyers are improper, but simply that they are uneconomic as there could be duplication and extra costs which is contrary to the general limitations on costs recovery.
In Guernsey, again, the starting point is that only the costs of Guernsey Advocates are recoverable. Certain exceptions have been recognised in case law, although these are getting more restricted, and this article delves into further detail below.
The Royal Court in Jersey is more accommodating generally in respect of recovery of foreign lawyers’ fees, particularly for large scale litigation, but the fees recoverable will generally be pegged to the local Jersey rate rather than recovered at London rates.
In Bermuda, there are no rules limiting the recoverability of foreign lawyers’ fees.
| Recoverability of external lawyers’ fees in offshore jurisdictions |
| BVI: must be admitted to practice, or fees recoverable for expert evidence on foreign law only |
| CAYMAN: can be temporarily admitted, (i) expert evidence on foreign law issues, (ii) costs granted on the indemnity basis, (iii) Cayman Court grants a dispensation. |
| GUERNSEY: only costs of Guernsey advocates are recoverable, subject to certain circumstances |
| JERSEY: more accommodating but will cap fees at local Jersey rates |
| BERMUDA: no rules limiting the recovery of foreign lawyers’ fees, recoverable where necessary and proper for the attainment of justice. |
How to recover your fees as an onshore lawyer in hostile offshore litigation
Examining the case of BX v T Limited and AX and JX and CX and OX and PX and QX [2024] GRC066 (27 September 2024).
A referred to above, on this subject the position in Guernsey is particularly nuanced, especially following the decision in BX v T Limited [2024]. This case, and a couple of other recent decisions have really narrowed the scope for English lawyers to argue for their fees.
While the focus in this article is on Guernsey, these decisions will be of persuasive value in the Channel Islands as a whole, and elsewhere to a degree.
The case of BX v T Limited [2024] concerned applications for disclosure of trust information by potential future beneficiaries of the trust. The wider, international context was that the trust was a Bahamian trust, settled by an individual whose will was being administered in Jamaica. The applications themselves were dismissed and in the subsequent costs judgment, the judge considered whether the costs of the successful party’s English lawyers should be recoverable.
The starting point for this question in Guernsey, is the case of Ladbrokes plc v Galaxy International Ltd (Guernsey Judgment 11/2009). This judgment identified five examples of when it could be reasonable for a costs order to include, as proper disbursements, recovery of foreign lawyers’ costs. These are summarised as follows:
- a need for specialist expertise not available in Guernsey;
- continuity of material knowledge, from external lawyers already well immersed in and acquainted with the detail of material facts;
- a need for research into foreign law not readily able to be carried out in Guernsey, for substantive purposes;
- efficiency by obtaining the “very best” legal advice in a complex case; and
- obtaining practical resources (in particular voluminous documents management) unavailable in Guernsey.
A great deal has changed since 2008, especially in terms of the development of the internet, and the availability of research tools and materials in other jurisdictions. This was recognised in the recent Guernsey Court of Appeal decisions of CRGF GP Ltd v Fonds Rusnano Capital SA [2023] GCA064 (“Rusnano”) and Re the M Trusts [2023] GCA085, especially with regard to examples (i) and (iii) above.
In Rusnano, the Court of Appeal stated that to the extent it helps determine Guernsey law, Guernsey Advocates should be capable of conducting research into English law themselves.
In Re the M Trusts, the Court of Appeal held that just because a point was a novel one in Guernsey law that did not justify resorting to English counsel for advice, and stated that it would only be a very exceptional circumstances that a Guernsey Advocate would be insufficiently qualified to advise.
Points to note
In light of these decisions, how might English lawyers seek to recover their costs from the other side in hostile offshore proceedings?
First, provided it is the case, they might argue that they were providing specialist expertise on matters of foreign law.
As above, the scope for this argument has really narrowed in recent years, and in reality it is now only likely to be justified where there are material issues of foreign law in the proceedings, rather than novel points of local law. In Rusnano only the costs for advice on service in a foreign jurisdiction were allowed, and even then only at the rate of Guernsey advocates.
Second, there is the argument for continuity and efficiency.
One might think that this is where English lawyers could set up their stall, by arguing that their historic knowledge and longstanding relationships with the clients enable continuity and efficiency, and ultimately result in a cost saving. However, in Rusnano – where there was a handover between local counsel – the English counsel’s fees were only allowed insofar as they effected the literal handover of the matter from one set of local counsel to another, and even then were only recoverable at Guernsey rates.
Briefly on the argument of practicality, in Re the M Trusts, English solicitors were allowed their fees for assisting with compliance of a production order. They held the documents in the first place and had better resources to give effect to the order. Their costs were allowed but again only at the rate payable in Guernsey.
It is also worth bearing in mind the subject of rates. As noted already, some recent decisions have capped the recoverability of English lawyers’ costs to the maximum rate available in Guernsey.
Albeit, in BX v T Limited [2024], the judge considered a different approach. Obiter, it was her view that foreign lawyers’ costs are governed by their local market and if it is reasonable to engage foreign lawyers at all then its reasonable costs should depend on the local rates for such work.
While this may superficially seem like a positive result for the London lawyer, by acknowledging that a different rate should apply to the costs of foreign lawyers, it might be construed that the judge in this decision is drawing an even clearer distinction between the local offshore legal work on the one hand and the specialist ad hoc advice foreign law advice which is very much the exception.
It seems also that context is key. BX v T Limited [2024] concerned a discrete disclosure application and the judge drew a distinction between these applications, which she described as “collateral and peripheral” to proceedings in other jurisdictions, and “large scale commercial litigation” where the involvement of English lawyers is considered standard. Although of course this now leaves a bit of a gap in guidance where large scale matters are concerned.
On a similar note, being able to prove an intrinsic connection to England is also helpful. That said, this was not something that they were able to achieve in BX v T Limited [2024].
It was submitted in that case that the connection to England was that the beneficiaries’ legal affairs were organised on a “hub and spoke” basis with English lawyers being central to the proceedings in all the relevant jurisdictions. But the judge dismissed this argument and noted that there didn’t appear to be any element of specialism in the situation at all.
Finally, it is important to note that English lawyers’ costs will not be recoverable just because the other side instructed English lawyers as well.
Concluding remarks
The BX v T Limited [2024] costs judgment has gained attention for its particularly restrictive approach to the recoverability of English lawyers’ fees, and the judge acknowledged that the decision might be considered unreasonable to those involved in large scale commercial disputes.
Given those remarks, perhaps the main takeaway from this recent case is for English lawyers to really think about the value they are adding to offshore proceedings and to carefully manage their clients’ expectations as to what could be recoverable even if they win.
