Non-parties costs order set aside by the BVI Court – different implications under the old and new Civil Procedure Rules
In the recent decision of Justice Webster in Oscar Trustee Limited v MBS Software Solutions Limited, a non-party costs order and the permission for service of such application out of jurisdiction have been set aside on the ground that rule 7.14 of the BVI Civil Procedure Rules 2000 (now rule 7.17 of Civil Procedure Rules (Revised Edition) 2023) cannot be a free-standing gateway for service of an application out of jurisdiction.
The claimant (OTL) is a New Zealand company, who commenced the proceedings against the defendant (MBS) claiming for its return on its investment in a mining project in Turkey under a Hong Kong-law governed contract. MBS successfully sought a stay of the proceedings in favour of parallel proceedings in Hong Kong on the ground of forum non conveniens. OTL sought leave to appeal against that stay but the application was dismissed by the Court of Appeal. Costs orders were made in favour of MBS against OTL for, inter alia, both the stay application and the leave application.
As the costs orders were not paid, MBS sought a non-party costs order against the two respondents in this application, namely a solicitor in New Zealand and an accountant in Australia, and the application, together with permission for service out thereof, was granted on an ex parte basis in November 2022. Shortly thereafter the respondents filed this application to set aside the order.
The first issue which the Court had to decide on was whether the Civil Procedure Rules 2000 (the Old Rules) or Civil Procedure Rules (Revised Edition) 2023 (the New Rules) apply to the setting aside application as the hearing date had been fixed prior to the commencement date of the New Rules (i.e. 31 July 2023) but the hearing date itself was after the New Rules took effect. With reference to the transitional provisions of the New Rules, the Court took the view that the Old Rules should be applied.
The Court went on to consider rule 7.14 of the Old Rules, which provides that "…An application… order or notice issued, made or given in any proceedings may be served out of the jurisdiction without the court’s permission if it is served in proceedings in which court process has been served out of jurisdiction pursuant to rule 7.2…". MBS relied on the Court of Appeal’s decision in Halliwel Assets Inc v Hornbeam Corporation, and contended that as long as the main claim itself qualifies for service out under CPR Part 7, an application in such proceedings can be served out of jurisdiction without leave pursuant to rule 7.14.
Justice Webster refused to follow the interpretation of rule 7.14 in the Halliwel case, noting that its interpretation was not necessary to the decision in that case and, thus being dicta, had no binding authority on another court. Based on a plain reading of rule 7.14, he concluded the rule can only be relied upon in proceedings where prior permission to serve the claim form out of jurisdiction has been given (instead of just being qualified for), and it cannot form a free-standing gateway for service out of the non-party costs order application. In this case, the proceedings had already been stayed before the respondents were joined as parties solely for costs purposes, and no prior permission of service out had been sought or granted for the claim form, and accordingly the service out had to be set aside.
This decision serves as guidance as to whether a claim for a non-party costs order can be served out of jurisdiction –
- For proceedings under the Old Rules, there is no leeway for service of claim for costs against non-parties out of jurisdiction unless prior permission has been given for service out of the claim form under such proceedings.
- For proceedings under the New Rules, rules 7.2(1) and 7.3 (12) applies – such claim against a non-party may be served out of jurisdiction without leave of the Court.
