Fyffes Plc (plaintiff) v DCC Plc, S & L Investments Ltd, James Flacon and Lotus Green Ltd (defendants).
Costs - Right to costs - Discretion of the court - Whether the court should apply the general rule that costs follow the event - Whether the court should exercise its discretion and exclude certain costs from the award of costs - On whom does the burden of displacing the general rule lie - Test to be applied to determine whether the general rule should be displaced - Rules of the Superior Courts, 1986, O.99, r.1(1), r.1(3), r.1(4).
The High Court (Miss Justice Laffoy); judgment delivered on February 10th, 2006.
The court's discretion to award costs in a case to which rule 1(4) of Order 99 applies is considerably tempered by the provision which stipulates that, as a general rule, costs should follow the event. In the context of an application by an unsuccessful plaintiff to be relieved of some of the costs which would be awarded against him under the general rule, the court is entitled to have regard to the fact that a defendant, who was successful overall, was not successful on substantive issues raised by him on his defence. The burden of displacing the general rule rests with the party who asserts that it should be displaced. Whether the general rule should be displaced is determined by reference to the facts of the particular case, not extraneous matters. The test must be whether the requirements of justice indicate that the general rule should be displaced. Only exceptional circumstances would justify departure from the general rule.
The High Court so held in making an order that the defendants have the costs of the proceedings except - 80 per cent of the costs of making discovery, and the costs of 25 hearing days.
Paul Gallagher SC, Paul Sreenan SC, Brian Murray SC and John Hennessy BL for the plaintiff; Kevin Feeney SC, Michael Cush SC, Michael Ashe SC, Jim O'Callaghan BL and John McCarroll BL for the defendants.
Miss Justice Laffoy began her judgment by stating that she had considered the submissions made on behalf of the defendants and the plaintiff on the issue of the costs of the proceedings on January 26th, 2006. Miss Justice Laffoy stated that it is common case that the right to costs is governed by Order 99 of the Rules of the Superior Courts, 1986. Rule 1(1) of Order 99 provides that the costs of, and incidental to, the proceedings are at the discretion of the court. Rule 1(3) deals with the costs of an action, question or issue tried by a jury and stipulates that the costs shall follow the event unless the court, for special cause, to be mentioned in the order, shall otherwise direct. Rule 1(4), which was the relevant sub-rule in the case, provides as follows:
"The costs of every issue of fact or law raised upon a claim or counterclaim shall, unless otherwise ordered, follow the event."
It was submitted on behalf of the defendants that there was no reason why the normal rule, that costs follow the event, should not be applied in the instant case. The defendants won and they should get full costs, including all reserved costs. While the plaintiff did not dispute that the event had been decided in favour of the defendants, it was submitted on its behalf that the court, in exercise of its discretion, should exclude the costs of the dealing issue, which was decided against the defendants, from the award of costs in favour of the defendants. Counsel for the defendants relied primarily on the decision of the Supreme Court in Cooper-Flynn v Radio Telefís Éireann 2 IR 72. That decision arose out of an action tried by a jury, in which the issue of costs fell to be determined in accordance with rule 1(3), rather than rule 1(4), of Order 99. That being the case, Miss Justice Laffoy stated that it is not apposite. Miss Justice Laffoy said that there is a difference in terminology between rule 1(3) and rule 1(4) which governed the issue of costs in the instant case and the extent to which that difference was significant, if at all, was not addressed by counsel.
Counsel for the plaintiff relied on one Irish authority, the decision of the Supreme Court in Grimes v Punchestown Developments Co Ltd 4 IR 515. Counsel for the plaintiff relied on the following passage from the judgment of Denham J. as setting out the principles by which the court should be guided in exercising its discretion:
". . . . The normal rule is that costs follow the event. However, there are circumstances when a court on the facts of a case determines that the normal rule will not apply. Indeed, a successful applicant may not succeed in obtaining an order for costs if the facts indicate features which are unsatisfactory as to the way in which they acted . . . . The burden is on the party making an application to show that the order for costs should not follow the general rule . . . ."
Counsel for the plaintiff submitted that the judgment in the Grimes case acknowledged an entitlement in the exercise of the court's discretion to take into account substantive factors distinct from the issue as to which side wins the event. Counsel for the defendants advanced a different analysis of the judgment in the Grimes case. He suggested that the true analysis was that it was a case in which discretionary factors which were relevant to the substantive matter were said to be appropriate in exercising the court's discretion as to costs. That is not, it was submitted, authority for the proposition that the court looks to the substantive issues in the case or, that, where, as here, the party which was unsuccessful overall has won on one or more of the substantive issues, that of itself is a factor to be taken into account in the exercise of the discretion in relation to costs. Miss Justice Laffoy stated that aside from the statement of principle in the judgment of Denham J., which she had quoted, the decision in the Grimes case turned very much on its own facts.
The only other authority to which the plaintiff referred was an Australian case, Byrns v Davie 2 VR 568. Miss Justice Laffoy stated that counsel properly drew the court's attention to the statutory provision or rule in relation to costs which was being applied in that case. The relevant statutory provision which was quoted in the judgment of Gobbo J., was to the effect that, unless otherwise expressly provided by the Act or any other Act or by the rules, the costs of, and incidental to, all matters in the court were in the discretion of the court and the court had full power to determine by whom and to what extent the costs were to be paid. In other words, unlike Order 99(1), the rule did not point to a position of general application, that costs follow the event, which might be displaced in the exercise of the court's jurisdiction. In Byrns v Davie, Gobbo J. referred to a number of English authorities. One was a decision of the House of Lords in Donald Campbell & Company v Pollak AC 732, which he used to distinguish a decision of the Court of Appeal, which had been relied on by the defendants: Ritter v Godfrey 2 KB 47. He quoted the following passage from the judgment of Viscount Cave L.C. at p.811:
"A successful defendant in a non-jury case has no doubt, in the absence of special circumstances, a reasonable expectation of obtaining an order for the payment of his costs by the plaintiff; but he has no right to costs unless and until the court awards them to him, and the court has an absolute and unfettered discretion to award or not to award them. This discretion, like any other discretion, must be exercised judicially, and the judge ought not to exercise it against the successful party except for some reason connect with the case."
Gobbo J. also referred to a more recent English decision, the decision of the Court of Appeal in Gold v. Patman & Fotheringham Limited 2 All ER 497 and quoted a statement from Sellers LJ (at p.503) to the effect that, if a plaintiff makes unnecessary and unfounded claims, they can well be segregated and he may be penalised in costs; but a greater latitude is given to a defendant. On the facts in Byrns v. Davie, Gobbo J. stated that the plaintiffs had failed in their action on what was essentially a threshold matter, namely, the construction of a covenant, but had succeeded in respect of other matters that occupied a large proportion (70 per cent) of the hearing. His conclusion was that substantial justice would be done if the defendants who raised those other issues recovered only 40 per cent of their taxed costs, including reserved costs.
Counsel for the plaintiff submitted that Gobbo J. had approached the issue of costs in a manner similar to the manner approved of by the Supreme Court in the Grimes case, in recognising an entitlement to have regard to the substantive issues and the facts of the particular case and whether something was unnecessary in the context of the case.
Counsel for the defendants emphasised two points in relation to the Byrns v Davie decision in response. First, he emphasised the significance of the difference between the rule being considered in that case and the rule under consideration here and, in particular, that the latter points the court to the general provision that costs shall follow the event. Secondly, he commented on the factual similarity between Byrns v. Davie and Gold v. Patman & Fotheringham Ltd, in each of which the defendant succeeded on the narrow question of the construction of a document. It was submitted that Gobbo J. was influenced in his conclusion that what he called "a threshold issue" could have been dealt with by way of preliminary issue. It was not suggested, nor could it be, that in the instant case the price-sensitivity issue could have been dealt with as a preliminary issue. Therefore, it was submitted that the Australian case was not as helpful as might appear on first impression.
Miss Justice Laffoy said that what the decision of the Supreme Court in the Grimes case clearly establishes is that the court's discretion to award costs in a case to which rule 1(4) of Order 99 applies is considerably tempered by the provision which stipulates that, as a general rule, costs should follow the event. The burden of displacing the general rule rests with the party who asserts it should be displaced. Whether the general rule should be displaced is determined by reference to the facts of the particular case, not extraneous matters. Miss Justice Laffoy stated that she understood that to mean all facts in relation to the particular case, including the conduct of the parties leading to, and in the course of the prosecution of, the proceedings. Miss Justice Laffoy stated that as to whether the decision of the Supreme Court is authority for the proposition that the court is entitled to have regard to the fact that a defendant, who was successful overall, was not successful on substantive issues raised and prosecuted by him on his defence, in the context of an application by the unsuccessful plaintiff to be relieved of some of the costs which would be awarded against him under the general rule, in her view, it is. The decision of the Supreme Court does not, either expressly or by implication, preclude the court from considering any matter connected to the case. Miss Justice Laffoy stated that, while not articulated in the Grimes case, it seemed to her that the test must be whether the requirements of justice indicate that the general rule should be displaced.
Turning to the submissions made in relation to the factual situation which arose in the case, counsel for the plaintiff acknowledged that it was for the plaintiff to prove the two components of its assertion of unlawful dealing: the dealing and that the third defendant was in possession of price-sensitive information at the time of the dealing. Counsel for the plaintiff also acknowledged that the defendants were entitled to take whatever points they wished, but submitted that, if they did and they were calculated to occasion unnecessary expense, it would be fundamentally unjust for the plaintiff to be liable for the defendants' costs. The question posed by counsel for the plaintiff was whether it is just that the plaintiff should have to bear the cost of a position deliberately adopted by the defendants which was undoubtedly going to, and did, lead to an unnecessary prolongation of the proceedings and the incurring of unnecessary expense by both parties, in particular, by the plaintiff who had to expose what counsel described as "an artificial construct that was put forward to confuse the reality". The answer offered by counsel was that it would be wholly unjust to overlook that position which the defendants persisted in throughout the trial. An added factor in this case, it was submitted by counsel for the plaintiff, was that the third defendant was a director of the plaintiff at the relevant dates and should have given a complete and accurate picture of what happened, at any rate following receipt of the transcripts of the Davy dealing room tapes on December 3rd, 2001. Particular emphasis was attached to a letter from the defendants' solicitors dated January 11th, 2002, in which it was reiterated that the disposals of the shares were effected by the fourth defendant and that no person or persons other than the directors of the fourth defendant caused or procured the making of such disposals.
In summary, counsel for the plaintiff submitted that the court should exercise its discretion and not allow the defendants the costs of the dealing issue for the following reasons: the exceptional nature of the case, by reason of its length and the issues raised; the fact that the dealing issue was identifiable as a separate discrete issue, which was based on facts internal to the defendants and known only to the defendants; and that before the initiation of the proceedings the plaintiff sought a clear and unambiguous description of the share sales from the defendants and that was not given, notwithstanding that the third defendant at the material time had been a director of the plaintiff.
In replying to the plaintiff's application that the award of costs in favour of the defendants should exclude the costs of the dealing issue, counsel for the defendants advanced an analysis of the dealing issue, which on a broad view was correct, namely, that it was concerned with whether the third defendant dealt and the capacity in which the corporate defendants dealt. He submitted that the resolution of those sub-issues turned on what were the correct inferences to be drawn from largely uncontroversial facts, together with the correct application of quite complex legal principles against the background of a difficult statute. He referred to a comment in the judgment delivered on December 21st, 2005, that "I did not get the impression that the witnesses as to fact did not have a belief in the veracity of the position they were presenting". It was submitted that the substance of the comment was equally true of the pre-trial correspondence. Counsel for the defendants also analysed the submission made on behalf of the plaintiffs that, while the defendants were entitled to raise any issue they thought fit in the proceedings, the decision should not be devoid of consequences. The thrust of that submission, it was submitted, was that, if the defendants had conceded the dealing issue from the outset, the trial would have been shorter and less costs would have been incurred all round.
Accepting that that reasoning had a certain logic, it was submitted that, if one extended the logic to the plaintiff, which lost on the price-sensitivity issue which turned on facts which were internal to the plaintiff, if the plaintiff had conceded the price-sensitivity issue, there would have been no trial and no cost to anybody. Miss Justice Laffoy said that it was difficult to argue against that logic. However, logic and justice are not always commensurate.
Miss Justice Laffoy stated that in consideration whether there should be a limited departure from the general rule that costs follow the event as advocated by the plaintiff, in her view the starting point mustbe that, adopting the terminology used by counsel for the defendants, this was commercial litigation at a high level and it was commercial litigation between two major public companies in this jurisdiction. That being so, only exceptional circumstances would justify departure from the general rule. Miss Justice Laffoy stated that in her view the facts of the case were exceptional to the extent that the shares in issue were an asset of the DCC Group and the holding was so treated in the consolidated balance sheet of the DCC Group. The profit which accrued on the sale of the shares accrued to the DCC Group. The third defendant was a director of the plaintiff on February 3rd, 2000, which Miss Justice Laffoy considered to be the material date because the subsequent sales flowed from what happened on that day. Although he was elected to the board of the plaintiff in the ordinary way, in reality the third defendant was a director of the plaintiff by reason of the DCC Group holding. The approach adopted by the defendants on the dealing issue, which was based on the fact that the legal and beneficial ownership of shares had been segregated for a purpose which was not associated with these proceedings, deliberately ignored the reality that the third defendant's connection with the plaintiff was attributable to the ownership of the shares and that the shares were owned and sold and that the profit generated was owned by the DCC Group. That approach added considerably to the complexity and to the duration of the case. Miss Justice Laffoy stated that she thought it would be fair and just to take that fact into account in the exercise of the court's discretion in relation to costs. As to the manner in which this should be done, Miss Justice Laffoy stated that she had come to the conclusion that the proper approach was to disallow the defendants the costs of making discovery in relation to, and hearing dates taken up with, the dealing issue. That approach would not, as a percentage reduction would, unfairly dilute the consequences of the plaintiff not having succeeded in an action in which it brought a claim of unlawful dealing against the defendants.
Miss Justice Laffoy stated that therefore, there would be an order that the defendants have the costs of the proceedings except - 80per cent of the costs of making discovery, and the costs of 25 hearing days.
Arthur Cox (Dublin) (for the plaintiff); William Fry (Dublin) (for the defendants)
Kieran O'Callaghan, barrister