Interlocutory pre-emptive costs order has no place in ordinary litigation

Village Residents Association Limited (applicant) v An Bord Pleanala and McDonalds Restaurants of Ireland Limited (respondents) and Kilkenny Corporation (notice party).

Judicial Review - Practice and procedure - Costs - Jurisdiction of High Court to make pre-emptive costs order - Grounds upon which order will be made - Public interest challenge - Security for costs - Jurisdiction of High Court to determine where burden of costs reserved on earlier interlocutory application should lie - Companies Act 1963, section 390 - Courts (Supplemental Provisions) Act 1961, section 14 - Rules of the Superior Courts 1986, Order 84 rule 20(7), Order 99 rules 1(1),1(3), 1(4) and 5.

The High Court (before Miss Justice Laffoy); judgment delivered 23 March 2000.

Although the High Court has jurisdiction to make a pre-emptive costs order at an interlocutory stage in the case of a public interest challenge, such an order would not have any place in ordinary inter partes litigation. Further, in the absence of agreement, the court had no jurisdiction on an interlocutory application to determine where the burden of costs reserved on an earlier interlocutory application should lie.

The High Court so held in declining to make the orders sought by the applicant.

Patrick Treacy BL for the applicant; Nuala Butler BL for the first respondent; Garrett Simons BL for the second respondent; there was no appearance on behalf of the notice party.

Miss Justice Laffoy set out the facts of the case stating that the first respondent (the board), on an appeal by the second respondent (McDonalds), against a decision of the notice party to refuse permission for a development, decided to grant permission for the said development subject to conditions.

The applicant was incorporated on 24 June 1999, as a company limited by guarantee not having a share capital, with the primary object of representing members of the community interested in the preservation and protection, improvement of the amenities and environment in the locality and taking such legal or other actions as might be considered necessary or desirable to support such interests.

These proceedings were initiated by notice of motion dated 25 June 1999 wherein the applicant sought leave to apply by way of application for judicial review for, inter alia, an order of certiorari of the board's decision. By order dated 11 November 1999 the applicant was granted leave to apply for an order of certiorari on the grounds that the board did not give adequate reasons for granting the permission in that the reasons as given did not provide an explanation or at least an adequate explanation as to why the board made a decision which it was alleged constituted a material contravention of the development plan.

On 12 November 1999 McDonalds' solicitors wrote to the applicant's solicitors seeking an undertaking that the applicant would furnish to McDonalds security for costs. No such undertaking was forthcoming.

The freeholder owner of the premises the subject of the decision of the board, a Mr Treacy, was not a party to the proceedings. The applicant had not at any time sought a direction from the court that the grant of leave should operate as a stay of the decision of the board, under Order 84 Rule 20(7) of the Rules of the Superior Courts 1986, nor had the applicant sought injunctive relief to restrain the implementation of the development to which that decision related. On 23 February 2000 Mr Treacy notified the applicant and McDonalds that he was proceeding to develop his property in accordance with the board's decision.

There were two applications before the court. The first was an application of McDonalds, on foot of a notice of motion dated 29 November 1999, seeking an order pursuant to section 390 of the Companies Act 1963, that the applicant should provide security for McDonalds' costs in opposing these proceedings. The second was the applicant's notice of motion of 1 February 2000 seeking: firstly, a pre-emptive or protective costs order - an order directing that the applicant would not be liable for the costs of any other party to these proceedings as may arise, or the reserved costs of any such party as have arisen in the proceedings to date; secondly, an order that the applicant would not have to furnish security for costs of any other party to the proceedings; and, thirdly, an order granting such costs as have arisen in the proceedings to date in favour of the applicant as against the board and McDonalds jointly and severally.

It was common case in R v Lord Chancellor, ex parte CPAG [1998] 2 All ER 755, a decision of Mr Justice Dyson, that the court had jurisdiction to make a pre-emptive costs order at an interlocutory stage in the proceedings. The jurisdiction was based on, firstly, section 51 of the Supreme Court Act 1981 which provided, inter alia, that the costs of and incidental to all proceedings were at the discretion of the court and the court had power to determine by whom and to what extent the costs should be paid and, secondly, Order 62 Rule 3(3) of the Rules of the Supreme Court which provided that, if the court in the exercise of its discretion saw fit to make any order as to costs of any proceedings, the court should order costs to follow the event, except where it appeared to the court that in all the circumstances of the case some other order should be made as to the whole or any part of the costs. The English court acknowledged that there was a distinction between ordinary private law litigation and public interest challenges. In McDonald v Horn [1995] 1 All ER 961, Lord Justice Hoffman observed, at page 969, that the general rule that costs follow the event was a formidable obstacle to any pre-emptive costs order as between adverse parties in ordinary litigation.

Mr Justice Dyson stated that the essential characteristics of a public law challenge were that it raised public law issues which were of general importance, where the applicant had no private interest in the outcome of the case.

The necessary conditions for the making of a pre-emptive costs order in public interest challenge cases were that the court was satisfied that the issues raised were truly issues of general public importance, and that it had a sufficient appreciation of the merits of the claim that it could conclude that it was in the public interest to make the order. Unless the court could be so satisfied by short argument it was unlikely to make the order in any event. Otherwise, there was a real risk that such applications would lead to dress rehearsals of the substantive applications. The court must also have regard to the financial resources of the applicant and the respondent, and the amount of costs likely to be in issue. It would be more likely to make an order where the respondent clearly had a superior capacity to bear the costs of the proceedings than the applicant and where it was satisfied that, unless the order was made, the applicant would probably discontinue the proceedings and would be acting reasonably in so doing.

Miss Justice Laffoy held that the court had jurisdiction in an appropriate case to deal with costs at an interlocutory stage in a manner which ensured that a particular party would not be faced with an order for costs against him at the conclusion of the proceedings. Section 14 of the Courts (Supplemental Provisions) Act 1961 provided that the jurisdiction vested in and exercisable by this court was to be exercised so far as regards pleading, practice and procedure generally, including liability to costs, in the manner provided by the rules of court in force when the Act came into operation. As far back as 1905 the rules had provided that costs were in the discretion of the court. Order 99 Rule 1(1) of the 1986 Rules provided that the costs of and incidental to every proceeding in the Superior Courts was in the discretion of those courts respectively. The general rule, reflected in Rule 1(3) and 1(4), was that unless otherwise ordered, costs followed the event. Rule 5 provided that costs could be dealt with by the court at any stage of the proceedings, or after the conclusion of the proceedings, and that an order for the payment of costs may require the costs to be paid forthwith, notwithstanding that the proceedings have not been concluded.

However Miss Justice Laffoy stated that she could not envisage such an approach to a costs issue having any place in ordinary inter partes litigation. As a broad proposition the principles enunciated by Mr Justice Dyson - confining the possibility of making such orders to cases involving public interest challenges and requiring that the issues raised be of general public importance and that at the stage at which it is asked to make the order the court should have a sufficient appreciation of the merits of the claim to conclude that it is in the public interest to make the order - would seem to meet the fundamental rubric that the interests of justice should require that the order be made. Having said that, it might be that in a particular type of case other factors might come into play. For instance, in judicial review proceedings challenging the validity of a decision of the board or of a planning authority which had no private, as opposed to public, ramifications and, therefore, where what was at issue was a true public interest issue of general importance, it might well be that there would exist policy considerations, reflected in legislation, which the courts would have to consider.

Miss Justice Laffoy further stated that in any case she was satisfied that the case did not meet any of the criteria laid down by Mr Justice Dyson and that the interests of justice did not require that the order sought by the applicant be made. First, the challenge was not a public law challenge; the members of the company clearly had a private interest in the outcome of the application. Secondly, the court was not satisfied that the ground on which the applicant was granted leave raised an issue of general public importance. Thirdly, the court was not satisfied that it had sufficient appreciation of the merits of the application to conclude that it would be in the public interest to make a pre-emptive costs order. Fourthly, the applicant was seeking a pre-emptive costs order against a non-public body, McDonalds, which was a private company. Of all the litigants embroiled in an issue as to whether the board should give reasons for materially contravening a development plan, why should it be penalised in costs?

Miss Justice Laffoy then went on to deal with the question of security for costs and the special circumstances contended for by the applicant. Firstly, it was noted that it was well settled that the Supreme Court should not ordinarily entertain an application for security for costs on an appeal to that court if it was satisfied that the question at issue was a question of law of public importance. However Miss Justice Laffoy stated that for the reasons outlined earlier for rejecting the applicant's contention that the case raised issues of public importance, she considered that the case did not raise a question of law of public importance. The criteria for determining whether a question of law of public importance existed which could be extrapolated from the judgment of Mr Justice Morris in Lancefort Limited v An Bord Pleanala [1998] 2 ILRM 401 - whether the point is of such gravity and importance as to transcend the interests of the parties actually before the court and whether it is in the interests of the common good that the law be clarified so as to enable it to be administered not only in the instant case but in future cases also - was not met.

Secondly, the court was invited to infer that McDonalds was acting in concert with Mr Treacy in implementing the development to which the board's decision related. Miss Justice Laffoy stated that the implementation of the development could not fundamentally undermine the jurisdiction of the court because, as had been held by the Supreme Court in The State (Fitzgerald) v An Bord Pleanala [1985] ILRM 117, in considering an application for retention permission a planning authority is not entitled to include in its consideration the degree of injury involved in the removal of a structure unlawfully erected. Moreover it was open to the applicant to apply for a stay under Order 84 or seek injunctive relief. The court did not find any conduct on the part of McDonalds which would preclude the giving of security.

Thirdly, the establishment of substantial grounds for contending that the decision of the board was invalid was a statutory requirement in this and every similar case, compliance with this requirement could not constitute a special circumstance. In any event, it was well settled that the strength or otherwise of a party's case was not an appropriate consideration on an application for security for costs, unless the plaintiff's case was unanswerable in which circumstances security should be refused: per Mr Justice Barron in Lismore Homes Ltd (in receivership) v Bank of Ireland Finance Ltd [1997] IR 501, at page 530, citing the Supreme Court decision in Comhlucht Paipear Riomhaireachtha Teo v Udaras na Gealtachta [1990] 1 IR 320.

Fourthly, Miss Justice Laffoy stated that there had been no delay on the part of McDonalds in bringing the application for security. The initiating letter was despatched on the day immediately following the order of the court granting leave to the applicant. McDonalds could not be faulted for giving the applicant an initial free run. There was no evidence that the applicant had altered its position to its detriment by reason of the application for security not having been made at the leave stage.

The final ground on which it was alleged by the applicant that an order for security for costs should not be granted was that the true purpose of McDonalds in seeking security was to stifle the applicant's claim. The court could not see how this ground, on its own, could justify refusing McDonalds' application. If an order for security for costs was made in the instant case the judicial review proceedings would only come to a halt if the members chose not to finance the applicant to enable it to give security. Consequently, McDonalds were entitled to an order pursuant to section 390 of the Companies Act 1963 that the applicant should provide security for McDonalds' costs of opposing the proceedings.

The court also noted that when it was invited on a challenge to standing to infer that objectors to planning decisions had clothed themselves with limited liability for the less than pure motive of conferring immunity against costs on themselves and the challenge was successfully resisted, on a subsequent attempt to resist an application for security for costs by the company, the bona fides of the members of the company required cautious consideration.

In relation to the question of reserved costs on the application for leave, Miss Justice Laffoy stated that in the absence of an express statutory provision or a rule of court, or in the absence of agreement, the court had no jurisdiction on an interlocutory application to determine where the burden of costs reserved on an earlier interlocutory application should lie. Consequently no order was made as to reserved costs.

Solicitors: Michael Lanigan & Co (Kilkenny) for the applicant; T. T. L. Overend McCarron & Gibbons (Dublin) for the first respondent; McCann Fitzgerald (Dublin) for the second respondent.