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High Court clarifies costs awards basis in complex matters
The High Court recently provided guidance in relation to the determination of costs and how they might be apportioned in circumstances in which arguments have been raised on various issues that were in dispute, not all of which were resolved in favour of the party which succeeded overall or where some did need even require a decision. Such guidance is essential in a jurisdiction that operates on the general principle that the loser pays. In complex litigation it is rarely the case that the overall winner has succeeded on every issue raised in the case.
In Aforge Finance SAS v HSBC Institutional Trust Services (Ireland) Limited(1), Justice Clarke took the opportunity to clarify the position in respect of costs in complex litigation, which he had previously enunciated in the Veolia Water case(2), but which he acknowledged had been the subject of some misunderstanding in other cases since the judgment. In Veolia Water Clarke stated that it was incumbent upon a court to consider whether it should engage in a more detailed analysis of the precise circumstances giving rise to costs before making a costs award. There, he said that although costs are discretionary and should ordinarily follow the event, it may be appropriate for costs awards to reflect issues on which the overall successful party did not prevail.
In Aforge Clarke recognised that he had to determine three issues. The first was to determine the event which the costs should ordinarily follow, which reflects the basic principle under Irish law that costs are awarded in favour of the successful party. The second was to determine whether it was appropriate in the light of the principles identified in Veolia Water to depart from that basic principle. Clarke identified that the third issue derived from the complication in this case that a number of other parties, which were not parties to these proceedings but which were plaintiffs or other parties in related litigation, also took part in this hearing. In this regard, the judge acknowledged that none of those parties sought costs and that they had taken part in these proceedings at their own risk in relation to costs.
In addressing the first issue, he concluded that the result had gone in favour of the defendant. In circumstances in which no order had been made (as it was not appropriate to do so), the plaintiffs had lost. As a corollary, since the defendant had won, the 'event', for costs purposes, favoured the defendant, which would ordinarily be entitled to its costs.
Clarke then considered whether there should be any variation to the ordinary costs principle that the successful party be awarded its costs. Given what he perceived as some uncertainty regarding the Veolia Water decision, Clarke took the opportunity to comment on his decision in that case. He felt that Veolia Water makes clear that the starting point is that a successful party, whether plaintiff or defendant, gets all of the costs of the case, such that costs can be said to follow the event. However, Veolia Water seeks to to identify that there may be circumstances in which costs simply following the event would be unfair. He cited the example of proceedings which may have been lengthened by virtue of an otherwise successful party raising unmeritorious points, thereby significantly increasing the costs.
However, he clarified that Veolia Water was not a recipe for a fine analysis of precisely how much time was spent on individual issues, which one of the unsuccessful parties in Aforge had argued should be. Rather, he suggested that the decision in Veolia Water envisaged taking a broad view on whether it can fairly be said that the successful party has lengthened the proceedings or increased its costs by raising points which the court has found to be unmeritorious. He acknowledged that:
"It is a fact that in virtually every case there may be some issues, large or small, which the court does not decide one way or the other. It may be that it becomes unnecessary to decide it. Issues can rise and fall and cease to be quite as relevant by the end of the case. In addition, there are issues which the court finds it unnecessary to determine because having decided other issues in a particular way knock on issues just don't arise… the mere fact… that an issue was not decided does not mean that any costs attributable to that issue are to be excluded from the costs which an otherwise successful party should obtain. The risk that any party takes in commencing proceedings is that the existence of the proceedings will raise a range of issues which, if the proceedings be unsuccessful, will generate costs which will have to be met."
He noted that in this case, certain issues had been squarely put there in terms of this application by the plaintiffs and the fact that one turned out not to require a decision did not change that fact. Since it was an issue which had to be argued, he felt it could not be described as an unmeritorious additional defence or line of defence. Thus, it did not change the defendant's entitlement to its costs.
Regarding the complication arising from the involvement of the parties to the related proceedings, Clarke felt that the duration of the proceedings was increased by one day because of the involvement of those parties. However, he went on to state that just because the point argued did not come to be determined, it did not mean that the point should necessarily be regarded as unmeritorious. In circumstances in which neither the plaintiffs nor the defendant asked for those parties to be brought in, it would be unfair for them to be fixed with any costs arising out of that matter. For him, the costs of that additional day were most analogous to the costs of an issue which becomes moot simply through supervening events, in respect of which no order should be made.
Therefore, Clarke ruled that the defendant was entitled to the entirety of its costs against the plaintiffs, subject to the deduction of the costs of one day of the hearing arising from the involvement of the parties in the related proceedings.
The decision is important because it clarifies that questions of costs (and a party's entitlement to costs) must be considered in the round. As a general principle, a party which succeeds on matters which it has to address as part of the proceedings should be entitled to its costs from the losing party. It is not appropriate to undertake a forensic analysis of how arguments were taken up on individual points in determining how the costs might be apportioned. The general principle remains that, unless a party itself raises a point which is unmeritorious or which it did not have to raise as part of the proceedings, it should be entitled to all of its costs where it can be considered successful overall, notwithstanding that certain points put by the losing party fall away.
© Matheson 2011
This article first appeared on the International Law.com website (28 June 2011).
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(1) Ex tempore ruling made by Mr Justice Clarke, February 28 2011.
(2) Veolia Water UK plc v Fingal County Council  IEHC 240.