N (M) (plaintiff/respondent) v M (S) (defendant/appellant)
Practice and procedure - Costs - Appeal to Supreme Court - Appeal as to quantum only -Quantum reduced - Application by defendant for costs - Practice to be recommended - Letter of offer to be written by either party - Terms of letter of offer to be used to determine Order as to costs - Scope of new procedure.
The Supreme Court (Mrs Justice Denham, Mr Justice Geoghegan and Mr Justice Mc Cracken); judgment delivered May 5th, 2005.
Following a trial at first instance, and in the context of an appeal on quantum only, either party is entitled to write a letter to the other which is "without prejudice" save as to the costs issue. The letter would state the minimum amount the plaintiff would accept or the maximum amount the defendant would pay. The letter would be of assistance to the court in determining the issue of costs of the appeal.
The Supreme Court so held in making no order as to costs in the instant case.
Turlough O'Donnell SC with Patrick C. O'Connell BL for the plaintiff/respondent; Simon W. Kennedy, Solicitor for the defendant/appellant.
Mr Justice Geoghegan began by saying that the judgment related to the issue of costs in an appeal brought by the defendant /appellant against an award of €600,000 damages for sexual assault obtained by the plaintiff/respondent in the High Court in a trial by judge and jury. On the hearing of the appeal which related to the assessment of damages only the Supreme Court reduced the award to a figure of €350,000. The defendant, having obtained this substantial reduction, had applied for his costs of the appeal against the plaintiff. Counsel for the plaintiff in response did not actually seek the costs of the appeal on behalf of the plaintiff but submitted to the court that there should be no order for costs on the appeal. Mr Justice Geoghegan said there is never any easy answer in justice as to who should pay the costs of an appeal when there is a reduction in damages in an appeal confined to assessment of damages and as this was a reasonably substantial case, the court considered it appropriate to reserve judgment so as to consider whether any worthwhile guidelines could be formulated.
Mr Justice Geoghegan said there are no simple answers. If a plaintiff is awarded damages in the High Court which are too high and are, therefore, reduced by the Supreme Court this will not usually arise from any fault on the part of the plaintiff. It is a considerable hardship to the plaintiff if, in addition to suffering a reduction in his award, he then has to pay two sets of costs to the opposing lawyers and his own lawyers out of the legitimate award. On the other hand, if the plaintiff were to be awarded his costs of the appeal despite the fact that he had suffered a reduction in damages, that may legitimately be viewed as an injustice to a defendant. The reduction in damages which the defendant by his well-founded appeal has achieved is eaten away by his having to pay two sets of costs on the appeal.
Mr Justice Geoghegan said that in the intermediate situation where the Supreme Court decides to make no order as to costs on the appeal there is, on one view, a hardship to both sides. On the one hand the plaintiff has to suffer a reduction in his ultimate legitimate award in order to pay his own lawyers even though he was in no way to blame for the High Court awarding him an excessive sum. On the other hand, the defendant, notwithstanding that he was found to have brought a legitimate appeal and has successfully obtained a reduction in the High Court award, finds himself having to pay his own lawyers thereby greatly reducing the benefit which he has achieved by the appeal. Mr Justice Geoghegan said that although he was about to suggest procedures which in his view might ease the problems which arise in these types of cases there was still no perfect solution. Nor would it be appropriate to lay down absolute norms as to how costs were to be dealt with in all cases of this kind. Every appeal has its own special aspects. In most instances of course the normal rule of "costs following the event" will apply. But in cases where that may be perceived to cause a hardship, the court must exercise its discretion and the manner in which it exercises that discretion will differ from case to case.
As to the correct application of principle in relation to costs in appeals from assessments only, Mr Justice Geoghegan said there was not much assistance to be gained from English case law. Under current English Rules of Court there are many factors which may be taken into account in relation to costs. Questions of reasonableness in not submitting to mediation and questions of the significance to be attached to success is one discrete issue which may have the effect of winning the appeal but failure in a number of others may all now in many instances be taken into account.
Mr Justice Geoghegan said that it had been suggested that following a trial at first instance and in the context of an appeal either party should be entitled to write a letter to the other which would be"without prejudice" save as to a costs issue. Thus a defendant who considered that the plaintiff's award was too high and would likely be reduced on appeal may write a letter to the plaintiff claiming that the award of say €100,000 was too high but that he would be prepared to pay €75,000 and that if that sum was not accepted the letter would be used in the Supreme Court for the purposes of a costs application in the event of the damages being reduced to €75,000 or less. By the same token, it would be open to a plaintiff in such a case to write to the defendant offering to accept €75,000 and warning the defendant that if a reduction of damages was achieved by the defendant but the resulting sum was still €75,000 or more the plaintiff would use the letter with a view to obtaining his costs of the appeal notwithstanding the reduction. Mr Justice Geoghegan said that this practice which had proved useful in other jurisdictions should be availed of in this jurisdiction.
Mr Justice Geoghegan said that an argument can be made that there is never any real hardship to a defendant if he has to pay either two sets or one set of costs on an appeal notwithstanding obtaining a reduction in damages because there was nothing to prevent him making a lodgment of that amount with his defence in the first instance. In modern times, Mr Justice Geoghegan said he was inclined to think that that may be too purist a view. Cases have a way of changing their colour as time goes on after the stage of delivery of the defence. There is nothing to prevent a defendant who either has not made a lodgment or has made an inadequate lodgment making an open offer, as the court has suggested, on a "without prejudice" basis except as to costs for the purposes of an appeal and, indeed a defendant who has made a lodgment would be entitled to make an offer higher than the lodgment by open letter in that manner. If this procedure was adopted more often, the injustices which can arise in relation to costs of an appeal would be greatly reduced.
Mr Justice Geoghegan said that there may be some cases where a plaintiff may be entitled to his costs of the appeal notwithstanding that there is a reduction in his damages given the various remedies open to a defendant such as the making of a lodgment or the making of an open offer as the court has suggested. In this particular case, however, the defendant has obtained a very substantial reduction in the plaintiff's award and his financial position is such that there would have been no reality in making offers that might have been acceptable to the plaintiff notwithstanding that they involved a reduction in the damages awarded in the High Court. In the circumstances of this case the solution put forward by counsel for the plaintiff would seem, in all the circumstances, to be the fairest. Accordingly, Mr Justice Geoghegan said he was of the view that there should be no order as to costs on the appeal.
Mr Justice Geoghegan said he would like to add one rider. Although the novel procedures which the court had suggested might usefully be adopted in relation to appeals from the Circuit Court to the High Court in Dublin or to the High Court on Circuit, Mr Justice Geoghegan said he did not think that the two situations are similar. A circuit appeal is a full rehearing and that can make a very big difference to the factors which the judge might take into account in exercising his or her discretion. Mr Justice Geoghegan said for his own part, and especially in smaller cases, he had from time to time awarded costs of an appeal to a plaintiff in a circuit appeal notwithstanding that his damages had been reduced. Given the rights of the defendant to have lodged and to make offers of the kind which the court had indicated, there may be little or no injustice in doing that whilst the opposite could cause an undue hardship to a plaintiff. Mr Justice Geoghegan said this judgment should not be used to fetter the discretion of a judge hearing a circuit appeal. Different principles apply.
Ms Justice Denham and Mr Justice McCracken concurred with the judgment of Mr Justice Geoghegan.
Solicitors: Sean Costello & Co (Dublin), for the Plaintiff/ respondent; Simon W. Kennedy & Associates (Wexford), for the Defendant/appellant.
[Editor's note - The new procedures were applied in the case of McCarthy v Walker, ex tempore, Supreme Court, Ms Justice McGuinness (Mr Justice Kearns and Mr Justice McCracken concurring), June 3rd, 2005. There, the general damages awarded in the High Court of €45,000 were reduced on appeal to €32,500. Ms Justice McGuinness said the court felt it was an appropriate case for an offer, in accordance with the procedure outlined in the above reported case, to have been made, and accordingly awarded the plaintiff the costs of the High Court trial and 50 per cent of the costs of the appeal (to be assessed on the High Court scale).]
P.J.Breen, barrister