THE COURT OF APPEAL
Neutral Citation Number: [2017] IECA 163
Record Number: 2015/515
Finlay Geoghegan J.
Peart J.
Hogan J.
BETWEEN/JOHN FLYNN AND BENRAY LIMITED
FIRST DEFENDANT
SECOND DEFENDANT / APPELLANT
JUDGMENT OF MR. JUSTICE MICHAEL PEART DELIVERED ON THE 25TH DAY OF MAY 2017
1. This judgment is in respect of the appeal by the second defendant/appellant (“the Receiver”) against the order made by the High Court (Haughton J.) in respect of costs as between the plaintiffs and the Receiver following the determination of the substantive issues in the case which have already been the subject of the separate judgment of Ms. Justice Finlay Geoghegan on appeal to this Court. Her judgment sets out comprehensively the factual background to the proceedings, and the issues which arose for determination both in the High Court and on appeal to this Court. It is unnecessary to do so again, save to the limited extent necessary for the purposes of addressing the Receiver’s costs appeal.
2. The trial judge ultimately decided to make no order in respect of the plaintiffs’ costs against the Receiver in respect of the negligence/breach of duty claims brought against him; and also that he should make no order in respect of the Receiver’s costs against the plaintiffs in respect of the conspiracy claims brought against him, which the plaintiffs ultimately withdrew. In other words, the plaintiffs and the Receiver would bear their own costs of the proceedings between them. He so ordered because in his view the justice of the situation would be met if the costs to which each of these parties were otherwise entitled to as against each other were simply set off one against the other. But I need to explain briefly how that came about.
3. Among the claims brought against the Receiver in these proceedings were claims of conspiracy, and of negligence and breach of duty owed to them. The plaintiffs withdrew the conspiracy claims on Day 11 of the hearing. In his judgment the trial judge described those claims as unmeritorious, and stated that the plaintiffs ought never to have brought them. He went on to determine that those claims had prolonged the hearing by three days, and that the Receiver was entitled to his costs of those claims following their withdrawal. However, he rejected the Receiver’s submission that he was entitled to those costs on a solicitor/own client basis. In this regard, the Receiver had submitted on the basis of authority that where a claim of conspiracy is brought without any valid basis against a professional person, arising from his actions carried out in that professional capacity, and either fails or withdraws the claim, costs on a solicitor/own client basis should follow not only as a punishment, but also because such a defendant ought to receive a full indemnity so that he/she is at no financial loss by having to defend the claim.
4. The Receiver appeals against the refusal to award those costs on a solicitor/own client basis as well as the trial judge’s determination in relation to the costs of the plaintiffs’ claims against him in negligence and breach of duty to which I will now turn.
5. Following the withdrawal of the conspiracy claims, the plaintiffs continued with their claims against the Receiver in negligence and breach of duty. They led the evidence of Mr. Luby throughout Day 11 in support of those claims, on which he was also cross-examined. However at the commencement of Day 12 (20th February 2015) the Court was informed by counsel for the Receiver that the negligence and breach of duty claims were compromised between the parties on the basis of a letter dated 20th February 2015 sent by the Receiver’s solicitors to the plaintiffs’ solicitors that very morning, the terms of which were acceptable to the plaintiffs. This letter included a statement that the terms of compromise being proposed were without any admission of wrongdoing on the part of the Receiver. The Court’s order dated 11th September 2015, having noted the compromise and the Receiver’s undertaking to abide by the order of the court, stated that “the Receiver was released from further involvement in the proceedings save as to the issue of costs”. When considering the question of costs arising from the negligence/breach of duty claims the trial judge decided that this letter constituted ‘the event’ for the purposes of Ord.99 of the Rules of the Superior Courts, and was satisfied that the plaintiffs were entitled to their costs of those claims against the Receiver on the basis that they should follow that event.
6. Having decided that the plaintiffs were entitled to the costs of the compromised negligence / breach of duty claims, and that the Receiver was entitled to the costs of the withdrawn conspiracy claims, he stated at para. 41 of his judgment:
“… I believe the justice of the situation is met if I simply make no order in relation to the plaintiffs’ and second defendant’s costs inter se, effectively setting off the plaintiffs’ costs against the costs to which the defendant would be entitled in respect of the failed and unmeritorious conspiracy claim.”[my emphasis]
7. I should perhaps note at this point that there is within the trial judge’s judgment on costs no specific finding that the plaintiffs were entitled to their costs of the negligence and breach of duty claims against the Receiver. However, given what he stated in para. 41 to which I have just referred, it must be inferred that he was satisfied in that regard.
8. The Receiver has submitted that if his costs against the plaintiffs in respect of the withdrawn conspiracy claims had been awarded on a solicitor/own client basis (being a full indemnity basis), the amount would be significantly greater than if taxed on a party and party basis, and would also considerably exceed the amount of costs to which the plaintiffs would be entitled against him on a party and party basis in relation to the negligence and breach of duty claims. He submits that the trial judge erred in exercising his discretion by deciding that the justice of the situation would be met by making no order as to costs, and that instead he should have directed that the plaintiffs’ costs of the negligence/breach of duty claims be set off against the Receiver’s costs of the conspiracy claim.
9. The plaintiffs on the other hand point to the fact that the costs order in their favour against the Receiver would include also the costs of a successful application for interim and interlocutory injunctive relief which they applied for at the outset of the proceedings to restrain the Receiver from taking steps to market and sell their minority shareholding. It is urged upon this Court that the trial judge was correct in the way he balanced the competing claims for costs, and concluded ultimately that the justice of the case would be met by making no order for costs.
10. The Receiver submits also that the trial judge erred in deciding that the letter dated 20th February 2015 constituted the ‘event’ for the purposes of Ord.99 of the Rules of the Superior Courts, thus entitling the plaintiffs to the costs of the negligence and breach of duty claims on the basis of those costs should follow that event. In that regard the Receiver refers to the fact that the letter specifically stated that what he was undertaking to do in relation to any future marketing of the shares was without any admission of wrongdoing on his part in relation to the complaints made against him by the plaintiffs in relation to the manner in which he had previously marketed the shares when they were first put up for sale.
11. Essentially the Receiver asks this Court to set aside the costs order made as between these parties in the High Court, and instead, order that the Receiver be awarded his costs of the proceedings in respect of both the negligence and breach of duty claims, and also the conspiracy claims, the latter to be on a solicitor/own client basis, and that no order be made against him in respect of the plaintiffs’ costs.
12. Each party’s written submissions identified the following as the issues which they considered to arise for determination on this appeal. For convenience I shall set them out as they helpfully appear in the plaintiffs’ submissions:
The event re: the claim for negligence:
(1) Was the learned High Court Judge correct in finding that the plaintiff was entitled to its costs as against the Receiver in respect of the claim arising out of the inadequacies in the marketing strategy and advertising undertaken by the Receiver in respect of the sale of the plaintiff’s shareholding, and, in particular, was the Judge correct in finding that the letter dated 20th of February 2015 sent by the solicitors for the Receiver to the plaintiffs’ solicitors in fact and in law constituted the event that resolved the plaintiffs’ remaining claims against the Receiver?
(2) Insofar as it is relevant, was the learned High Court judge correct in finding that the Receiver’s proposal, as set out in the letter of 20th February 2015 could have been presented in an open letter or a ‘Calderbank letter’ in advance of the hearing, and that had this been done, the plaintiffs might never have proceeded to hearing against the second defendant?
The costs awarded to the Receiver:
Was the learned High Court judge correct in declining to award the Receiver his costs as against the plaintiffs in respect of the conspiracy claim, on a solicitor own client basis?
The set-off of the orders for costs:
Was the learned High Court judge correct in his decision that the costs awarded to the respective parties should be effectively set-off against each other, so that no order for costs was ultimately made?
13. As will become clear later in this judgment, I consider that the trial judge erred in considering these costs issues by reference to the provisions of Ord. 99 of the Rules of the Superior Courts, and in particular by reference to what constituted “the event”. As I explain, the circumstances in which the conspiracy claims and the negligence/breach of duty claims came to be withdrawn by the plaintiffs are within the provisions of Ord. 26 of the Rules of the Superior Courts on ‘discontinuance’, given that at that point in the trial the Court’s leave to discontinue was required before the plaintiffs could do so. It is clear that while not so stating explicitly, the trial judge did permit the plaintiffs to discontinue those claims while leaving over the question of costs. Under Ord. 26 of the Rules of the Superior Courts the trial judge’s task in relation to costs was to decide what terms as to costs was just between the parties. He was not required to consider what was “the event” as if he was dealing with the question of costs under Ord. 99 of the Rules of the Superior Courts. For this reason the first issue identified by the parties for decision on this appeal, namely: “was the letter dated 20th February 2015 ‘the event’ in respect of the negligence/breach of duty claims?” is not an issue which this Court must decide. The correct question is whether the trial judge, even though doing so under the incorrect rule, in fact carried out the exercise that was required of him under Ord. 26 of the Rules of the Superior Courts, namely to consider what order for costs was just as between the parties, and whether the order which he made should or should not be upheld as being an appropriate exercise of his discretion in this regard. For this purpose it is necessary to give some detail in relation to the letter of the 20th February 2015 and the circumstances in which it was written.
14. The plaintiffs had withdrawn their claims of conspiracy against the Receiver at the commencement of Day 11 because they were satisfied by then that there was no evidence of dishonesty or mala fides on which they could rely for the purpose of a conspiracy claim. However, counsel explained to the trial judge that nonetheless the plaintiffs were still anxious to pursue their claims in negligence and breach of duty. He also informed the Court that a decision on whether to withdraw the claim of conspiracy had not been possible until the evidence up to that point had been heard.
15. The hearing therefore continued and the plaintiffs called Mr. Luby to give evidence in support of these remaining claims. The plaintiffs’ complaints about the marketing of the shares by the Receiver focussed on the fact that only a single advertisement of the sale of the shares had been inserted, namely, one in The Sunday Business Post; that this particular advertisement was extremely small, being about half the size of a standard notice; that it was not prominently displayed in the newspaper having been placed on page 4 thereof; that the wording of the advertisement, while referring to a minority shareholding in a private Dublin hospital, did not in any way identify the hospital as being the Blackrock Hospital; and finally that any person wishing to express an interest in the shares was required to communicate that interest within four days.
16. While Mr. Luby did not accept that the Receiver had been negligent as such (though that question is more properly a matter for the trial judge) by proceeding in this way, and that it was his “judgment call”, he did say that he himself would have done things differently. He was not critical about the size of the advertisement as such, though he would have included more detail. He would have advertised the share sale also in The Irish Times; he would have identified the hospital; and he would have allowed 14 days for responses given that there was no urgency in relation to the sale. He was critical also of the fact that there was no targeted approach to the marketing campaign: in other words, that there was no attempt made to identify other parties who might have an interest, or any approach made to other shareholders, or to others who might be interested. He also had some reservations in relation to the justification for the valuation considered to be appropriate on the basis of a discount because it was a minority shareholding.
17. Mr. Luby was cross-examined throughout Day 11 by counsel for the Receiver and by counsel for Breccia, after he had given his direct evidence by reference to his report and by way of answers to some additional questions put to him in relation to it. He was also questioned at some length by the trial judge. By the end of Day 11 the plaintiffs’ case had concluded. At that conclusion counsel for Breccia requested that the Court would rise a little early so that, before going into evidence, he and his colleagues could “assess and appraise the case that is now being made, shorn of the conspiracy and in particular, to consider what parts of the evidence that has been given now need to be confronted by evidence on my side” (Day 11, p. 134-135). Counsel for the Receiver supported that application stating, inter alia, the following:
“So the only case remaining against my client is the case of negligence. We want to carefully consider the transcript of Mr. Luby’s evidence today because without prejudicing what one might say about it, it does appear in large part that Mr. Luby has accepted that what Mr McAteer did under the various headings were really his judgment calls and legitimate judgment calls. He hasn’t, in outright terms, said that he has been guilty of negligence. And there is also the critical issue, Judge, that at the close of the plaintiffs’ case no evidence has been put up to the court at all by the plaintiffs, certainly no admissible evidence, that the 6.5 million figure for an 8% shareholding is an undervalue. If that’s right, Judge, and we just want to reflect on that overnight, that obviously has a potentially very critical impact on what, if anything, remains of the case against the Receiver.” (Day 11, p. 135)
18. I should perhaps add that immediately after the above comments, the trial judge stated:
“I would have thought the minority discount issue was very much there still to be dealt with”.
19. The letter dated 20th February 2015 is quite lengthy. It refers to the withdrawal of the conspiracy claims against the Receiver by the plaintiffs, and states that in the light of that withdrawal the only remaining claims against him are predicated on an allegation of negligence or breach of duty in the conduct of the Receivership with a view to obtaining the best price for the minority shareholding. The letter reiterates the Receiver’s denial of any wrongdoing in this regard, and his belief that he had at all times acted properly and appropriately, as indeed he had maintained when resisting the injunction applications that the plaintiffs had made at the commencement of the proceedings. It went on to state the belief that the evidence of Mr. Luby given on Day 11 did not establish the position to be otherwise, referring to Mr. Luby’s acceptance in his evidence that the decisions made by the Receiver had been legitimate judgment calls, even if he himself would have made different judgment calls.
20. The letter went on to state the Receiver’s contention that the negligence/breach of duty claims could not be maintained against him where at the date of the commencement of the proceedings he had not committed to a binding, or indeed any, contract for the sale of the shares. It made the point then that the Receiver had gone no further than identifying a preferred bidder, namely Yalart Holdings Limited. It then stated that given the passage of time due to the proceedings it would be necessary for the Receiver to undertake a further marketing process in order to achieve a price which he could be satisfied represented the best price reasonably obtainable for the shares.
21. It is what follows these preliminary points in the letter that is particularly relevant for present purposes. I will therefore set forth most of the remainder verbatim:
“In the circumstances, and strictly without prejudice, in the interests of the most efficient disposal of what remains in these proceedings, the Receiver now confirms:-
(i) that he will abide by the outcome of any determination made by the Court in respect of the validity of his appointment by the first defendant;
(ii) that, in the event that the validity of the appointment is upheld, he will within 14 days of the conclusion of the proceedings in the High Court, re-market the shares the subject matter of the Receivership by way of advertisement in two national newspapers, and that he will allow a period of not less than 14 days for expressions of interest.
He does so strictly on the basis that he is not accepting that he has acted in any way in breach of his duties in the Receivership to date. We believe that the foregoing proposal renders moot any complaints which your clients seek to maintain (the validity of which are not accepted).
On the basis of the foregoing, we would propose that the only remaining claim against the Receiver for alleged breach of duty and/or negligence (which is, in any event, not sustainable as a matter of law in the light of the fact that no damage has occurred as there has been no sale) be withdrawn by agreement of the plaintiffs, or failing that, that the Court release the Receiver from the action subject to the above terms and on the basis that any issue as to the costs of our client’s involvement in the proceedings to date be deferred until the conclusion of the action. For the avoidance of doubt, our client will be seeking all of his costs at that juncture; however, that is a matter that can be more justly determined at the conclusion of the proceedings.”
22. In his substantive judgment the trial judge simply noted that these particular claims had been resolved “by agreement between the plaintiffs and the Receiver in these terms, and that on that basis the Receiver had been released from any further involvement in the case “save in respect of the issue of costs”.
23. In addressing the question of those costs in his subsequent ruling, the trial judge took a view on the potential merits of the plaintiffs’ claims made in negligence/breach of duty, and said the following:
“28. The Second Named Defendant however claims all of his costs on the basis that once the conspiracy claim was withdrawn the only remaining claim against the Second Defendant was for negligence or breach of duty arising from misconduct of the Receivership in marketing the sale of the shares. It is argued that this claim could not succeed because the marketing was the Receiver’s ‘judgment call’, because there was no evidence that a sale to Yalart Holdings Limited would have been at undervalue and because the Receiver had never committed to a binding sale. It was argued that only when a Receiver has committed to a binding sale at an undervalue does any claim for breach of duty become actionable in damages, reliance being placed on the decision of McKechnie J. in Ruby Property Co. Ltd and McNally v. Kilty and Superquinn, unreported High Court 31st January 2003.
29. I do not agree that the Plaintiffs’ remaining claim was so limited or that it must necessarily have failed. One of the Plaintiffs’ principal claims was for injunctive relief on the basis that the appointment of the Second Defendant was invalid. When this was initially sought on an interlocutory basis by letter of 22nd August, 2014, the First Defendant replied on 25th August seeking more time and then on 26th August they replied setting the validity of the appointment and refusing an undertaking. This stance was repeated in a letter of 2nd September some two days after the Second Defendant advertised sale of the shares on 31st August, 2014 in the Sunday Business Post seeking expressions of interest by 4th September in response to which the only expression of interest treated by the Second Defendant as valid was that of Breccia’s sister company, Yalart Holdings Limited.
30. In his defence the Second Defendant at para. 4 pleads that it is ‘… his duty to continue to act as Receiver and to discharge his functions and duties’. At para. 9 he denies that his appointment was unlawful and, ‘considers he was and continues to be validly appointed Receiver’, but that he will abide by any Order that the Court will make.
31. Thus the Receiver at all times aligned himself with the First Defendant in that he at all times positively asserted the validity of his appointment. The Plaintiffs were therefore fully entitled and indeed bound to join the Second Defendant as a party to the proceedings and to pursue at all stages at hearing as against the Second Defendant the case that the appointment was invalid and that an injunction should be granted.
32. I also do not accept the proposition that the claim for breach of duty would necessarily have failed based on the material before the Court after Mr. Luby’s evidence. It seems to me that there was scope for legal argument that the marketing strategy and advertising undertaken was below an acceptable or reasonable level to attract interested parties, and that but for the injunction the Second Defendant would have committed to a sale to Yalart Holdings Limited as the only valid bidder, and that such sale would have been for €6.75 million.
33. Further, notwithstanding that Mr. Luby did not present expert valuation evidence, this would not have precluded the Plaintiffs from relying on such other evidence as emerged during the hearing or commenting on the valuations obtained by the Second Defendant. For example, those valuations were based on a sale of a minority shareholding with minority discount. In the context of a sale to a sister company of an existing shareholder, namely Breccia holding 28% and also my finding at para. 369 that Breccia had ‘…a wider ambition namely to gain a controlling interest in BHL’, the use of the minority discount may not have been appropriate.”
24. Having so stated, the trial judge went on to state at para. 34:
“it is my view that the contents of the letter of 20th February, 2015 from the Second Defendant’s solicitors to the Plaintiffs’ solicitors should in fact and in law be regarded as ‘the event’ that resolved the Plaintiff’s’ remaining claims against the Second Defendant.”
25. Referring to the final paragraph of the letter from which I have quoted in para.19 above, and in particular the sentence which I have underlined for ease of reference, the trial judge stated at para. 36:
“… Although these terms ‘morphed’, to use [counsel’s] phrase, into an agreement the following day, it is clear that had there been no agreement the Second Defendant would have unilaterally proposed to this Court that the Second Defendant be released on these terms. The letter was in reality the Second Defendant’s proposal to the Court. It is not therefore correct to characterise the event leading to release of the Second Defendant as compromised terms. The reality is that it was the unilateral act of the Second Defendant in giving the commitment and undertaking set out in the letter that was the event resolving the Plaintiffs’ residual claims.”
26. The trial judge also noted at para. 37 of his judgment that the letter had for the first time introduced a new marketing strategy of advertisement in national newspapers and 14 days for expressions of interest. In that regard he stated:
“In terms of the Plaintiffs’ remaining claims this substantially provided what they were looking for based on Mr. Luby’s evidence, which of course the Second Defendant had in the form of Mr. Luby’s report of 12th of January 2015 a couple of weeks before the hearing commenced. This proposal could have been presented in an open letter or a Calderbank Letter in advance of the hearing but this never happened. Had it been done that way the Plaintiffs might never have proceeded to hearing against the second defendant, but in any event the Second Defendant would have had a sound basis for seeking costs.”
27. These then were the circumstances and facts which led the trial judge to conclude that the letter dated 20th February 2015 constituted ‘the event’ for the purposes of the general rule under Ord.99 of the Rules of the Superior Courts, so that costs should follow the event save where some special cause can be identified that justifies the Court departing from that rule. However, as I have stated, the question of costs of these discontinued claims fell more properly for consideration under Ord. 26 of the Rules of the Superior Courts, requiring a decision as to what was just in all the circumstances. I do not propose therefore to give a summary of the submissions made to this Court at the initial hearing of the appeals against the costs order made, as it was accepted by the parties at the reconvened hearing that these costs should have been considered under Ord. 26 of the Rules of the Superior Courts. I should add that I satisfied that the trial judge was in error to conclude that the letter dated 20th February 2015 constituted the “event”. The event for the purposes of the negligence/breach of duty claims was the discontinuance of those claims by the plaintiffs. The letter simply provided the context for that discontinuance. It is the discontinuance that was permitted by the Court which brings the issue of the costs of those claims within the jurisdiction provided for in Ord. 26.
28. Even though the trial judge proceeded with the costs issues under Ord. 99 of the Rules of the Superior Courts, he did so by carrying out a balancing exercise of the competing claims when deciding how his discretion should be exercised. That same exercise is one that he would need to have done had he dealt with the matter under Ord. 26. This Court must decide whether or not the manner in which that discretion was exercised, albeit for the purposes of the incorrect rule, is one that ought to be interfered with by this Court on the basis of some clear error of principle on the part of the trial judge. In this regard the Court was referred, inter alia, to the judgment of Hamilton CJ in Spencer v. Kinsella [1999] IESC 16 where he stated:
“Normally costs are at the discretion of the trial judge and this Court would be very reluctant to interfere with the exercise of such discretion by a trial judge who has heard and decided all the matters relevant to the proceedings before him”.
29. Counsel for the plaintiffs has submitted that this was a complex case, evident not only from the fact that the case lasted some 12 days, but also the fact that the trial judge’s judgment itself in the substantive case runs to some 198 pages containing 431 paragraphs. As such, a wide margin of appreciation should be allowed to the judge who in a careful judgment on costs decided ultimately that the justice of the situation was to be met by making no order for these costs.
30. Counsel has submitted also that in order to obtain the benefit which the plaintiffs ultimately secured by virtue of the terms offered in the letter dated 20th February 2015, it was necessary for them to commence and pursue these proceedings so that they could obtain injunctive relief to restrain the sale of the shareholding by the Receiver. In this regard counsel has referred to the correspondence between the parties immediately prior to the commencement of these proceedings, which was referred to also in the High Court.
31. For example, by letter dated 22nd August 2015 to Breccia, the plaintiffs’ solicitors sought certain undertakings, including that Breccia would instruct the Receiver not to offer the shares for sale to any party until their claims in relation to the Shareholders’ Agreement had been determined, as well as an undertaking from the Receiver (the validity of whose appointment was being denied) that he would not offer the shares for sale, or market same, or enter into any agreement to do so, until all the issues between Benray and Breccia had been determined in the proceedings. The letter concluded in the usual way by warning that in the absence of a suitable undertaking being provided, the plaintiffs reserved the right to bring proceedings, including for injunctive relief, and that the costs of such proceedings would be sought.
32. By letter dated 25th August 2015 solicitors for the Receiver sought further time to respond to that letter, and requested that the plaintiffs desist from commencing any proceedings in the meantime.
33. By letter the following day dated 26th August 2015 the Receiver’s solicitors wrote again, this time stating, inter alia, that they were satisfied that the Receiver had been validly appointed and refusing to provide any undertaking that the Receiver would not offer the shares for sale or market same until the issues between Breccia and Benray were determined. It also stated that any proceedings brought by the plaintiffs “will be vigorously defended by the Receiver who will seek from your client the costs of defending any such proceedings”.
34. In a response by letter dated 29th August 2015, the plaintiffs’ solicitors put the Receiver on notice of proceedings between Benray and Breccia, and went on to reiterate their contention that the Receiver’s appointment was unlawful. They again called for the undertakings previously requested and refused, but then stated the following:
“In the alternative, by way of compromise, our client would be willing to accept an undertaking on behalf of your client, that your client would provide seven days notice to our client (and to this office) of any intention on the part of your client to sell, and/or to market, and/or to offer for sale the shares of Benray Limited, or any interest in the shares of Benray Limited pending the determination of the plenary proceedings which are about to be issued. We would be obliged for a reply to this request by noon on Tuesday next, the 2nd prox. on the basis that no steps shall be taken in the meantime to sell, market or otherwise offer for sale the shares, or any interest in the shares, whilst you take your client’s instructions in relation to this request. In the meantime, our clients continue to fully reserve their position.”
35. By letter of the same date to Breccia’s solicitors, the same offer by way of compromise was made.
36. By letter dated 2nd September 2014 the Receiver’s solicitors responded by reiterating their position as to the validity of the Receiver’s appointment and rejecting “outright” any contention to the contrary. This letter went on to state that the Receiver was not prepared to give the undertaking sought, and further that he was “proceeding with the Receivership in the normal course, including taking the appropriate steps for the marketing and ultimate sale of the shares in the Blackrock Hospital Limited”.
37. That correspondence is urged upon the Court as providing relevant context for the trial judge’s consideration and ultimate determination of how his discretion in relation to costs was exercised. It is submitted that in the light of that correspondence, the plaintiffs were completely justified in commencing proceedings for injunctive relief first of all, and to bring claims, inter alia, in negligence and breach of duty arising from how they considered the actions of the Receiver fell so far short of what was reasonable to expect in relation to, in particular, the marketing strategy adopted by the Receiver.
38. That correspondence is relevant also in relation to the point urged by the plaintiffs that the Receiver could have sent a ‘Calderbank letter’ in the same terms as the offer of compromise contained in the letter dated 20th February 2015 instead of waiting to hear what evidence the plaintiffs would adduce on the negligence/breach of duty claims. I will presently address that submission together with the Receiver’s response that until such time as the conspiracy and dishonesty allegations were withdrawn it was not reasonable to expect that the Receiver would consider his position in relation to the remainder of the plaintiffs’ claims.
39. As I have already stated, the initial hearing before this Court in relation to this costs appeal the parties proceeded on the basis of Ord.99, as it had done in the High Court, and no submissions were made in relation to the applicability of Ord.26 of the Rules of the Superior Courts and the jurisdiction which is specifically conferred upon the Court in relation to costs of claims that are discontinued with leave of the court, inter alia, during the trial.
40. Following its own deliberations after that initial hearing the Court considered that Ord.26 of the Rules of the Superior Courts was relevant and that the parties should be given an opportunity to make further submissions in relation to it. A further hearing took place for that purpose when counsel for the plaintiffs and counsel for the Receiver agreed its relevance to the facts of this case, and made further oral submissions, having prepared helpful written submissions in advance of the hearing.
41. Not all of Ord. 26, r.1 is relevant to the present appeal. The following is the relevant part:
“ … save as in this rule otherwise provided, it shall not be competent for the plaintiff to discontinue the action without leave of the court, but the court may before, or at, or after, the hearing or trial, upon such terms as to costs … as may seem just, order the action to be discontinued, or any part of the alleged cause of complaint to be struck out.” [emphasis added]
42. In the present case, the trial judge was informed at the commencement of Day 12 of the hearing that in the light of the letter of the 20th February 2015 received from the Receiver’s solicitors the plaintiffs were not proceeding further with their claims in negligence and breach of duty against the Receiver, and that any question of costs arising in relation thereto should be left over for later determination. In his judgment, as I have already described, the trial judge concluded that “the contents of the letter ……… should in fact and in law be regarded as ‘the event’ that resolved the plaintiffs’ remaining claims against the second defendant”. As already stated, I respectfully disagree with this conclusion. The letter was not the event. The event was rather the withdrawal or discontinuance by the plaintiffs of those claims against the Receiver, albeit in the light of what was contained in the letter. While this letter provides the context for what occurred, ‘the event’ itself must be seen as the withdrawal of those claims by the plaintiffs, albeit in the light of what was stated in the letter. I have already noted that the trial judge’s order in this respect states that the Court released the Receiver from further involvement in the proceedings save as to the issue of costs. This in my view should be seen as the exercise by the trial judge of his jurisdiction under Ord. 26 of the Rules of the Superior Courts permitting those particular claims against the Receiver to be discontinued, or part of the claims be struck out, as provided for in that rule, even though that rule is not explicitly referred to either in the judgment or the order as drawn up. Under the rule, the trial judge may permit discontinuance to occur during the trial “upon such terms as to costs … as may seem just”.
43. It should also be noted that Ord. 99, r.1 commences as follows:
“1. Subject to the provisions of the Acts and any other statutes relating to costs and except as otherwise provided by these Rules …” [emphasis added]
44. It is clear therefore that what is provided for in Ord.99 of the Rules of the Superior Courts is subject to, inter alia, the provisions of Ord. 26, r.1 of the Rules of the Superior Courts. In reality what happened in this case was that the plaintiffs withdrew their negligence and breach of duty claims in the light of what was contained in the letter. They discontinued them, but could do so at that stage of the proceedings only with leave of the court. It is clear from the judgment and order of the trial judge that he permitted them to do so, and released the Receiver from the proceedings save in relation to costs. Thereafter the trial judge was required to determine what order as to costs was just in all the circumstances, or, as stated by Laffoy J. in her judgment in the High Court in Shell E&P Ireland Ltd v. McGrath (No.3) [2007 4 I.R. 277 at 300: “The issue before the court on this application under Ord. 26, r.1 is what provision in relation to costs on allowing the plaintiff to discontinue its claim renders justice as between the plaintiff and the defendants”. It was not necessary to determine whether there was ‘an event’ as such for the purpose of Ord. 99. Indeed, the letter dated 20th February 2015 clearly envisaged that the trial judge should approach the question of costs on the basis of what was just given that it stated towards its conclusion that the question of costs “is a matter that can be more justly determined at the conclusion of the proceedings.” [emphasis added]
45. Accordingly, it does appear that the trial judge erred in his approach to determining costs between the plaintiffs and the second named defendant in September, 2015. By that time, he had delivered his substantive judgment between the plaintiffs and the first named defendant. The plaintiffs, for the reasons already set out, had on days 11 and 12 of the trial respectively withdrawn the conspiracy claim and indicated an intention not to proceed with the remaining claims in negligence and breach of duty against the Receiver. As they could only discontinue with leave of the Court, and in effect the trial judge permitted them to do so whilst indicating that he would deal with the question of costs at the end of the proceedings, he was in September 2015 exercising a discretion given him by Ord. 26, r. 1 rather than Ord. 99, r. 1. That being so the question which he ought to have addressed was what were the “terms as to costs” which would be just as between the plaintiffs and the second named defendant having regard to the proceedings brought, the claims pursued, and the circumstances in which they were withdrawn or sought to be discontinued on days 11 and 12 of the trial.
46. Whilst not framed in that way, the judgment of the trial judge does in substance consider and decide upon a costs order which he believed met “the justice of the situation”. Further he did so by considering on the facts, the relevant questions relating to the differing circumstances and reasons in and for which the plaintiffs withdrew the conspiracy claim and decided not to proceed with the claims for negligence and breach of duty against the Receiver.
47. I consider that notwithstanding the error of principle in the approach of the trial judge the order made by him should nonetheless be upheld as one which was just between the parties.
48. The fact that the Receiver chose not to go into evidence on Day 12 does not alter the fact that the proceedings concluded following the completion of the cross-examination of Mr. Luby in the afternoon of the 19th February 2015. In approaching the question of these costs after he gave judgment on the substantive issues between the plaintiffs and Breccia, the trial judge needed to consider what costs order was “just” as between the plaintiffs and the Receiver. While he did so by reference to Ord. 99, he was in reality deciding in the light of the letter and the run of the case what order was just in all the circumstances. Indeed, Haughton J. may be said to have in substance approached this task in precisely the same manner as contemplated by Ord. 26, r. 1 by determining what order for costs was just in all the circumstances. He was, in my view, entitled to have regard to the evidence given by Mr. Luby when considering the significance for the plaintiffs of the letter dated 20th February 2015, even though the Receiver might have, but chose not to, gone into evidence, perhaps to contest or counter Mr. Luby’s evidence.
49. While Mr. Luby had stated in his evidence that certain actions taken or not taken by the Receiver were “his judgment call”, he nevertheless went on to state that he himself would have acted differently. I accept also that when asked was the Receiver negligent he expressed the view that he was not. But that question would ultimately have been one for the trial judge exclusively. If the trial judge had been called upon to reach a determination as to whether the Receiver had been guilty of negligence or breach of duty, the statement by Mr. Luby that the Receiver was not negligent would not be determinative. The trial judge would have had to consider the evidence of what actions had or had not been taken by the Receiver, and would then have to consider whether those actions or inactions fell short of what could be reasonably expected of a Receiver, applying the well recognised Dunne principles (Dunne v. National Maternity Hospital [1989] I.R. 91) as to professional negligence.
50. Part of that evidence would have been Mr. Luby’s statement that if he had been dealing with the marketing and sale of the shares in this case he would have done things differently. If the Receiver had gone into evidence himself and/or had adduced expert evidence that evidence would have been considered by the trial judge. But any expression of a view by such experts that the Receiver was negligent is not in any way determinative of the issue. The expert on either side can say whether or not the actions of the Receiver did or did not fall short of any particular recognised standard, but ultimately the question of whether it amounts to negligence is a question of law to be decided by the judge alone.
51. In his evidence Mr. Luby had stated what he would have done had he been acting as Receiver and carrying out a marketing campaign in respect of the sale of this shareholding. What he would have done differed to what was done by the Receiver, and largely supported the complaints being made by the plaintiffs. What was contained in the letter written overnight to the plaintiffs’ solicitors at the end of Day 11 reflected to a large extent what Mr. Luby said ought to have been done. I appreciate that the letter was written in the context of what the Receiver was proposing for a new marketing campaign in respect of the shares, and he was making the point that given the passage of time caused by the proceedings a new marketing of the shares would have to take place in any event. I also appreciate that what he proposed doing was offered without any admission of wrongdoing on his part. But given the complaints that were made by the plaintiffs in relation to how the Receiver had acted in relation to the marketing of the shares, the limited nature of that campaign, the minimal nature of the advertisement inserted in just one newspaper, the absence of any identification of the particular hospital, and the very short response time that had been given to any interested party to indicate interest, it was, in my view, perfectly reasonable and open to the trial judge to conclude that the just result be that the plaintiffs should get their costs of those claims against the Receiver. The letter was a decisive document which the plaintiffs were entitled to regard as having addressed their concerns such that it was no longer desirable or necessary to continue the proceedings against the Receiver. Equally, the trial judge was entitled to have regard to the fact that the plaintiffs so regarded the letter, and to take it into account in the exercise of his discretion.
52. I do not overlook that the Receiver has submitted that it was not until such time as the claims of dishonesty, bad faith and conspiracy were withdrawn by the plaintiffs that he could reasonably be expected to give consideration to writing in the terms contained in the letter dated 20th February 2015, and that this should inform the exercise of the trial judge’s discretion in relation to costs. However, I am satisfied that the conspiracy claim formed only one part of the plaintiffs’ claims. The negligence/breach of duty claims were separate and different. One could be dropped without affecting the other. Equally one could be defended without affecting the other.
53. I am satisfied that upon the discontinuance of these claims by the plaintiffs (with the Court’s leave), the trial judge’s jurisdiction to make a costs order exists under Ord.26 of the Rules of the Superior Courts. Allowing him to make such order as to costs as he considered to be just. In my view, it was open to the trial judge to conclude that it was just in all the circumstances that the plaintiffs should be considered to have an entitlement to the costs of the negligence and breach of duty claims, even though they were withdrawn as explained herein. I am not satisfied that there is any basis for interfering with the manner in which he exercised his discretion in this regard. He had a firm evidence-based factual basis for so deciding in the particular circumstances of this case. It was also, as I later state, just in the circumstances of this case to set off one set of costs against the other by making no order as to costs.
54. The second limb of the first issue which was identified by the plaintiffs, as described at para. 10 above is:
“Insofar as it is relevant, was the learned High Court judge correct in finding that the Receiver’s proposal, as set out in the letter of 20th February 2015 could have been presented in an open letter or a Calderbank letter in advance of the hearing, and that had this been done, the plaintiffs might never have proceeded to hearing against the second defendant?”
55. I do not consider it necessary to express any concluded view on that question given the conclusions just expressed in the preceding paragraphs. But I would say that since the Receiver had sight of Mr. Luby’s report in advance of the hearing, and since his evidence was very much in accordance with what he stated in his report, it is hard to avoid the thought that the letter eventually sent on 20th February 2015 could have been sent much sooner, be it in the form of a so-called Calderbank letter or otherwise. It did not, in my view, have to await the withdrawal of the conspiracy claims. In such circumstances, the trial judge might well have been obliged to exercise his discretion differently if a Calderbank letter had been written prior to the hearing commencing. But as I have said, it is unnecessary to express a concluded view on the matter.
The costs of the withdrawn conspiracy claims awarded to the Receiver on a party/party basis
56. The Receiver was found to be entitled to his costs of the conspiracy claims which were withdrawn by the plaintiffs on Day 11. However, he complains that he should have been found entitled to have them awarded on a solicitor and own client basis, and not simply party and party. He has sought to rely upon the judgment of Kelly J. (as he then was) in Geaney v. Elan Corporation plc. [2005] IEHC 111 in which as a mark of “the Court’s displeasure” at the manner in which the defendant has failed to properly comply with its discovery obligations pursuant to an order in that regard, Kelly J. ordered the defendant to pay the plaintiff’s costs of a motion to strike out the defendant’s defence for failure to make proper discovery, on a solicitor and client basis. In addition, Kelly J. had stated that he could see no reason why the plaintiff should be out of pocket by having to bring the motion to strike out the defendant’s defence.
57. In the present case it was urged in the High Court that given the finding by the trial judge that the conspiracy claims, so lately withdrawn, were unmeritorious and ought never to have been brought, and given also that the claim of conspiracy was made against the Receiver acting in his professional capacity, the Court would be justified in penalising the plaintiffs not only by awarding costs, but by doing so on a solicitor/own client basis, so that the Receiver would not be out of pocket at all in relation to the costs of the conspiracy claims.
58. The Receiver relies also on the conclusion by the trial judge at para. 27 of his costs judgment not only that the conspiracy claim was unmeritorious and that it prolonged the trial, but also that once the Receiver’s discovery had been made it ought to have been clear to the plaintiffs that there was no evidence of dishonesty or conspiracy, and those claims should not have been pursued at hearing at all. Also, as submitted by counsel, Mr. Luby made it clear in his evidence that he never subscribed to the conspiracy claims being made by the plaintiffs. He points also to the absence of any apology from the plaintiffs for having alleged dishonesty and conspiracy, and to the strident terms in which during his evidence the first named plaintiff, James Flynn, maintained his allegations of dishonesty and conspiracy despite his knowledge that the Receiver’s discovery bore no trace of evidence to support the allegations which he eventually and belatedly withdrew.
59. While trial judge stated in his costs judgment that an award of solicitor/client costs was something that he could do, he decided in the end that the justice of the situation would be met by simply making no order as to costs, effectively setting off the plaintiffs’ costs of the negligence claims against the Receiver’s costs of the conspiracy claims.
60. As part of the discretion afforded to the trial judge in the matter of costs, including under Ord. 26 there is clearly a discretion to make an award costs on a solicitor/client basis in cases where the judge is satisfied that it is warranted. As he himself stated, it is something which he could have done. But nevertheless he has a discretion. It is very much a matter for the trial judge, who after all is in the very best position to determine how that discretion should be exercised, particularly having heard evidence over a period of 11 days, and having considered and determined the complex issues that arose in a very lengthy and considered judgment. I have already noted at para. 25 above what was stated by Hamilton C.J. in Spencer v. Kinsella [1999] IESC 16, namely:
“Normally costs are at the discretion of the trial judge and this Court would be very reluctant to interfere with the exercise of such discretion by a trial judge who has heard and decided all the matters relevant to the proceedings before him.”
61. The trial judge might well have been justified in finding the Receiver entitled to his costs of meeting the conspiracy and dishonesty claims on a solicitor/client basis, and had he done so this Court would not necessarily have interfered with the exercise of his discretion in that manner. The trial judge had a choice to make, and he was in by far the best position to make it as I have said. This Court should hesitate to interfere with such an exercise of discretion simply because it might have exercised that discretion in a different way. In that respect I would refer to what Clarke J. stated in Nash v. DPP, unreported, Supreme Court, 24th October 2016:
“That is not, of course, to say that an appellate court should not allow an appeal where an error of principle is identified in the approach of the trial court to the question of costs, or where the appellate court feels that the exercise by the trial judge of an assessment in relation to costs has gone outside of the parameters of that margin of appreciation which the trial judge enjoys.”
62. I find no error of principle by the trial judge in his respect, and neither do I feel that he went beyond the parameters of that margin of appreciation which he enjoys in the matter of costs.
63. It should be stated, however, that a plaintiff who seeks to bring claims of dishonesty and conspiracy against any person must be cautious, and should do so only when there is clear evidence that supports a prima facie case in that regard. That caution is all the more important where the defendant is a professional person and where the allegations relate to the manner in which he has acted in his professional capacity. Where that caution is not exercised, and groundless claims are advanced, which ultimately either fail or are withdrawn, the plaintiff is exposed to the risk that costs may be awarded against him/her on a solicitor/client basis. Whether that occurs must always be a matter for the trial judge, and an appellate court should be slow to interfere, except in the clearest of cases.
64. I would therefore not interfere with the trial judge’s conclusion that in making the ultimate order as to costs he should consider the Receiver entitled to the costs of the conspiracy claims on a party and party basis.
The set-off of the orders for costs
65. Again, the question whether the trial judge should have in substance set off one set of costs against the other, rather than make two awards of costs, each to be then taxed and ascertained in default of agreement, so that the party whose costs tax higher than the other will receive the balance in his favour, is a matter within the judge’s discretion as to what is just in all the circumstances.
66. On the facts before the trial judge in September 2015, the plaintiffs had in substance sought to discontinue their entire claim against the Receiver, albeit in two steps on Days 11 and 12 of the trial. The two parts of the claim, namely conspiracy and negligence, had at all stages been included in the same pleadings and were withdrawn/discontinued one day after the other. In such circumstances the trial judge concluded that each party was entitled to the costs of one part of the claim. I agree with that conclusion, for the reasons already stated. It was within his discretion, in all the circumstances, to decide that the justice of the situation would be met by making no order as to costs in relation to the plaintiffs’ and Receiver’s costs i. I would not interfere with this aspect of his order. For the purposes of Ord. 26 of the Rules of the Superior Courts I consider such an order to be just in all the circumstances.
67. For all these reasons, I would affirm the costs order made and dismiss this appeal.
