High Court: Application for costs on ‘solicitor and client’ basis refused



High Court
High Court

A group of companies seeking costs on the “solicitor and client” basis have had their application refused in the High Court.

After setting out the legal principles that Courts should follow in considering the form of a costs order, Mr Justice David Barniville said the defendant’s reasoning for not entering an appearance and breaching the Rules of the Superior Courts was not totally unreasonable and did not merit a departure from the normal position of “party and party” costs.

Background

In November 2016, the plaintiffs, Trafalgar Developments Ltd, Instantania Holdings Ltd, Kamara Ltd and Bairiki Incorporated,brought proceedings against 11 defendants.

The plaintiffs allege that the defendants were co-conspirators in a “scheme” the intention of which was to deprive the plaintiffs of their shares in a Russian company called OJSC Togliattiazot (ToAZ). The plaintiffs allege that this was for the ultimate benefit of the first defendant, Dmitry Mazepin.

Application for costs on “solicitor and client” basis

The within judgment concerned an application for costs against the ninth defendant, Androula Charilaou, on “solicitor and client” basis.

Ms Charilaou was served in Cyprus with notice of the plenary summons commencing the proceedings in February 2017; however, she did not enter an appearance within five weeks of service required by O.12, r.2(3)(a) of the RSC.

In June 2018, the plaintiffs issued a motion for judgment in default of appearance against (inter alia) Ms Charilaou – this was listed for hearing on 27 July 2018.

On 25 July 2018, an unconditional appearance was filed on behalf of Ms Charilaou; thus the motion for judgment in default of appearance did not proceed against Ms Charilaou, and she agreed to pay the costs of the motion.

Mr Justice Barniville said that the “complicated” issue arising in the present case was “more interesting than many costs issues encountered by the courts”. He explained that, although Ms Charilaou conceded to costs of the motion on the “party and party” basis, the plaintiffs contended that the Court should make an order for costs on the “solicitor and client” basis due to her “deliberate decision to hold off entering an appearance to the proceedings until the last minute, as part of a deliberate strategy on her part, which caused delay in the conduct of the proceedings”. Furthermore, they argued that there was “considerable expense” incurred in translating documents into Greek for service on Ms Charilaou in Cyprus.

Legal principles

Firstly, Mr Justice Barniville considered the observations made in Geaney v Elan Corporation Plc [2005] IEHC 111, Dunnes Stores v An Bord Pleanála [2016] IEHC 697, Shell E&P Ireland v McGrath and ors [2007] IEHC 144, and Flynn and anor v Breccia and anor [2017] IECA 163.

From these cases and Order 99 rule 10 RSC, Mr Justice Barniville said the following could be derived:

  1. The normal position is that where costs are awarded against one party in favour of another, those costs will be taxed or adjudicated on the “party and party” basis.
  2. The Court has discretion to depart from the normal position in the particular circumstances of the case and to direct that costs be taxed or adjudicated on the “solicitor and client” basis.
  3. There has to be a good reason for the Court to depart from the normal position and to make an order for costs on “solicitor and client” basis (or on the even more severe basis, “solicitor and own client” basis).
  4. The Court may exercise its discretion to order costs on “solicitor and client” basis where it wishes to mark its disapproval of, or displeasure at, the conduct of the party against which the costs order is being made. 
  5. The conduct in question can include:
    1. A particularly serious breach of the party’s discovery obligations;
    2. An abuse of process by that party in commencing and maintaining proceedings for an improper purpose or for an ulterior motive, designed to seek collateral and improper advantage;
    3. The failure to exercise the requisite caution in commencing proceedings making claims of fraud or dishonesty or conspiracy without ensuring there exists clear evidence supporting a prima facie case concerning such claims;
    4. Any other conduct which the Court considers merits being marked by the Court’s displeasure or disapproval, such as a particularly serious or blatant breach of a Court order, the directions of the Court, or the RSC.
  6. In considering whether the conduct of a party is such that the Court should exercise discretion to make an order for costs on the “solicitor and client” basis, the Court should:
    1. Clearly identify the particular conduct or behaviour of the party which is said to afford the basis for the Court exercising its discretion to award costs on the “solicitor and client” basis;
    2. Carefully examine and consider the explanation (if any) offered by the party for the conduct or behaviour in question;
    3. Carefully consider and examine the consequences (if any) of the conduct or behaviour in question for the other party, whether in terms of delay or costs or any other form of prejudice to that party;
    4. In light of the above, determine whether, in all the circumstances, it would be appropriate and in the interests of justice to award costs on the “solicitor and client” basis under O.99, r.10(3).
  7. While a failure to comply with the provisions of the RSC or of a direction or order of the Court normally merits the award of costs against the party in default, such costs will normally be awarded on the “party and party” basis. It will generally only be if the breach or failure to comply is of a particularly blatant or serious nature, having serious consequences for the other party, that the Court will be justified, in the exercise of its discretion, to award costs on the “solicitor and client” basis (or, exceptionally, on the “solicitor and own client basis”).

Decision on the application for costs

Applying the principles, Mr Justice Barniville concluded that, while Ms Charilaou’s decision not to enter an appearance following service of the proceedings until just before the hearing of the motion for judgment in default of appearance, amounted to default on her part and a breach of the requirement under O.12, r.2(3)(a) to enter an appearance within five weeks of service, the explanation given by her for that decision (to avoid becoming embroiled in the proceedings until it was absolutely necessary to do so), is not totally unreasonable.

While this contributed to some delay in the progress of the proceedings, the actions and conduct of other defendants also contributed to the delays.

Mr Justice Barniville commented that, on the evidence, Ms Charilaou’s conduct was not consistent with the existence of a deliberate strategy to delay the proceedings.

In those circumstances, Mr Justice Barniville concluded that it would not be in the interests of justice and would be unfair to Ms Charilaou to accede to the plaintiffs’ application, and that the appropriate order to make was an order for costs on the “party and party” basis.

This order was subject to the qualification that, as part of the costs to be adjudicated, Ms Charilaou should bear all of the costs incurred in translating certain documents and serving certain documents to her in Cyprus.

© Irish Legal News Ltd 2020

Tags: Legal costs



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