High Court extends time for Veolia Water to pursue contract damages claim against Fingal County Council regarding tender evaluation issues.

Neutral Citation Number: [2006] IEHC 240

THE HIGH COURT

IN THE MATTER OF COUNCIL DIRECTIVE 92/13/EC

AND IN THE MATTER OF THE EUROPEAN COMMUNITIES (REVIEW PROCEDURES FOR THE AWARD OF CONTRACTS BY ENTITIES

OPERATING IN THE WATER, ENERGY, TRANSPORT AND TELECOMMUNICATIONS SECTORS) REGULATIONS 1993 (S.I. No. 104 of

1993)

[2006 No. 83 JR]

[2006 No. 16 COM]

BETWEEN

VEOLIA WATER UK PLC, BOWEN WATER TECHNOLOGY, SOUTH MIDLAND CONSTRUCTION LIMITED AND CLG DEVELOPMENTS

LIMITED, TRADING AS THE VEOLIA WATER CONSORTIUM

APPLICANTS

AND

FINGAL COUNTY COUNCIL

RESPONDENT

Judgment of Mr. Justice Clarke delivered 22nd June, 2006.

1. Introduction

1.1 I have already delivered judgment in this matter in relation to a preliminary issue concerning whether the applicants were in time

in the bringing of proceedings seeking damages arising out of the award of a water metering contract or should have time extended.

The background to that challenge is fully set out in my previous judgment (Unreported, High Court, Clarke J. 2nd May, 2006).

1.2 As appears from that judgment one matter was left over for further consideration; that is to say the question of whether Veolia

had established an arguable case in respect of its claim based upon what was described in that judgment as the “upgradeability

issue”. On Friday 22nd June I delivered an ex tempore judgment in which I indicated, for the reasons explained in the course of that

judgment, that I was satisfied that Veolia had met the low threshold of arguability sufficient to justify extending time in respect of

that ground as well. The original judgment had concerned three groups of grounds and had determined that Veolia was out of time but

that time should be extended in respect of one group of grounds but not in respect of a second group of grounds.

1.3 Therefore as a result of the combined effect of my original judgment and the later judgment of 22nd June, time has been

extended so as to permit Veolia to pursue its claim in respect of two of the three groups of grounds put forward. Time was not

extended in respect of those grounds associated with the contention that Fingal were in breach of their obligations in respect of the

award process by reason of having evaluated the competing tenders for ranking purposes without reference to what were described

as “provisional items”.

1.4 In the context of that overall result to the preliminary issue both parties addressed arguments concerning how I should deal with

the costs of that issue. Having regard to the obligation upon the Commercial Court to deal, where possible, with the question of

costs, I propose so to do. However before dealing with the costs of this matter, it seems to me that it is appropriate to set out some

principles which, it seems to me, should be applied in the case of the assessment of costs in complex litigation and also in respect of

hearings which do not give rise to a final conclusion to the proceedings.

2. Costs Principles in Complex Litigation

2.1 It is trite to state that in recent times litigation has become more complex. Amongst the consequences of an increased complexity

in litigation are:-

(i) That litigation as a whole (including interlocutory steps) has become more expensive so that much more turns upon the

precise order for costs which may be made at the end of such litigation, or in respect of significant interlocutory matters;

and

(ii) That it is increasingly the case that numbers of relatively discreet issues arise in the course of litigation so that it is

possible to form a view as to whether the result of the litigation as a whole (or, indeed, the result of an individual

interlocutory application) might not properly provide the sole basis for the award of costs in respect of the matter

determined, having regard to the fact that not all of the issues canvassed at the hearing may have been determined in

favour of the party ultimately succeeding on the substantive issue or issues.

2.2 It seems to me that having regard, in particular, to the very substantial sums of money that may be at stake when a court is

considering how to award costs, it is incumbent on the court, at least in complex cases, to at least give consideration to whether it is

necessary to engage in a more detailed analysis of the precise circumstances giving rise to such costs having being incurred before

awarding costs. Furthermore it seems to me to be incumbent on the court to attempt to do justice to the parties by fashioning,

where appropriate, orders of costs which do more than simply award costs to the winning side.

2.3 Having said the above it seems to me that two matters traditionally taken into account by the courts in the award of costs

remain of the highest significance and require to be re-emphasised.

2.4 The first is that costs always remain discretionary and anything which is said concerning the principles which ought normally to

apply in considering the award or refusal of costs should be subject to the caveat that the court always remains open to the

suggestion that, by virtue of special or unusual circumstances, it is appropriate to depart from what otherwise might be the normal

course in respect of an order for costs in a particular case. What I am about to outline is, therefore, in my view, properly described as

the default position which should apply in the absence of such special or unusual circumstances. It should not be taken as, in

anyway, diminishing the courts entitlement to depart from such a position in an appropriate case.

2.5 Secondly the overriding starting position should remain that costs should follow the event. Parties who are required to bring a

case to court in order to secure their rights are, prima facie, entitled to the reasonable costs of maintaining the proceedings. Parties

who successfully defend proceedings are, again prima facie, entitled to the costs to which they have been put in defending what, at

the end of the day, the court has found to be unmeritorious proceedings. Similarly it seems to me that the courts generally (and the

Commercial Court in particular) should be prepared to deal with the costs of contested interlocutory applications on the basis of an

analysis of whether there were proper grounds for bringing, on the one hand, or resisting, on the other hand, the relevant application.

In that context it may be appropriate to distinguish the case of a routine application which would have to be brought in any event as

part of the ordinary course of the proceedings and which is not contested to the extent that the costs of the application are

increased. In such a case it may well be appropriate that the costs either be reserved to the trial judge or be made costs in the

cause.

2.6 Where, as is increasingly the case, an interlocutory application of significance to the interests of the parties and the conduct of

the litigation, is the subject of significant dispute, such applications frequently require to be listed in a manner similar to the listing of

full hearings. In such cases it is appropriate, in general terms, to consider the costs of such applications as stand alone items to be

assessed by virtue of the “event” being the issue which is determined by the interlocutory application.

2.7 Before departing from this latter aspect of the matter it is worth noting that there are certain cases where even a determination

as to what the “event” is, may be a matter of some complexity. For reasons which I will address in due course this case is one of

them.

2.8 However, as indicated above, it seems to me that the starting point of any consideration of costs has to be to identify what the

“event” is and, thereby, identify the winning party. In the ordinary way, if the moving party required to bring either the proceedings

as a whole (where the costs of the litigation as a whole are under consideration) or a particular interlocutory application (where those

costs are involved) in order to secure a substantive or procedural entitlement, which could not be obtained without the hearing

concerned, then that party will be regarded as having succeeded even if not successful on every point. The proceedings, or the

relevant application as the case may be, will have been justified by the result. Where the winning party has not succeeded on all

issues which were argued before the court then it seems to me that, ordinarily, the court should consider whether it is reasonable to

assume that the costs of the parties in pursuing the set of issues before the court were increased by virtue of the successful party

having raised additional issues upon which it was not successful.

2.9 Where the court is so satisfied, then the court should attempt, as best it can, to reflect that fact in its order for costs. Where

the matter before the court involved oral evidence and where the evidence of certain witnesses was directed solely towards an issue

upon which the party who was, in the overall sense, successful, failed, then it seems to me that, ordinarily, the court should disallow

any costs attributable to such witnesses and, indeed, should provide, by way of set off, for the recovery by the unsuccessful party

of the costs attributable to any witnesses which it was forced to call in respect of the same issue. A similar approach should apply to

any discrete item of expenditure incurred solely in respect of an issue upon which the otherwise successful party failed.

2.10 Similarly where it is clear that the length of the trial of whatever issues were before the court was increased by virtue of the

raising of issues upon which the party who was successful in an overall sense, failed, then the court should, again ordinarily, award to

the successful party an amount of costs which reflects not only that that party should be refused costs attributable to any such

elongated hearing, but should also have to, in effect, pay costs to the unsuccessful party in relation to whatever portion of the

hearing the court assesses was attributable to the issue upon which the winning party was unsuccessful.

2.11 Thus, for example, in O’Mahony v. O’Connor Builders (Unreported, High Court, Clarke J. 22nd July, 2005) for the reasons set out

in the judgment of that date, I concluded that the issue under consideration should be resolved in favour of the plaintiff (who was

defendant on the issue concerned). However it is also clear from the judgment that in respect of a significant number of issues raised

at the hearing I found against the plaintiff. At a subsequent hearing I concluded that the original hearing was lengthened by

approximately one day by virtue of the fact that the plaintiff had raised those additional issues. The hearing took in total three days.

In the circumstances I determined in respect of an application for costs that it was appropriate to award the plaintiff the costs of the

issue but confined to a single day’s hearing. That single day was calculated on the basis that the plaintiff was entitled, in general

terms, to be regarded as the winner of the issue in that he had, as defendant on the issue, successfully resisted the making of the

orders sought against him. However I was also of the view that the plaintiff was, prima facie, obliged to pay the defendant one day’s

costs to reflect the fact that the defendant had been, unnecessarily, put to the cost of an additional day’s hearing by virtue of the

plaintiff having raised unmeritorious issues.

2.12 Apart from the fact that such an approach seems to me, in general terms and subject to the overriding discretion to which I

have already referred, to be calculated to meet the justice of similar cases, it also seems to me that such an approach has the merit

of discouraging parties from raising additional unmeritorious issues. This applies to cases where a plaintiff may prolong litigation by

relying on additional unmeritorious grounds further to the grounds upon which the plaintiff may be successful. It equally applies to a

case, such as O’Mahony, where the defendant on the issue (i.e. the plaintiff in the overall proceedings) though successful in the

overall sense in resisting the application, nonetheless prolonged the hearing by a significant margin by raising unmeritorious grounds of

defence.

2.13 I adopted a similar approach to the costs of a hearing involving leave to seek judicial review of a planning decision which resulted

in a judgment in Arklow Holidays v. An Bord Pleanála and Others (2006) IEHC 15. As appears from that judgment, the applicant

obtained leave on some but not all grounds. An exercise similar to that adopted in relation to the costs in O’Mahony followed.

2.14 It seems to me that an approach along those lines is appropriate in more complex litigation involving a variety of issues even

where, in the overall sense, one party may be said to have succeeded and the other party may be said to have failed. Before leaving

the general principle I should, however, add that it seems to me that an approach such as that which I applied in O’Mahony, and

Arklow Holdings and which I propose applying in this case, may not be appropriate in more straightforward litigation, notwithstanding

the fact that some element of a plaintiff’s case or a defendant’s defence may not have succeeded. The fact that such an additional

issue was raised should only affect costs where the raising of the issue could, reasonably, be said to have effected the overall costs

of the litigation to a material extent.

3. The Facts of this Case

3.1 Having identified what I consider to be the proper overall approach to a matter such as this, I return to the question of what the

“event” might be said to be on the facts of this case. As indicated above this is a somewhat complex question.

3.2 On one side counsel for Fingal argues that Fingal has succeeded in excluding a significant number of issues from the proceedings

by virtue of having successfully established that the application, insofar as it relates to those issues, is out of time and that it is not

appropriate to extend time. In that sense it can be said that Fingal has been successful in that, were it not for the hearing, the

matters now excluded would remain in issue. On that basis it is said that Fingal has, in substance, succeeded and should be treated

as the “winner”. It is, therefore, suggested that Fingal is entitled to its costs of the preliminary issue with, if it be necessary, an

allowance in accordance with the principles which I identified above, for the fact that Fingal was not successful on all issues.

3.3 On the other hand counsel for Veolia points to the fact that the trial of a preliminary issue is not what might be described as a

usual step in proceedings. The jurisprudence of the courts make clear that, in the ordinary way, a preliminary issue will only be

directed to be tried if there is at least the possibility (in the event that the issue should be decided in one way) that its resolution

may bring the proceedings as a whole to an end. In that sense, it is argued, Fingal has failed. Viewed in that perspective, the reason

why there was a preliminary issue in the first place was because Fingal urged upon the court that the time bar issue should be tried in

a preliminary fashion. The stated purpose of the application was that in the event that it was resolved in Fingal’s favour, the

proceedings as a whole would be at an end. On that basis it is contended that Fingal, having failed to achieve the end concerned,

can properly be said to have lost the application (albeit with some limited element of success). In those circumstances Veolia

contends that it is, prima facie, entitled to the costs of the preliminary issue with, it is conceded, some appropriate allowance being

made for the fact that it failed on some issues. I have to confess that there is merit in both approaches. It is fair to say that counsel

for Fingal is correct when he asserts that the reason why the issue was, at least partly, successfully resolved in his favour was that,

as a result of my earlier findings, Veolia brought proceedings which should not, having regard to the time bar, have been brought at

least insofar as they related to the now excluded grounds. On the other hand counsel for Veolia is almost certainly correct when he

submits that the preliminary issue would not, almost certainly, have been directed to be tried at all, if it were confined only to some

of the grounds. Thus if Fingal had urged that a preliminary issue be tried as to whether those aspects of the claim (and only those

aspects) which I have now found to be time barred were to be regarded as time barred, it is unlikely that a preliminary issue would

have been directed in the first place.

3.4 It is also necessary to give consideration to the effect on the length of the hearing by the raising of the various issues by both

parties. In substance there were four matters before the court. The first was a legal issue as to when time began to run. Fingal was

successful on that issue. The parties appear to accept that that issue took approximately one day of a six day hearing.

3.5 The other three issues, insofar as they related both to the facts and to the law, concerned the proper approach to the extension

of time in respect of the three separate groups of grounds of challenge, having regard to when it might be said that Veolia knew or

ought to have known of its grounds of complaint and the extent to which Fingal might be said to be blameworthy in respect of any

lack of knowledge. The three sets of issues were, therefore, to a not insignificant extent, interlinked.

3.6 Firstly it should be noted that only two witnesses were called, one on each side, both of whom dealt with all issues. There is not,

therefore, on the facts of this case, any reason for making any special order in respect of the costs of the attendance of witnesses.

3.7 While it is true to state that Veolia was successful in obtaining an extension of time in relation to two of the three groups of

grounds advanced at the hearing it should also be noted that the third set of grounds (that is to say upgradeability, as ultimately

determined in my ex tempore judgment of 22nd June) was not as central to the case or as extensive as the other two sets of issues.

In those circumstances it seems to me that the length of time devoted to the specifics of these three issues might be said to slightly

favour Veolia but by a margin significantly less than two thirds to one third. A number of general legal and background factual matters

had to be canvassed in respect of the extension of time issue generally and, therefore, applied equally to all three sets of grounds

and the time devoted to these matters should be apportioned in a proportionate fashion.

3.8 It can, therefore, be fairly said that insofar as either party may be said to have been successful in relation to the specific issues

canvassed before the court the matter comes out at very close to equality.

3.9 If it were reasonably clear as to which party could be said to have been successful, then, in that eventuality, it would be

appropriate, in my view, to award that party their costs and to assess the extent by which the hearing as a whole had been

lengthened by the fact that that party raised issues upon which it was not successful. However where, as here, there are two

equally valid ways of looking at which party might be said to have been successful, then it seems to me that it is appropriate to base

the award of costs on an assessment of how much of the hearing might be said to be attributable to the issues upon which each

party succeeded. In that context issues which would have arisen in any event (such as the legal principles applicable to an extension

of time and the necessary background information to enable the court to have a proper understanding of the tender process) should,

as I have indicated above, be attributed proportionally across the range of issues to which they were applicable for the purposes of

coming to a global view as to the length of time taken at the hearing in respect of issues upon which either party might be said to

have succeeded. For the reasons indicated above I am satisfied that an analysis on that basis results in a roughly equal allocation of

time in favour of both parties. In those unusual circumstances it seems to me that the justice of the case will be met by making no

order as to costs.

3.10 I should finally add that in the event that I am wrong in that overall approach and that it is appropriate to regard either side as

having substantially succeeded then the following would have been my assessment of the practical implications of such a view in

either case.

3.11 In the event that Fingal should be regarded as having succeeded, then it seems to me that the case was lengthened by a period

of a little more than one day by the addition to the hearing of matters specifically related to the issues upon which Fingal failed. On

that basis Fingal would prima facie be entitled to the costs of a five day hearing but would have to concede costs in respect of a one

day hearing and would, therefore, in principle, be entitled to an order for costs on the basis of a four day hearing.

3.12 In the event that Veolia should be regarded as having been successful then it seems to me that the hearing could be said to

have been lengthened by a little less than two days by dealing with the issues (including the legal issue) upon which Veolia failed. In

those circumstances the appropriate order would be to award Veolia costs based on a two day hearing. It should be noted that the

remaining three days (above and beyond the time specifically attributed under this paragraph and p. 3.11) were, in my view,

attributable to the general legal and background issues that were applicable to all three sets of grounds.

4. Conclusions

However for the reasons indicated above it seems to me that in the unusual circumstances of this case both parties can, on the basis

of an equally legitimate view, be taken to have succeeded and having regard to the fact that an overall assessment of the time

attributable to those issues upon which each party was successful leads to rough equality, I have therefore come to the view that no

order as to costs should be made.