Supreme Court partially allows appeal on costs in family separation, awarding 40% to appellant and 60% to respondent.

THE SUPREME COURT

[Appeal No: 323/2014]

Denham C.J.

Clarke J.

MacMenamin J.

In the Matter of the Judicial Separation & Family Law Reform Act, 1989;

And in the Matter of the Family Law Act, 1995

Between/

M.D.

Applicant/Respondent

and

N.D.

Respondent/Appellant

Judgment of Mr. Justice Clarke delivered the 23rd July, 2015.

1. Introduction

1.1 This judgment is concerned with the costs of aspects of these proceedings in the High Court and also with the costs of this

appeal. These costs issues follow on from the joint judgment which I delivered with MacMenamin J. on the substantive issues which

arose on this appeal (D. v. D. [2015] IESC 16).

1.2 Although I agree with a great deal of what is said by MacMenamin J. in his judgment on these costs issues, I have come to a

different conclusion as to the way in which the principles which MacMenamin J. identifies should be applied in this case.

2. The Principles

2.1 Because the jurisprudence and reasoning which lie behind those principles have been so fully analysed in the judgment of

MacMenamin J., I do not propose to say very much on that topic other than to summarise my own views which I do not believe differ

materially from those of MacMenamin J. It is also unnecessary for me to repeat the facts which are relevant to the costs issues

concerned for these are also fully set out in the judgment of MacMenamin J.

2.2 For the reasons which MacMenamin J. has advanced, it seems to me that a different approach needs to be taken to the costs of

matrimonial proceedings than that which is appropriate in many other forms of civil proceedings. This is so not least in matrimonial

cases which are substantially concerned with the division of assets and other financial resources. Costs have to be borne by one or

other party. Those costs will inevitably diminish the overall resources available. A court, in deciding on the proper provision which

requires to be ordered, must have regard to the fact that the overall resources from which that provision can be made will inevitably

be diminished by whatever costs are incurred in the litigation. It seems to me that in any case where the Court is minded (as the

Court was in this case) to divide the available financial resources on a broadly equal basis between the parties (even if not

necessarily on a strict 50/50 basis), the starting point or default position should be that the Court should make no order as to costs

and thus require both parties to bear their own costs. That is so precisely because to make any other order, unless there were good

reason for so doing, would in fact have the potential to significantly interfere with the provision made. If the party providing assets or

resources as a result of any court order is required to also pay costs then that party will end up, for no good reason, materially worse

off than the party to whom provision is made. Likewise, if the party to whom provision is to be made ends up paying costs then that

party will get less provision than might have been intended.

2.3 I, therefore, agree with MacMenamin J. that the broad based approach should be the starting point and that, ordinarily, it may

well be that in many cases where there is a broadly equal sharing of the resources available that approach will require, as part of the

very exercise of ensuring broad equality, that both parties bear their own costs. Obviously, somewhat different considerations might

apply in a case where the Court did not consider it appropriate to conclude that whatever provision was to be made would lead to a

broad equality of resources.

2.4 However, I also agree with MacMenamin J. that regard has to be had to the Veolia principles (see Veolia Water UK plc v. Fingal

County Council (No. 2) [2007] 2 I.R. 81). By virtue of those principles, a court should consider whether it needs to depart from what

might be the default position to reflect the fact that the costs of the litigation have been increased because of unmeritorious actions

taken by one or other party. The precise application of the Veolia principles in the context of family law will, however, likely be

different to the application of those same principles in, for example, commercial litigation. In ordinary inter partes litigation the starting

point is that the winner obtains an order for all reasonable costs against the loser. Costs, as it is put, follow the event. In such a

context, the Veolia principles require the Court to consider whether unmeritorious action on the part of the winning party has had the

effect of increasing the costs of the litigation as a whole to a material extent. If the Court so finds, then the Court should give

serious consideration to adjusting its order as to costs to reflect that fact. An unsuccessful defendant may properly be obliged to pay

the plaintiff’s costs. However, if that unsuccessful defendant has been put to a great deal of additional and unnecessary expense

because of the way in which the case was run by the successful plaintiff then that fact needs to be taken into account in fashioning

an appropriate and just order as to costs.

2.5 For the avoidance of doubt, it is important to identify, however, the proper extent of the application of the Veolia principles.

Those principles were recently summarised by Barrett J. in IBB Internet Services Limited and ors. v. Motorola Limited [2015] I.E.H.C.

445 at para. 6 of his judgment where he says the following:-

“6. …In Veolia Water U.K. plc v. Fingal County Council (No.2) [2007] 2 I.R. 81, Clarke J. outlined a number of relevant

considerations that arise in applications for costs in more complex cases. These can be summarised as follows. First,

the overriding principle is that ‘costs follow the event’. Second, the party who wins the ‘event’ should get full costs.

Third, the court should consider departing from awarding full costs to such a party where it is clear that it materially

added to the costs of the proceedings by raising arguments or grounds found by the court to be unmeritorious; in doing

so the court should focus on whether the costs of the proceedings as a whole were materially increased. Fourth, there

can be other factors relevant to the award of costs. Less than a decade after Clarke J. made his observations in Veolia

(No.2), they are now cited in so many applications for costs and have been relied upon in so many prominent cases

(e.g. Kavanagh v. Ireland & Ors [2007] IEHC 389 (Smyth J.), Mennolly Homes Ltd. v. Appeal Commissioners [2010] IEHC

56 (Charleton J.), and McAleenan v. AIG (Europe) Ltd. [2010] IEHC 279 (Finlay Geoghegan J.)) that it does not seem

premature to state that those observations ought now to be treated as, and in truth are, representative - indeed they

were likely to some extent determinative - of current settled practice in this area.”

2.6 There has, in my view, sometimes been a misunderstanding about the proper application of those principles and in particular the

third point noted by Barrett J. in IBB Internet Services. As Barrett J. points out, the circumstances in which a court should consider

departing from awarding full costs is “where it is clear that (the relevant party) materially added to the costs of the proceedings by

raising arguments or grounds found by the Court to be unmeritorious”. In addition, Barrett J. correctly notes that in so doing, the

Court should focus on whether the costs of the proceedings as a whole were materially increased. It is clear, therefore, that the

proper application of the Veolia principles does not involve the Court in simply determining that an otherwise successful party was

unsuccessful on one or more points raised. It is necessary, in order to depart from the principle that costs follow the event, that it be

“clear” that the raising of those additional unmeritorious points actually and materially increased the costs of the case. For example, it

is by no means clear that the costs of a judicial review hearing which finishes within a day but which involved five points would be, to

any material extent, greater than the costs of a similar judicial review proceeding which also finished within a day but which involved

only three points. In such a case, the fact that one or more of the relevant points were lost by the otherwise successful party might

well not, therefore, legitimately lead to the view that it was clear that the costs had been increased. The Court must not only be

satisfied that the otherwise successful party has raised unmeritorious points but also that it is clear that the raising of those points

has materially increased the costs of the litigation as a whole.

2.7 It should also be emphasised that a party who is forced to come to court to obtain some relief which was not otherwise available

to it must, ordinarily, be taken to have “won” the proceedings although, as pointed out in Veolia itself, there may be certain types of

cases or applications where it may be less clear as to what the “event” is. Likewise, a party which successfully defends proceedings

must also be taken to have “won”. It should also be noted that courts frequently do not have to resolve some of the issues raised

because of the view which the Court takes on other issues. It would be wrong to penalise an otherwise successful party by not

awarding them costs attributable to issues which were reasonably raised but which did not have to be resolved because of the way in

which other issues in the case were determined. I will return, later in this judgment, to the question of how best to apply the Veolia

principles in practice.

2.8 However, for the reasons already identified, in many cases the starting point in family law proceedings will be that both parties

are to bear their own costs. In many such cases there will also be aspects of the litigation which are inevitable in any event. There

may be genuine differences of opinion as to the value of assets or as to the best way to divide up resources. Where the parties have

acted reasonably in relation both to the conduct of the litigation and in any attempts to resolve it (such as, as MacMenamin J. points

out, by writing focused Calderbank letters and the like) then the reasonable costs incurred are an inevitable, if unfortunate,

consequence of marital breakdown. Those costs should be borne equally in cases where the assets and financial resources are

likewise being distributed on the basis of broad equality.

2.9 Where, however, it can be shown that a party to family litigation has acted unmeritoriously in the conduct of the case and has

thereby significantly increased the costs of the proceedings, a court should attempt the same broad task which was identified in

Veolia and attempt to adjust the default costs order to reflect the fact that the other party has been put to significant additional

costs because of an unmeritorious course of action adopted by an opponent.

2.10 Before going on to the application of those general principles to the facts of this case I should state that, in my view, a trial

judge considering costs issues under the Veolia principles must be afforded a significant margin of appreciation both as to the

question of whether it is appropriate to deviate from the default position in the first place but also as to the manner and extent to

which any appropriate deviation should occur. There is a range of methods by which a court can properly reflect the fact that an

otherwise successful party has made the proceedings significantly more expensive than necessary by adopting an unmeritorious

position or by conducting itself in an improper fashion. Sometimes it may be possible to identify with precision a particular area of

costs which can be subjected to a costs order which is different from the order made in respect of the remainder of the costs of the

proceedings. For example, there may have been a discreet hearing on a particular issue which was decided against an otherwise

successful party. It may be appropriate to award the costs of that separate hearing in a different way to the costs of the remainder

of the proceedings. Likewise, there might be circumstances where the costs of a particular expert witness or witnesses might be dealt

with separately. There is no necessarily correct way in which it may be appropriate to apply the Veolia principles. It is very much a

case of the trial judge deciding how best to deal with the particular circumstances which have arisen in the case in question.

2.11 I now turn to the application of those general principles to this case.

3. Application to this Case

3.1 What the trial judge appears to have done in awarding Ms. D. 80% of the costs of the relevant hearing in the High Court and 80%

of those interlocutory costs which had not otherwise been specifically dealt with was to take a broad view that Mr. D. had been

successful on some issues which had been unmeritoriously raised by Ms. D. and that it followed that Ms. D. should not be entitled to

full costs but only to 80% of her costs in order to reflect that fact. Where I differ from MacMenamin J. is that I feel that that

approach was in itself an error in principle. In my view, the trial judge should have started on the basis that both sides should pay

their own costs but should, legitimately, have deviated from that position to reflect the fact that the trial judge came to the view

that Mr. D. had significantly contributed to the complexity and difficulty of the case because of his actions. I will return to this point

later in this judgment. However, I would not second guess the trial judge’s assessment of the fact that the proceedings had been

made more lengthy and complex (and thus more expensive) by unreasonable action on Mr. D.’s part and the raising by him of

unmeritorious issues. The trial judge was in a much better position, having dealt with the case over a prolonged period, to make such

a judgment. The trial judge was also in a better position to determine how best to deal with the consequences of that judgment.

While this is a point to which I will also return, I should, at this stage, state that I would not second guess the trial judge’s view that

it was appropriate, in all the circumstances of this case, to deal with that issue by adopting a broad brush percentage approach.

3.2 Neither would I second guess the trial judge’s assessment of 20% as representing the proportion of the overall costs attributable

to those issues which were unmeritoriously raised by Ms. D. I appreciate that counsel for Mr. D. attempted to conduct a detailed

exercise, by reference to the transcript, of analysing the time spent dealing with various types of issues with a view to suggesting

that the 20% figure fixed on by the trial judge was an underestimate. As noted earlier, I do not believe that the proper application of

the Veolia principles is really capable of that sort of minute analysis. The costs of litigation are affected by a range of issues. The

length of time spent on various issues in the course of a hearing is a significant, but by no means the only, factor. The fact that

there is a hearing at all brings with it some costs irrespective of the issues. The presence of expert witnesses means that the costs

associated with issues requiring such expertise may be greater than other issues. In reasonably lengthy litigation the fees of lawyers

are structured in a way in which they are not necessarily directly proportionate to the number of hours or minutes spent on a

particular issue.

3.3 In those circumstances, it seems to me that a trial judge who becomes satisfied that the Veolia principles ought to be invoked to

deviate from what might otherwise be the proper costs order may necessarily have to take a relatively broad brush approach. Indeed,

adopting any other course of action may, in many cases, be likely to be counterproductive, for it would turn the exercise of

determining the proper order as to costs into a major forensic debate in and of itself, thus adding significantly to the overall costs of

the litigation. It would only be appropriate for this Court, on an appeal, to vary the assessment of the trial judge of the extent to

which costs had been increased by the actions of a relevant party if that assessment was clearly and significantly wrong. I am not

satisfied that it has been demonstrated that the assessment of 20%, as being the costs attributable to those issues which were

unmeritoriously raised by Ms. D., has been shown to be clearly and significantly wrong.

3.4 It might, of course, have been the case that the trial judge might have attempted to isolate a particular number of days of the

hearing and deal with the costs attributable to those days in a manner appropriate to reflect the unmeritorious issues raised by Ms. D.

on which Mr. D. succeeded. That is undoubtedly an approach which a trial judge, in an appropriate case, may choose to adopt.

However, it is also open to the view that it would have been very difficult, in the circumstances of this case, to make a fair and exact

finding as to just by how much Mr. D.’s costs had been increased by the raising of the relevant issues simply by reference to a

number of days’ hearing. First, there was no separate and distinct hearing in relation to the issues concerned. Second, it is by no

means clear as to how much of the overall cumulative cost of all expert witnesses was attributable to dealing with those issues.

Furthermore, it is not clear as to the extent to which solicitors’ instruction fees or barristers’ brief fees may themselves have been

higher because of the greater complexity and scale of the case which resulted from the raising by Ms. D. of those unmeritorious

issues. While the trial judge was not, therefore, in any way bound to approach this case on the basis of an estimate of a percentage

of costs, such an approach was, in my view, well within the range of approaches which were open to the trial judge. That was so

particularly in the circumstances of this case where it would have been difficult to disentangle, with any real degree of precision, the

costs attributable to the issues in respect of which a separate order in relation to Mr. D.’s costs was required to be made.

3.5 There is, however, another issue which, in my view, the trial judge should have taken into account. There clearly were some

aspects of the hearing in the High Court to which the judgment relates which would almost inevitably have been required in any

event. There were differences between responsible experts as to the valuation of property and as to the way in which property could

most beneficially be sold. A resolution of those differences would have been required in any event. As the Court understands it, there

was no position adopted in a Calderbank type letter which would have been material to treating the costs of any of those valuation

issues as properly falling on one party. The situation might well have been different had the trial judge completely accepted the

valuation of one or other side, or if the valuation of any relevant asset as found by the trial judge demonstrated that one party ought

reasonably to have accepted the position on the valuation of the asset concerned as set out by its opponent in a Calderbank letter.

However, no such considerations arise in this case.

3.6 In those circumstances, it is appropriate to divide up the costs which arose before the High Court into three different categories.

The first category relates to those issues which would have arisen in any event. Applying the same broad brush approach as was

properly adopted by the trial judge in respect of identifying the costs attributable to those issues unmeritoriously raised by Ms. D., I

would estimate that 20% of the total costs incurred in the High Court related to issues which would have been required to have been

dealt with in any event.

3.7 The second category of costs relates to those issues unmeritoriously raised by Ms. D. As already noted, I do not believe that

there is any basis for disturbing the assessment of the trial judge to the effect that a further 20% of the costs incurred in the High

Court are attributable to those issues.

3.8 The third category relates to the balance of the costs and again, for the reasons which I have already sought to identify, I see

no reason to disturb the decision of the trial judge that the balance of the costs (being 60% of the total costs) are properly

attributable to issues on which Ms. D. was successful and where those issues only arose because of unmeritorious positions taken, or

actions conducted, by Mr. D.

3.9 It follows that the analysis of the costs of both parties is that 20% of those costs would have been incurred in any event, a

further 20% was incurred because of unmeritorious issues raised by Ms D. on which Mr. D. succeeded, while the balance of 60%

relates to unmeritorious issues raised by Mr. D. on which he failed, or were otherwise attributable to improper actions by Mr. D.

3.10 Given that the starting point for the allocation of costs is, for the reasons already set out, that both parties should pay their

own costs, it follows that the first 20% of costs should be directed to be borne by each party paying that part of their own costs for

those costs would have been incurred in any event. It further follows that Mr. D. should be entitled, as against Ms. D., to 20% of his

costs, for that is the estimate of the additional cost to which he was put by having to successfully deal with unmeritorious issues

raised by her. Likewise, Ms. D. should be entitled to 60% of her costs, for that is the estimate of the proportion of her costs which

are attributable to issues which she had to deal with because of unmeritorious positions adopted by Mr. D. or as a result of improper

actions on his part.

3.11 The effect of those considerations is that there should be no order as to 20% of costs, an order in favour of Mr. D. in respect of

a second 20% of costs, and an order in favour of Ms. D. of 60% of costs. All such costs should be set off one against the other so

that a net order that Ms D. recover 40% of the costs incurred in the High Court follows from a proper consideration of each of those

elements.

3.12 For the purposes of clarity I should add that, in my view, Mr. D. should actually be awarded 20% of the costs although they

require to be set off in the manner which I have specified. In my view, the order of the trial judge, which simply directed that Mr. D.

would not have to pay 20% of the costs which might otherwise have to be paid to Ms. D., was insufficient and amounted to an error

in principle. An actual order in favour of Mr. D. was the appropriate course of action to adopt. That is what the Veolia principles

require. Mr. D. was put to significant additional expense in having to fight the issues concerned because Ms. D. chose to raise them.

Having raised those issues and having failed on them, it seems to me that Mr. D. is entitled to his costs of that issue.

3.13 I do not disagree with MacMenamin J. that the same overall approach should be applied to all interlocutory costs (except for

those in respect of which an actual order as to costs had already been made) as should be applied to the costs of the hearing. While

it might be possible to attempt to minutely examine each of the applications before the High Court, I am of the view that it is better

to regard those interlocutory applications in respect of which the High Court judge did not make a specific order, (being an order

designed to reflect the trial judge’s view of the merits of the application in question), as part of the overall costs and to subject them

to the same general regime as I have indicated should be applied to the costs of the substantive hearing. While I obviously differ from

MacMenamin J. on what the overall approach should be, I agree that it should be applied to the relevant interlocutory costs as well,

and would propose that Ms. D. be awarded 40% of those costs on that basis. Finally, I should express my agreement with the views

expressed by MacMenamin J. on the issue of interlocutory costs in respect of which no order at all was made.

4. The Costs of this Appeal

4.1 It was Mr. D. who instigated the appeal in this case. In substance, his appeal failed. Indeed, he actually ended up slightly worse

off as a result of the range of adjustments which this Court felt ought be made. On that basis, it seems to necessarily follow that Mr.

D. should have to pay the costs of the substantive appeal. It is true that there were some issues raised on the appeal by Ms. D. on

which she was unsuccessful. However, the substantive appeal (i.e. the appeal other than the separate hearing on the question of

costs) would not, in my view, have been significantly longer and/or more costly even if those issues had not been raised.

4.2 In addition, it must be recalled that the issues raised by Ms. D. were in the context of a cross appeal. Regard must always be had

to the fact that a party on whom a notice of appeal is served may well decide to bring a cross appeal in circumstances where, if their

opponent had been prepared to leave the High Court judgment unchallenged, those issues would not have been raised at all as a

basis for a stand alone appeal. It follows that the costs of the hearing of the substantive appeal should be awarded to Ms. D. in full.

However, having found that Mr. D. was entitled to succeed on his appeal against costs, and in light of the fact that there was a

separate day’s hearing devoted solely to that question, it seems to me to equally follow that Mr. D. is entitled to his costs of the

second day. Both sets of costs in relation to this appeal should be set off one against the other.

4.3 It might be thought that there is something of an inconsistency between the fact that I have proposed that the costs in the High

Court should be dealt with on the broad brush percentage approach, which I have already analysed, while the costs of the appeal are

proposed to be dealt with by distinguishing between the costs of the appeal generally, on the one hand, and the specific costs

relating to the second day’s hearing, on the other. However, unlike the costs of the High Court, it seems to me that it is possible to

fairly and appropriately segregate those aspects of the costs of the appeal to which Mr. D. is entitled. There was an entirely separate

hearing, with its own separate written submissions, devoted solely to the question of costs. Unlike the position which pertained in

respect of the High Court costs, it seems to me that it is possible, in this context, to readily segregate the costs to which Mr. D. is

entitled by way of set off by specifying those costs by reference to the costs attributable to the second day’s hearing.

5. Conclusions

5.1 For the reasons set out in this judgment I would propose allowing, in part, Mr. D.’s appeal against the costs order of the High

Court which awarded 80% of the costs (including interlocutory costs not otherwise dealt with) against him. I would propose

substituting an order confined to 40% of those costs.

5.2 So far as the costs of the appeal to this Court are concerned, I would award the costs of the appeal generally to Ms. D. with the

exception of any additional costs associated with the second day’s hearing directed to the appeal against the costs of the High

Court. As I have, in substance, found in favour of Mr. D. on that latter issue, I would propose that the costs attributable to that

second day be awarded to Mr. D. and be set off against the costs awarded to Ms. D. The net position should be taxed in default of

agreement.