High Court of Justice in Northern Ireland Queen's Bench Division Decisions

O’Neill v J Donnell Murphy (t/a Murphy Kerr & Co Solicitors) [2002] NIQB 50 (13 September 2002)

Judgment: approved by the Court for handing down

(subject to editorial corrections)

IN THE HIGH COURT OF JUSTICE IN NORTHERN IRELAND QUEEN’S BENCH DIVISION _______

BETWEEN

CHARLES O’NEILL and GOLFLINK SYSTEMS LIMITED

Plaintiffs

and J DONNELL MURPHY T/A MURPHY KERR & CO SOLICITORS (A FIRM)

Defendant

________

WEATHERUP J

[1] The plaintiffs obtained judgment against the defendant for £16,500 and interest and the defendant resists the plaintiffs’ application for the costs of the action to be awarded against the defendant.

[2] The plaintiffs claimed damages for loss and damage alleged to have been sustained by reason of the negligence and breach of contract of the defendant in the provision of legal services for the plaintiffs. The loss and damage claimed by the plaintiffs related to their business of the provision of computer services to golf clubs. The original statement of claim of 24 March 1999 claimed £482,000 damages for loss of sales and maintenance and in addition there was a claim for general damages for loss of goodwill and business reputation. The claim was amended to special damages of £1.7M together with a quantified claim for the loss of loans to finance the business. By further amendment the claim for special damages was reduced to £1.4M and by final amendment the total special damage was reduced to £650,000.

[3] On 30 April 2001 the defendant sent a “Calderbank letter” to the plaintiffs offering to settle the plaintiffs’ claims for £25,000 including interest together with the plaintiffs’ costs.

[4] By Section 59 of the Judicature (Northern Ireland) Act 1978 the costs of proceedings are in the discretion of the court and the court has power to determine by whom and to what extent the costs are to be paid.

[5] Order 62 rule 3(3) of the Rules of the Supreme Court provides that –

“If the court in the exercise of its discretion sees fit to make any orders to the costs of any proceedings, the court shall order the costs to follow the event, except when it appears to the court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.”

[6] Before considering the “event” reference should be made to payment into court and Calderbank letters.

[7] Order 22 rule 1(1) provides that in any action for debt or damages any defendant may without leave at any time before the close of pleadings or with leave or on consent at any later time make a payment into court in respect of the plaintiffs’ claims. By Order 22 rule 1(7) it is provided that the plaintiffs’ cause in respect of a debt or damages shall be construed as a cause of action in respect also of such interests as may be included in the judgment if judgment were given at the date of payment into court.

[8] Had the defendant in the present proceedings made a payment into court on 30 April 2001 of £25,000 the plaintiff would have “beaten the lodgement”. For the purposes of the operation of Order 22 the exercise is to compare the value of the payment into court with the value of the judgment at the date of the payment into court. Accordingly the value of the plaintiffs’ judgment on 30 April 2001 of £16,500 plus interest at the court rate from time to time from 1992 would have been greater than £25,000. (White Book 22/1/11).

[9] “Calderbank letters” which are offers in writing “without prejudice save as to costs” developed in claims which did not involve debt or damages and to which Order 22 did not apply and have taken their name from Calderbank v Calderbank (1975) 3 All ER 333 where the Court of Appeal approved the procedure. This found expression in the English Supreme Court Rules where Order 22 rule 14 provided that a party to proceedings may at any time make a written offer to any other party to those proceedings which is expressed to be “without prejudice save as to costs” and which relates to any issue in the proceedings. This led to an amendment of Order 62 rule 9 to provide by rule 9(1)(d) that the court in exercising its discretion as to costs should take into account any written offer made under Order 22 rule 14 unless at the time it was made the party making it could have protected its position as to costs by means of a payment into court under Order 22. These provisions were not introduced in Northern Ireland.

[10] The starting point under Order 62 rule 3 is that costs follow the event. The defendant submits that the plaintiff should pay the defendant’s costs from 2 May 2001 (being the last date for acceptance of the defendant’s written offer) or alternatively there should be no order for costs from that date.

[11] The defendant relied on two principle factors. First the plaintiffs’ lack of response to the defendants offer. It appears that while there was no formal response to the defendant’s offer there were discussions between counsel and it is apparent that the plaintiff’s would not have accepted any sum in the region of that eventually awarded by the court. In view of the without prejudice discussions between counsel this factor rightly was not pressed by the defendant. Secondly that “the event” was that the plaintiffs had been unsuccessful in their claim for substantial damages. Reliance was placed on a number of authorities –

(a) Where the plaintiffs recovered nominal damages on assessment after summary judgment the defendant was awarded costs. Alltrans Express Limited v CVA Holdings Limited (1984) 1 All ER 685. The plaintiff claimed damages for breach of contract and obtained summary judgment. After a 15 day hearing on the assessment of damages the plaintiffs were awarded £2. The defendant had not paid money into court and the assessor considered the plaintiff to be the successful party and awarded the plaintiffs their costs. The Court of Appeal allowed the appeal on the basis that the consequence of the summary judgment was that the plaintiffs were entitled at least to nominal damages and the actual issue between the parties at the hearing was whether the plaintiffs were entitled to more than nominal damages and on that issue the defendant has succeeded. Further it was found that a payment into court of £2 would not have been accepted by the plaintiffs and would not have made any difference to the proceedings so it was wrong to hold that the absence of a payment into court made the plaintiffs the successful party.

(b) Recovery by the plaintiff of “trivial damages” ought not to render the plaintiff successful. Anglo-Cyprian Trade Agencies Limited v Paphos Wine Industries Limited (1951) 1 All ER 873. The plaintiff claimed damages of £2,000 for breach of contract being the full purchase price of goods delivered. At the trial the plaintiffs amended their statement of claim to claim in the alternative £52 as the cost of repairs of the defective goods. The plaintiff recovered the £52 and costs were awarded to the defendant. Devlin J stated at page 874F –

“No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate made to pay the costs of the other side, unless he has been guilty of some sort of misconduct. In applying that rule, however, it is necessary to decide whether the plaintiff really has been successful, and I do not think that a plaintiff who recovers nominal damages ought necessarily to be regarded in the ordinary sense of the word as a “successful” plaintiff. In certain cases he may be, eg where part of the object of the action is to establish a legal right, wholly irrespective of whether any substantial remedy is obtained. To that extent a plaintiff who recovers nominal damages may properly be regarded as a successful plaintiff, but it is necessary to examine the facts of each particular case.”

[12] On the facts of that case Devlin J found it in substance the defence consisted of one point which was found to be a good point although in law there had been a breach of contract and the plaintiff was awarded “trivial” damages “the plaintiffs, therefore, have not established anything which is of the least value to them, and, in my judgment, they are not to be regarded as successful plaintiffs.” (At page 875A).

[13] The judgment went on to consider the effect of the amendment to plead the alternative claim for £52 and Devlin J held that it was a necessary amendment and a matter of the first importance and he then set out the significance of the proper pleading of special damage to enable the defendant to know the claim so that he may if he so desires make a payment into court. The success of the amendment was found not to make any difference to the order which would have been made if judgment had been entered for the defendant in the original pleadings.

(c) Recovery by the plaintiff of damages on the basis of a late amendment only may establish the defendant as the successful party who will recover costs to the amendment as well as post amendment costs discounted to reflect the plaintiff’s recovery. Lipkin Gorman v Karpnale Limited (1989) 1 WLR 1340. The plaintiff claimed damage of £250,000 and by a late amendment a sum of £3,000. The plaintiff recovered the £3,000 only and the defendant was awarded the costs to the date of amendment. In respect of post amendment costs the plaintiff was ordered to pay 80% of the defendant’s costs. It is apparent that in respect of the claim prior to amendment the defendant was successful and therefore recovered costs. Maye LJ stated at 1390B –

“But it is very difficult in a case with the complications of this one to give an answer as to who was the successful party without qualifying that answer, at least to some extent. Both parties were successful in one sense. The club was successful to a substantial extent. However Order 62 rule 3(3) itself refers to a situation ‘when it appears to the court that in the circumstances of the case some other order should be made as to the whole or any part of the costs’ – so that one need not be too rigid in seeking to discover precisely what the event was. In the circumstances of the instant case one must exercise one’s discretion in making a proper order for costs, doing justice to all the circumstances of the case, but bearing in mind that the underlying principle is that the winner, whoever may be described as the winner, is in general entitled to be paid his costs.”

[14] Maye LJ awarded costs to the defendant because “in essence they should have their costs because they were the winners. I am not saying that necessarily that was ‘the event’ within the terms of the rule, but following the spirit of the rule that, in my view, is what should happen.” For the plaintiff’s limited success on the amended claim they recovered 20% of their costs.

[15] While the plaintiffs’ counsel indicated that a payment into court of the amount eventually awarded would have been accepted by the plaintiffs at the time the court was not satisfied that that was likely to have been the reasonable outcome of any such action and concluded at 1391D “I therefore think that one must put out of one’s mind as did the court in Alltrans Express Limited v CVA Holdings Limited any question of a payment into court or any failure to make any payment into court in this case.”

(d) A further example of recovery by the plaintiff on the basis only of a late amendment is Beoco Limited v Alfa Laval Co Limited (1994) 4 All ER 464. The plaintiff recovered against the first defendant and on foot only of an amendment made at the hearing recovered an entitlement to damages estimated at £21,000 when the overall claim was approximately £1M. The defendant recovered costs up to the amendment. In respect of post amendment costs the defendant recovered 85% of his costs. The amendment had been made in circumstances where there was no proper pleading of the alternative case and no discovery to the first defendant and no opportunity to investigate or make an estimate of the proper value of the amended claim so that it was considered unrealistic to expect the first defendant to a make a payment into court or to admit liability for damages to be assessed on the alternative basis. In those circumstances and because the first defendant was refused an adjournment to investigate the alternative claim it was held that the first defendant should be awarded a proportion of their costs of the likely recovery of some £21,000 Stewart-Smith LJ stated at 479H –

“Although this sum cannot by itself be described as trivial, in the context of a claim for £1M and the enormous expense of this action, it is trivial. It makes no commercial sense to incur costs of this sum to recover such a small sum. And it seems to me very probable that if the first defendant had a proper opportunity to make a payment into court on the basis that its liability on the alternative claim was limited in the way we have held it to be, it would have done so. A payment in of £21,574 plus interest would obviously not have been accepted and it would have made sound commercial sense to have made it. But for the reasons I have indicated, the first defendant had no chance to do so. Accordingly, in my judgment, although some discount should be made to reflect the very modest degree of success that the plaintiff achieved, it should not be a large one.”

[16] The court held that after the amendment the first defendants were essentially the winners.

[17] The defendant contends that the plaintiffs’ claim was not adequately particularised and refers to a comment to that effect in the judgment of the court. However that lack of particularity was a necessary consequence of the nature of the claim involving as it did speculation as to the extent of the business that would have been undertaken by the plaintiff but for the actions of the defendant. The nature and extent of the plaintiffs’ loss necessarily involved the making of various assumptions based on the evidence and that was all the defendant would ever have been able to do given the nature of the claim.

[18] The defendant did not dispute that there had been delay in dealing with the plaintiffs’ original claim and contended that the plaintiffs were only entitled to nominal damages. Accordingly the issues at the hearing were whether the actions of the defendant had caused loss and damage to the plaintiffs and if so to determine the nature and extent of such loss and damage. The defendant had the opportunity to seek particulars of the plaintiffs’ claims and to obtain such discovery as was available and to engage an expert to examine the plaintiffs’ claims and had they construed it appropriate to make a payment into court or an offer of settlement to the plaintiffs as was the case. This is not a case of a late amendment at the hearing of the action to introduce an alternative head of claim on which the plaintiffs succeeded. It is almost invariably the case that a plaintiff recovers only a limited amount of the claim for damages and to that extent such a plaintiff would generally be regarded as having been successful. However if nominal or trivial damages were awarded in a case where the amount of damages was the substantive issue then it may be that the defendant would be regarded as having been successful. The “event” for the purposes of Order 63 rule 3 was the success of the plaintiff even though that success was limited. Costs will follow that event except where in the discretion of the court some other order should be made “in the circumstances of the case”. The circumstances of the present case do not warrant an exception to an order that costs follow the event. Accordingly the plaintiff is awarded the costs of the action such costs to be taxed in default of agreement.