Judgment O'Reilly v Neville
| Jurisdiction | Ireland |
| Judge | Mr Justice Maurice Collins |
| Judgment Date | 31 July 2020 |
| Neutral Citation | [2020] IECA 215 |
| Date | 31 July 2020 |
| Court | Court of Appeal (Ireland) |
| Docket Number | Court of Appeal Record No: 2018 /114 |
and
[2020] IECA 215
Costello J.
Haughton J.
Collins J.
Court of Appeal Record No: 2018 /114
High Court Record No: 2011/7987 P
THE COURT OF APPEAL
CIVIL
Costs – Breach of contract – Construction – Plaintiffs appealing against costs order – Whether costs ruling ignored and/or contradicted findings in High Court judgment
Facts: The plaintiffs, Mr and Ms O’Reilly, made a claim for breach of contract, negligence and breach of duty in relation to the construction of a duplex dwelling at 19 Millrace Crescent, Saggart, County Dublin, which was constructed by the defendants, Messrs Neville and William Neville and Sons Construction Ltd (the Contractor), pursuant to an agreement with the plaintiffs entered into in March 2005. On 31 July 2017, following a 12 day hearing, the High Court (Binchy J) gave judgment determining the substantive issues in these proceedings: [2017] IEHC 554. The plaintiffs appealed to the Court of Appeal against the costs order. They said that the costs ruling ignored and/or contradicted the findings in the judgment. The plaintiffs also complained about the costs hearing itself. They said that it was “truncated” and that their counsel did not have sufficient time to address the Court.
Held by Collins J that the judge erred in his approach to costs in these proceedings. In Collins J’s view, that order did a significant injustice to the successful plaintiffs and it could not be permitted to stand. Collins J held that it was in the interests of the parties as well as in the public interest that the proceedings were brought to finality and, in his view, the Court could and should deal with the costs itself. The fundamental rule in costs is that costs follow the event and Collins J found that the Contractor did not (and could not) dispute that the “event” in these proceedings was determined in the plaintiffs’ favour. Collins J did not consider that the offer made by the Contractor in February 2016, or any of the earlier offers made by it, provided a valid basis for departing from the normal costs rule; equally, there was no basis for departing from the normal rule by reference to the principles in Veolia Water UK plc v Fingal County Council (No. 2) [2006] IEHC 240. Collins J would therefore substitute for the costs order an order awarding the plaintiffs the costs of the High Court proceedings (including any reserved costs). In light of the fact that Part 10 of the Legal Services Regulations Act 2015 came into operation in October 2019, Collins J’s understanding was that, in default of agreement, such costs must then proceed to adjudication in accordance with the procedures set out in Part 10 but the parties can be heard on that issue if necessary. Collins J held that, whatever the process, in quantifying the costs payable to the plaintiffs regard should be had to the value of what was at issue in this claim; that is a relevant factor by virtue of Schedule 1, Paragraph 2(g) of the 2015 Act. Having had regard to the value of what was at issue, and having borne in mind that the Contractor was represented by only one counsel, the Court considered that the plaintiffs should be permitted to recover only the costs of one junior and one senior counsel.
Collins J held that he would allow the appeal, set aside the costs order and substitute for it an order awarding the plaintiffs the costs of the High Court (including any reserved costs), such costs to be adjudicated in accordance with Part 10 of the 2015 Act in default of agreement. As regards the costs of this appeal, he held that the plaintiffs had succeeded and, prima facie, were entitled to their costs.
Appeal allowed.
On 31 July 2017, following a 12 day hearing, the High Court (Binchy J) gave judgment determining the substantive issues in these proceedings: [2017] IEHC 554 (“the Judgment”). The Plaintiffs had made a claim for breach of contract, negligence and breach of duty in relation to the construction of a duplex dwelling at 19 Millrace Crescent, Saggart, County Dublin (“the Property”), which was constructed by the Defendants (hereafter “the Contractor”) pursuant to an agreement with the Plaintiffs entered into in March 2005 (“the Building Agreement”). Construction was completed and the Plaintiffs entered into occupation in September 2005. The price paid by the Plaintiffs for the Property was just under €280,000.
It is evident from the Judgment that the Plaintiffs had issues with the Property from an early stage. Some remedial works were undertaken by the Contractor but these did not resolve the issues to the satisfaction of the Plaintiffs and, according to the Plaintiffs, in fact made matters worse. In August 2010 – by which time they had two young children – the Plaintiffs moved out of the Property. Their principal reason for taking that drastic step was a concern that conditions in the Property were having a harmful effect on the health of their children. In particular, the Plaintiffs were concerned that the health of their two children was being compromised by the damp and mould present in the Property, especially in the attic. These developments are all set out very clearly in the Judgment.
Contact continued between the parties and their professional representatives with the object of resolving matters but, while it appears that the Contractor accepted that certain remedial works were required, no agreement could be reached on the nature and extent of those works. Proceedings issued in September 2011. The principal relief sought by the Plaintiffs was rescission of the Building Agreement of 30 March 2005 and repayment of the contract price. Damages were claimed in the alternative. In their Defence, the Contractor pleaded that specific performance of the Building Agreement was the appropriate remedy for the Plaintiffs, relied on the terms of the Building Agreement as an answer to the claim, pleaded negligence on the part of the Plaintiffs and also pleaded that they had at all times been willing to address the Plaintiffs' complaints but that the Plaintiffs had failed to engage with them. Specific reference was made in that context to an “open letter of offer' of 5 April 2012 in which the Defendants had offered to carry out works recommended by their engineer, which offer (it was said) remained open. It will be necessary to refer to that letter in more detail below.
The Building Agreement (which was in the standard form issued jointly by the Law Society of Ireland and the Construction Industry Federation (2001 ed)) contained an arbitration clause (Clause 11). At paragraph 111 of the Judgement, the Judge expresses the view that arbitration would have been “a far more suitable form of dispute resolution” because of the technical nature of the matters in dispute. I agree. In other jurisdictions, specialist courts have been established to hear building disputes. That is not the position here. Generally, such disputes are determined by arbitration or other form of alternative dispute resolution (ADR). The inclusion of an arbitration clause in the standard form building agreement reflects that position. The Judge goes on to observe that the parties were nonetheless fully entitled to have recourse to the courts instead. That is true but only up to a point. Having regard to the fact that there was an arbitration clause in the Building Agreement, it was open to the Contractor to seek to have the proceedings stayed pursuant to the provisions of the Arbitration Act 2010 (and Article 8(1) of the UNCITRAL Model Law to which effect is given by the 2010 Act) but it did not do so.
In the course of the appeal hearing the Court asked why the Contractor had not sought arbitration. Counsel for the Contractor explained that his clients did not want to have a “technical fight” about repairing the Property; rather, he said, his clients simply wanted to repair it. While that is a fine sentiment, I have difficulty in taking it at face value. The Contractor could have avoided a “technical fight” by agreeing to carry out the works required by the Plaintiffs (and. in particular, the removal and replacement of the roof structure) but did not. That was, of course, its entitlement but it had the consequence that a “technical fight” was inevitable and the issue thereafter was in what forum and/or by what process that fight would be determined. The Plaintiffs invoked the jurisdiction of the High Court. The Contractor was not compelled to submit to that jurisdiction - it could have sought arbitration. Any arbitration could have been conducted by an engineer or architect and, for that reason, would likely have been shorter in duration than an action in the High Court. Instead, the Contractor sought to have the “technical fight” resolved on its terms, by a process of expert determination.
In any event, while efforts to resolve the dispute continued, the proceedings moved - albeit slowly - toward a hearing. The action was listed for hearing in the Chancery list on 24 November 2015 but no judge was available to hear it. Apparently prompted by the court, a mediation took place in January 2016 but did not produce a settlement. Later that month, the action was relisted for hearing in December 2016. At that stage, the Contractor made another offer to the Plaintiffs, by way of an open letter of 18 February 2016. It will be necessary to refer in more detail to this letter in due course.
That offer was rejected and the hearing commenced before Binchy J on 8 December 2016. While it was listed for 6-8 days, the hearing ultimately took 12 days. In the course of the...
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