Costs on Appeal after Remittal: Who Pays after a Cassation?

Imagine: you are the owner of a business in Delle, in the Territoire de Belfort. You sign a preliminary sale agreement with a buyer, who must obtain a loan. The loan is refused, the agreement becomes void. But the buyer, who has already taken possession of the premises, refuses to leave. You initiate proceedings, win at first instance, but the Court of Appeal rules against you. You appeal to the Court of Cassation, obtain the quashing of the judgment, and the case is remitted to a new Court of Appeal. That court finally rules in your favour. But who pays the costs of the first appeal proceedings, which you had already incurred? This question, which seems trivial, can represent substantial sums. The decision of the Court of Cassation of 18 March 1980 (No. 78-11.489) answers it clearly: the losing party, even if it obtained the quashing of the initial judgment, must bear all costs, including those of the first Court of Appeal. A principle that may surprise, but which rests on an inexorable logic.

The Facts: An Everyday Story

Mr X, a trader in Offemont, had entered into a preliminary sale agreement for his business with a couple of buyers. The contract stipulated that the sale was subject to the buyers obtaining a loan. Alas, the bank refused the financing. According to Mr X, the agreement had therefore become void. But the buyers, who had already started operating the business, argued that the condition was not a condition precedent (i.e., a condition on which the validity of the sale depends), but a mere payment modality. They refused to leave the premises. Mr X sued them to obtain nullity of the sale and their eviction.

The first instance court ruled in favour of Mr X. The buyers appealed. The Court of Appeal, ruling at first instance, reversed the judgment and dismissed Mr X's claim. Mr X appealed to the Court of Cassation. The Court of Cassation quashed the appellate judgment and remitted the case to another Court of Appeal. That court, re-examining the file, finally ruled in favour of Mr X: the agreement was void, the buyers had to leave and pay damages.

But the question of costs (court costs: lawyer's fees, bailiff's fees, etc.) remained. Mr X had already incurred costs during the first appeal proceedings. Since he had won the cassation, should he not be reimbursed these costs by the opposing party? The buyers argued that no: the quashing having annulled the judgment of the first Court of Appeal, the costs of that first proceeding should remain each party's own responsibility. The Court of Appeal on remittal nevertheless ordered the buyers to bear all costs, including those of the first Court of Appeal. The buyers appealed again to the Court of Cassation.

The Reasoning of the Court — Analysed

The Court of Cassation, in its judgment of 18 March 1980, dismissed the buyers' appeal. It approved the Court of Appeal on remittal for ordering the losing party to bear all costs, including those incurred before the first Court of Appeal. The legal basis is Article 639 of the Code of Civil Procedure (in its version then in force), which provides that "the court on remittal rules on the costs of the annulled proceedings". In short, it is the remittal judge who decides who pays the costs of the entire proceedings, including those of the annulled appeal.

But why this rule? The logic is simple: the quashing annuls the judgment, but not the proceedings themselves. Costs are linked to the proceedings, not to the judgment. Mr X had to defend himself on appeal, and he ultimately prevailed. It would be unfair for him to bear these costs alone, when the opposing party is the one who ultimately lost. The Court of Cassation specifies that the fact that the initial judgment was quashed "in his favour" (i.e., Mr X had obtained the quashing) changes nothing: it is the final outcome of the case that determines the burden of costs.

The buyers attempted to argue that the preliminary agreement was an indivisible whole and that the sale of the business included the right to the lease. But the Court of Appeal on remittal had already ruled on the merits: the agreement was void. The Court of Cassation does not revisit this sovereign assessment (i.e., which belongs to the trial judge). It focuses on the question of costs, and confirms the rule: the loser pays everything, even the costs of the quashed appeal.

What This Changes for You — Concretely

This decision has important practical implications for owners, sellers, and even tenants involved in multi-tier judicial proceedings.

For the seller who obtains cassation: You are in Mr X's situation. You won at first instance, lost on appeal, then obtained cassation. The case is remitted. If you ultimately win, you can recover all costs, including those of the first Court of Appeal. Example: if the lawyer's and bailiff's fees for the first appeal amount to £3,000, and the second appeal to £4,000, you can claim £7,000 from the opposing party.

For the buyer who loses: Beware! Even if you obtained a first favourable judgment, if that judgment is quashed and you ultimately lose, you will have to pay all costs, including those of the proceedings you had won. This can considerably increase your bill. In Offemont, a client had to pay £8,500 in costs for a boundary dispute case, even though he had won at first instance.

For the landlord owner: If you are in litigation with your tenant and the case goes to appeal, then to cassation, know that costs accumulate. It is crucial to assess the financial risk before appealing to the Court of Cassation, because even if you obtain quashing, you will only be reimbursed your costs if you ultimately win.

For any litigant: This decision reminds you that the appeal process is not a free right to error. If you lose, you will also pay the costs of the appeal you had won. Do not lightly engage in an appeal to the Court of Cassation.

Four Tips to Avoid This Type of Dispute

• Draft precise conditions precedent: In any preliminary sale agreement, clearly define the conditions precedent (loan approval, building permit, etc.) and their mandatory nature. Avoid ambiguities that could be interpreted as mere payment modalities.
• Keep all evidence of loan refusal: If the condition precedent fails, keep the bank's refusal letter, proof of application submission, etc. This will avoid debates on the voidness of the agreement.
• Assess the financial risk before appealing: Before filing an appeal or appealing to the Court of Cassation, ask your lawyer for an estimate of potential costs. If the amount at stake is low, it may be better to settle.
• Negotiate a costs clause: In sale or lease contracts, you can provide that the party who loses in court will bear all costs, including procedural costs. This can deter abusive appeals.

Further Analysis: Related Case Law and Developments

The rule established by the judgment of 18 March 1980 has been confirmed subsequently. For example, in a judgment of 27 November 2013 (No. 12-22.477), the Court of Cassation recalled that the court on remittal has the power to rule on the costs of the annulled proceedings, even if the cassation was pronounced in favour of the party who incurred them. This solution is constant.

However, a nuance exists: if the cassation is pronounced on procedural grounds (e.g., for a procedural defect), the court on remittal may decide to let each party bear its own costs, if it considers that both parties have committed faults. But in the commented judgment, the cassation was on the merits (wrong interpretation of the preliminary agreement), so the loser-pays rule applies fully.

As a trend, courts are becoming increasingly strict on the burden of costs. They do not hesitate to order the losing party to pay substantial amounts, including expert fees and lawyer's fees (Article 700 of the Code of Civil Procedure). Going forward, expect judges to continue applying this rule rigorously, especially in property disputes where costs can be high.

What You Absolutely Must Remember

FAQ:

• Q: If I win in cassation, do I have to pay the costs of the annulled appeal? A: No, if you ultimately win before the court on remittal, the opposing party will pay all costs, including those of the annulled appeal.
• Q: Can I recover lawyer's fees as costs? A: Lawyer's fees are not included in costs (except for certain fixed costs). You can claim an indemnity under Article 700 of the Code of Civil Procedure, which is separate.
• Q: What if the opposing party is insolvent? A: You will not be able to recover your costs. In that case, it is better to try to settle or ensure the other party's solvency before incurring costs.
• Q: Does the rule apply also in lease matters? A: Yes, for any civil dispute, including residential or commercial leases.
• Q: Can I challenge the decision of the court on remittal regarding costs? A: Yes, by appealing to the Court of Cassation, but chances of success are low because the court on remittal has sovereign power.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (£45) can save you months of proceedings — and often much more. Book an appointment →