Cost Consequences of Interlocutory Applications

The Court of Appeal has recently decided that if a motion is conceded before hearing, the party who brought it will be treated as being successful when it comes to the awarding of legal costs. Our Commercial Disputes team takes a closer look at the decision.

A recent Court of Appeal decision has addressed how legal costs should be handled in an interlocutory motion.[1] The respondent conceded the main issue and the reliefs being sought before the hearing took place. However, they argued that they should not have to pay the legal costs of the motion. The Court of Appeal agreed with the High Court judge that bringing the motion had led to the other side making the concession. As a result, the court treated the applicants as having won the case for the purposes of costs. This meant they were entitled to have their legal costs paid. The decision emphasises the importance of thinking carefully before deciding not to agree to the step in question before the threatened motion is brought.

Background

The case arose out of summary proceedings brought by the plaintiff company. The plaintiff company claimed the defendants still owed it money from a loan. The loan related to the purchase of a pharmacy business. The summary proceedings were sent to a full oral trial with the parties to exchange pleadings in the usual way. The defendants ultimately asked the court to direct the plaintiff company to provide security for their legal costs. They made this request because the plaintiff company’s latest accounts suggested it might not be able to pay the defendants’ legal costs if the defendants won the case. Following a lengthy exchange of affidavits, the plaintiff company agreed to lodge a specified sum as security. This agreement was made a week before a two-day hearing was due to take place. At the hearing of the motion, both sides agreed to the court making an order for the payment of the agreed sum. However, the costs of the motion were disputed. In the High Court, Mr Justice Meenan determined that the defendants should be awarded their costs of the motion. He held that the offer to provide security was only made because the motion had been brought. The defendants were therefore entirely successful in their application and entitled to their legal costs, although he imposed a stay on the payment of those costs. The plaintiff company appealed the decision, maintaining that the High Court had made an error.

Decision

The Court of Appeal noted that it could not simply reconsider the costs decision from scratch, but it had to instead respect the High Court’s significant discretion in awarding costs.[2] The key question was whether the order made by the High Court was one the judge could reasonably have made, given the circumstances. If it was, the Court of Appeal should not overturn it.[3]

In support of its argument that the High Court judge had not exercised his discretion “correctly”,[4] the company raised a number of grounds which the Court of Appeal addressed as follows:

• That Section 169(1) of the Legal Services Regulation Act 2015 only applies to the final outcome of civil cases, and not to the costs of interim or interlocutory applications. However, the Court of Appeal felt that the broader context militated against such a view. Section 168 applies to “any action or step in any proceeding” and requires the courts to have regard to Section 169(1). Prior case law[5] also supports the presumption that a party who succeeds in an interlocutory application is entitled to their costs of that application.
• That the judge was wrong to conclude the defendants had been ‘entirely successful’.[6] Although the judge was not required to formally determine the motion, the Court of Appeal found that he clearly and correctly considered the defendants had obtained something of value – the concession of the security - by pursuing it. The judge was therefore plainly entitled to find that they had been successful, as they had secured security. The key issue was the principle of obtaining security, even if the amount ultimately secured was less than originally sought. The quantum, or amount, of the security was not something the court had to decide on.
• That, regardless of whether Section 169(1) applied or the defendants were considered to be ‘entirely successful’, the judge failed to properly exercise his discretion. However, the Court of Appeal took the view that the motion had been conceded. It found that the making of the order was an ‘event’ that triggered cost consequences. Even if it was not considered an ‘event’, the Court of Appeal noted that case law supports awarding costs when one party’s actions make the proceedings unnecessary.[7] Here, the company had opposed the motion for two years and only conceded a week before the hearing. As a result, the court found it was not entitled to any credit on costs for eventually conceding.

The Court of Appeal therefore concluded that the order being appealed was “well within the range of orders reasonably open to the Judge to make.” The general principle that the losing party pays the costs is set out in Section 169(1), which the Supreme Court[8] has consistently confirmed as the starting point. It was clear that the defendants were effectively the winners and the plaintiff company the loser. This “inescapable fact” gave the High Court an “adequate basis” for making the cost order it did. The appeal was therefore dismissed.

Conclusion

The decision helpfully demonstrates that, even if a motion is conceded before a hearing, the party who brought it can still be seen as the successful one when it comes to costs. Subject to the factors set out at Section 169(1) of the LSRA and the exercise of the courts’ discretion, they should therefore be awarded their costs. The decision gives important clarity for parties who worry about legal costs when the other side agrees to the main relief but not to covering costs. For those faced with motions, the decision highlights that conceding the substantive reliefs sought is likely to have adverse cost consequences. Conceding early is the best way to minimise cost exposure, both by reducing the legal costs that build up and by increasing the chances of getting credit for conceding. Of course, the best way to avoid this exposure is to avoid unreasonable motions issuing at all, although clearly certain motions will be necessary.

For more information and expert advice on commercial disputes, contact a member of our Commercial Disputes team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] Pembroke Equity Partners Limited v. Corrigan & Galligan [2022] IECA 142.

[2] Which he acknowledged was conferred by Sections 168 and 169 of the Legal Services Regulation Act 2015 and by Order 99 of the Rules of the Superior Courts.

[3] O v. Minister for Justice [2021] IECA 293.

[4] Although that was how the company characterised the nature of the appeal, Mr Justice Collins was at pains to point out that it was apparent from case law that was not the threshold for review. Rather than looking at whether the order was ‘correct’, the issue was whether it was within the range of orders reasonably open to the judge.

[5] Daly v. Ardstone Capital Ltd [2020] IEHC 345; Veolia Water UK plc v Fingal County Council (No 1) [2006] IEHC 240.

[6] This is the express threshold requirement under Section 169(1) for a party to be entitled to their costs.

[7] E.g., Cunningham v. President of the Circuit Court [2012] IESC 39.

[8] Godsil v. Ireland [2015] IESC 103.