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Dispute Resolution: Picking Up the Tab? Non-party Costs Orders and Other Litigation Developments

19 December 2019

Parties pursuing litigation do so with the risk of being held liable for the opposing parties’ costs, if the litigation is unsuccessful. However, it is important to remember that the courts can also hold non-parties liable. The Supreme Court clarified this jurisdiction in 2019.

We review the welcome scrutiny by the Court of Appeal of the scale of defamation awards, as shown in the recent case of Kinsella v Kenmare Resources.

Finally, this year saw further consideration by the Supreme Court of the time limits on bringing financial mis-selling claims.

Holding non-parties liable for costs

The Irish courts have jurisdiction to join non-parties to proceedings for the purposes of making them liable for costs. This is more common in instances where the non-party initiates litigation through an insolvent company for his or her own benefit but without any risk to themselves.

The seminal “Mooreview Developments[1]” case set out a number of non-exhaustive criteria for these orders, including the degree to which the non-party would financially benefit from the litigation. In October 2019, the Supreme Court importantly clarified that a failure by an applicant to put the prospective non-party on notice was not a bar to this relief, in the matter of W.L. Construction Limited v Chawke & Ors[2]. The order was warranted in this case because the non-party was the company’s controller and his conduct at trial directly affected the loss of the plaintiff company’s action. It was emphasised by the Court that the jurisdiction is to be “exercised only in exceptional cases”.

Scrutiny of jury defamation awards

Kenmare Resources plc released a statement in 2007 concerning the resignation of its then deputy chairman, Mr Donal Kinsella, arising from an incident involving a female colleague on a business trip.

Mr Kinsella launched a defamation action and a jury found in his favour in 2010, awarding him €10 million. However, the award was reduced earlier this year by the Court of Appeal to the “proportionate” amount of €250,000, following a comparison of other awards in defamation and personal injury actions.

This decision is welcomed in light of the 2017 ruling that Ireland had breached Article 10 of the European Convention on Human Rights (freedom of expression) through the chilling effect large defamation awards had on journalism. The Defamation Act 2009 should also assist in this regard as it allows the Supreme Court and Court of Appeal to substitute a damages award for one that they consider appropriate, rather than the previous requirement to make a finding that the original award was disproportionate.

We discuss the likely impact of this decision in greater detail here

Time limits on financial mis-selling claims

Mis-selling claims, like any other, must be issued within a prescribed “limitation” period, following the accrual of the cause of action. Such claims are often based on negligence where the cause of action accrues from the date damage is suffered or is “manifest”. However, an assessment of when financial loss originally “manifested” is fraught with difficulty.  

The case of Cantrell v AIB[3] concerns claims that losses incurred by investors arose, in part, from loan agreements entered into by the corporate investment vehicles and the loan to value (LTV) covenants in those agreements. The High Court determined that the cause of action in negligence did not accrue at the date of entry into the investments - there was at that stage only a “mere possibility” of loss.

In contrast, the Court of Appeal found that “the damage became manifest once the LTV covenants were entered into by the directors” i.e. when the investment and its related financing was originally structured. While the loss did not occur until many years after the investment, it was ultimately caused by a defect (the LTV covenants) which was “not latent but one capable of being discovered on enquiry”.

The effect of this finding was to defeat those particular claims because the LTV covenants were entered into more than six years before the proceedings were issued. Investors and investment managers alike should therefore be aware that the time limit for issuing a claim for financial loss arising from the sale of investment products may start long before actual and quantifiable loss has been suffered.

Conclusion

It is now clear that while the jurisdiction to hold non-parties liable to costs is limited to exceptional circumstances, the courts are not constrained in making these orders by an exhaustive set of criteria.

Excessive defamation awards made by juries look set to be a thing of the past, following judicial willingness to reduce awards to a level that is fair and proportionate. There may also be potential legislative initiatives to come from the Government to set a formal limit, which would be welcomed.

The decision in Cantrell v AIB highlights the fact that the time limit for issuing a claim for financial loss arising from the sale of investment products may start long before actual and quantifiable loss has been suffered.

Looking to 2020, the recent commencement of key provisions of the Legal Services Regulation Act 2015 will see developments in the area of legal costs. In particular, litigation costs are set to be topical as we await the first decisions from the office of the “Legal Costs Adjudicator”, which has replaced the office of the Taxing Master.

We expect to see further developments in defamation law following a symposium on reform hosted by the Department of Justice in November 2019. The removal of jury decisions and the imposition of a limit on the quantum of damages awarded could all feature in the proposed Defamation (Amendment) Bill, which looks set to be published in Spring/Summer 2020.

Finally, the impact of Brexit on the enforcement of EU judgments in the United Kingdom, and vice versa, remains an issue to be monitored as negotiations progress.

For expert legal advice on successfully resolving disputes in 2020, contact a member of our Dispute Resolution team. 


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


[1] Moorview Developments Limited & ors. v. First Active plc [2011] 3 I.R. 615 and [2018] 2 I.L.R.M. 403

[2] [2019] IESC 74

[3] [2019] IECA 217

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