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When legal costs are awarded to the losing party

Introduction

Lawyers often seek to reassure clients with the well-known mantra that, when it comes to litigation, "costs follow the event". What this means is that a successful litigant will generally be able to recover his legal fees against his unsuccessful opponent. The word "generally" should be emphasised. Not all of the legal fees will be recoverable - only those which an adjudicator within the courts system, the Taxing Master, considers are reasonable to be paid by the unsuccessful party. These are known as "party and party costs", which means that one party can recover them against the other parties. This will normally be an amount less than the successful party's total legal bill. The remainder will need to be borne by him personally. This does not mean that the remaining fees were unreasonably charged - it just means that the unsuccessful party is not required by law to pay them.

A recent decision of the Court of Appeal highlighted an unusual situation in which a successful party may, in addition to not being entitled to recover his legal costs, be required to pay the costs of the unsuccessful party.

Central Bank of Ireland v. Walls Construction Limited [2025] IECA 61

The case involved a claim by an insurance company (the plaintiff) against another insurance company (the defendant) under the principles of subrogation. The plaintiff issued proceedings in the High Court by plenary summons on 2nd May 2019. The defendant entered an appearance on 24th October 2019. Then there was radio silence as the plaintiff, which is required under Order 20 of the Rules of the Superior Courts (RSC) to deliver a statement of claim within eight weeks of serving the plenary summons, failed to deliver its statement of claim until some four years later. The defendant then brought an application seeking an order that the plaintiff's claim should be dismissed on the grounds of "inordinate and inexcusable" delay. The courts are generally reluctant to make such orders because they have the potential to interfere with a plaintiff's constitutional right of access to justice. The defendant thus failed to meet the stringent criteria for succeeding in such an application and the application was refused by the High Court. The High Court judge (Owens J) was, however, critical of plaintiffs – particularly insurance companies which he noted were repeat offenders in this regard – issuing legal proceedings and then taking no steps to progress those proceedings. As a consequence of the plaintiff's failure to progress matters for almost four years, the court awarded the costs of the application to the defendant notwithstanding that the defendant was the unsuccessful party in the application.

The plaintiff appealed the costs order to the Court of Appeal.

Appealing a High Court costs order

O'Moore J in the High Court discussed the test to be applied by the appellate court in an appeal against a costs order of the court below. He noted that the onus on the appellant is particularly high because judges in the High Court enjoy a broad discretion in deciding the question of costs. He referred to the decision of the Court of Appeal in Pembroke Equity Partners Ltd v Corrigan [2022] IECA 142 where Collins J had said the following:

"But [the Court] must admit to being troubled by the incident, which appears to have involved a plain conflict of interest, not merely between the liquidators in their different capacities, but even with the interests of the liquidators in their personal capacities in securing payment of their fees. Mr Crystal QC, for the liquidators, told [the Court] that one of them assumed the role of [the debtor] and the other that of [the creditor], and they bargained with each other. This role playing does not seem to the [Court] an adequate way of dealing with the matter. It would have been much better if the liquidators had sought the directions of the court."

"It is necessary to recall that, in an appeal from a costs order made by the High Court in the exercise of the significant discretion conferred on that court by sections 168 and 169 of the Legal Services Regulation Act 2015... and by Order 99 RSC, this Court is not at large. The appeal does not involve a de novo assessment of where the costs should fall here. Rather, this Court is essentially concerned with whether the order under appeal was or was not within the range of orders reasonable (sic) open to the Judge to make in the circumstances presented to him. If, applying the appropriate principles, the order was within the range of orders reasonably open to the Judge, then this Court should not interfere with it."

As appears from this, the appellate court must ask itself whether the costs order made by the lower court was one which was "within the range of orders reasonably open" to that judge to make. The discretion is not absolute: there may still be cases where an order for costs, though technically open to a judge to make, was so unreasonable in the circumstances as to be repugnant to the very principle of justice itself. That is, of course, an extremely high bar for any litigant to overcome and, as such, appeals of costs orders from the High Court should be extremely rare in practice.

O'Moore J noted that the High Court judge had found that the plaintiff was engaging in an abuse of process of the courts by failing to progress its proceedings after issuing the plenary summons. The consequence of this abuse was not the harshest penalty, namely the outright dismissal of its proceedings, but rather the award of costs in favour of the defendant. O'Moore J held that the decision of Owens J to award costs to the defendant on that basis was within the range of orders reasonably open to him and the plaintiff's appeal was therefore dismissed. The purpose of the costs order was to make a statement to would-be plaintiffs to refrain from parking their litigation indefinitely. O'Moore J concluded:

"The discouragement of such an approach towards this type of litigation, which is what the trial judge intended his costs order to achieve, is well within the discretion (or, as Collins J. describes it, "the significant discretion") which the trial judge certainly enjoys."

It should be noted that O'Moore J did not conclude that it was unjustified in all cases for there to be a gap of four years between the service of a plenary summons and delivery of a statement of claim – he noted that this was itself a "controversial" position, but it was a position which the trial judge was entitled to take.

A final point to note is the plaintiff's estimate of the amount of legal costs involved in the defendant's High Court application. Counsel for the plaintiff had estimated the costs to be €50,000 per side. O'Moore J stated that this estimate seemed excessive in circumstances where the application was "run of the mill", it had lasted half a day and there were two short affidavits with no written legal submissions.

Conclusion

There are several reasons why a plaintiff might decide to issue legal proceedings and then seemingly stall in progressing them. One reason is that it may be necessary to issue proceedings before a potential claim becomes statute barred. Issuing a summons will normally stop the clock running on any potential time limitation. The parties may enter into protracted negotiations and exchange of documentation following the service of the summons, thereby preventing the plaintiff from advancing the proceedings. It may simply be the case, particularly when it comes to large organisations such as insurance companies or banks, which frequently engage in litigation, that there are too many cases for their lawyers to keep up with. There are, of course, plenty of cases where a plaintiff will simply choose to drag its feet for no reason at all. Whatever the reason may be, plaintiffs should be on notice by the decision in Walls Construction that, while courts may choose not to penalise them by terminating their litigation, they will not hesitate to make their displeasure known in the form of an adverse costs order. In modern litigation, such an order can often have the same effect. Indeed, in Walls Construction, the court noted that the estimated costs of the litigation to date were likely already in excess of the amount of the plaintiff's claim.

Author: Mahmud Samad BL
Publication date: 15th May 2025