Legal Costs Landscape

The High Court has recently addressed the legal costs landscape in Ireland, highlighting that costs can often exceed the value of claims. This issue is particularly prevalent in the High Court. The decision stressed the need to ensure that costs are proportionate. It invited the legislature to consider increasing the availability of affordable courts and emphasised that the High Court should only hear serious disputes. Commercial Disputes partners, Gearoid Carey and Gerard Kelly review the implications of this decision.

A recent decision[1] has taken the opportunity to criticise how litigation is disproportionately conducted in the High Court, where the costs of litigating are necessarily higher. A reduction in the volume of more affordable courts has exacerbated the phenomenon. The legal costs being incurred in cases can be disproportionate to the value of the case. A defendant has no option to defend the case. If the plaintiff does not have the means to meet any costs awarded against them, substantial High Court costs can be weaponised by a plaintiff with an improper purpose. Ultimately, the court felt it had a responsibility to make the system better for litigants and has suggested reforms.

Background

The decision arose in a case involving litigation between siblings regarding a dispute over a small family farm in Sligo. The proceedings had been brought by Mr Shannon against two of his sisters. The sisters had taken up occupation of a property registered in Mr Shannon’s name but which they claimed to own and refused to leave. This High Court decision was delivered after nearly 30 years of related litigation mainly brought by one of the sisters against Mr Shannon, primarily in the High Court and on appeal to the Supreme Court.

In separate prior judgments, the courts had referred to a “litigation stream” brought against Mr Shannon which he had no option but to defend. They stated that there was a “vendetta” against him. Consequently, Mr Shannon had incurred significant legal costs which he had no prospect of recovering. This prompted the High Court to describe the prior litigation as “one of the worst examples ever of the weaponisation of the courts”. Mr Shannon had eventually secured an Isaac Wunder order, which prevents a party commencing new proceedings without leave of the court. However, since Mr Shannon’s sisters were not corporate entities, security for costs was not available to him in those prior proceedings. Consequently, Mr Shannon had been exposed to costs at a much higher level than if a more proportionate court had been chosen to hear the cases. This made the unfairness of the vexatious litigation even worse, as it was pursued in the High Court where costs are higher. Ultimately, Mr Justice Twomey noted that although the court could not convince Ms Shannon of the error of her ways, it could “highlight the ways in which the system could be improved so that Ms Shannon cannot weaponise… the legal system against the brother”.

Observations made

The judgment said little about the merits of the case. Instead, it set out a critique of the costs landscape of High Court litigation. Mr Justice Twomey noted at the outset that the litigation landscape in Ireland had changed. Now, much more of the work of the courts is done in the High Court compared to the past. This is also more as compared to England & Wales at present. In this regard, he stated that:

• There had been “a 359% reduction in the proportion of District Courts to High Courts in recent decades”
• Whilst there “used to be more Circuit Courts than High Courts in Ireland, there were now fewer Circuit Courts” – in contrast, “in England & Wales, they have 700% more Circuit Courts [equivalents] than High Courts”, and
• There are now “five times more High Court judges, per head, in Ireland than there are in England & Wales”.

He went on to note that, if legal costs were the same in all courts, the changes referenced above would have little impact on litigants like Mr Shannon. However, that was not the case and meant that similar litigants were exposed to significant legal costs. Mr Justice Twomey further noted that the injustice of the vendetta being pursued against Mr Shannon was “exacerbated by the changes introduced by the Courts Act and other legislation over recent decades, which introduced a dramatic reduction in the proportion of District / Circuit Court to High Court. This reduction in the proportion of those courts amounts, in effect, to a reduction in the proportion of ‘affordable’ courts.”

He noted that “if High Court costs are not to be reformed, an indirect way of reducing the costs of litigants of resolving their disputes is to ensure that there are a sufficient number of affordable courts in Ireland so that relatively minor disputes (such as Mr Shannon’s) are not heard in the High Court, with that court instead being reserved for cases where costs are proportionate to the value / importance of the dispute.”

Judge Twomey noted that the traditional pyramid structure for trial courts which used to exist in Ireland, and still exists elsewhere, had been dismantled and even inverted. This change meant there were more of the unaffordable High Court cases than the relatively affordable Circuit Court cases. He also observed how litigation costs can sometimes even be a multiple of the value of the dispute. This illogical state of affairs arises from the fact that litigation is a captive market in that it usually involves a defendant who has not chosen to litigate. Since half the participants do not willingly choose to be in that market, it was “even more important that costs should be proportional to the value of the dispute”. Disproportionate costs are also an issue, as litigation can be used for improper purposes or by someone who is misguided. Overall, it is easier now to weaponise unaffordable High Court legal costs against another person. Given the matters could be determined in a lower court at much lower cost, the prevailing state of affairs did not benefit litigants like Mr Shannon. According to Mr Justice Twomey, “it is the responsibility of the courts to have the interest of litigants in mind”.

Conclusion

The High Court, and Mr Justice Twomey in particular, has become increasingly vocal in costs rulings. He has set out points of principle to incentivise parties to conduct themselves in particular ways to maximise recoveries / minimise exposures. For example, in a novel IP case[2] where Mr Justice Twomey felt he had no option but to award the plaintiff its substantial costs despite a limited damages award, he refused to direct an account of profits. In another case, he had also expressed the view that State agencies in particular should at least consider mediation in every dispute in which it is involved. Unlike most other litigants, there is nobody in a State agency who will be personally out of pocket if the litigation is won, lost or drawn. In addition, State agencies lack the financial incentive that most other litigants have to consider mediation.[3]

The recent decision concerning Mr Shannon makes more sweeping observations on the legal costs landscape. This involves suggesting changes to be implemented, in general terms, to the Oireachtas. Until structural changes make the lower, more ‘affordable’ courts more prevalent, or limit what might be brought before the High Court, parties should seek to avoid litigating in courts where the legal costs might be disproportionate to the dispute. The ruling is also clear that the courts recognise their role is not just the implementation of the law. Rather, they have a responsibility to “make the system better for the litigant”. If necessary, this includes highlighting issues for legislators to address.

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] Shannon v Shannon & Shannon [2024] IEHC 291

[2] Nutrimedical BV & Anor v Nualtra Ltd [2017] IEHC 253

[3]In both the principal judgment and cost ruling respectively - Sere Holdings Limited v HSE [2023] IEHC 63 and 2023 [IEHC] 133. See also https://www.mhc.ie/latest/insi...