Key Contacts: Clare Cashin – Partner | Gerald Byrne – Partner | Michael Cahill – Senior Associate
The judgment of Mr Justice Twomey in the Word Perfect Translation Services Limited -v- The Minister for Public Expenditure and Reform (No. 2)  IEHC 219 provides valuable insight into the Courts’ developing approach to costs orders and the obligations placed on the Courts by section 169 of the Legal Services Regulation Act 2015 (the “2015 Act”).
As noted in the opening paragraph of the judgment, the Courts are dealing with both a shortage of judges and case backlogs and in such circumstances there is a need to ensure that “scarce court resources are only used when necessary” and “only to the extent necessary”. Twomey J elaborates on this point by specifically mentioning litigation where: (i) mediation or other forms of dispute resolution have failed (or are inappropriate); and (ii) parties are only litigating issues that are necessary to determine the dispute between them. Where proceedings do not fall within these two categories, then it seems the parties to such proceedings may be found to have unnecessarily troubled the Courts and “there are likely to be negative costs consequences for the parties”.
It is clear from section 169(1) of the 2015 Act that there is an obligation on the Courts, when considering costs awards, to have regard to the circumstances and nature of a case “from the moment of the commencement of the dispute to the conclusion of the litigation”. This obligation appears to require the Court to ask itself a number of questions, including whether “the parties [have] conducted the case in the most cost-effective way possible?”
Where the Court cannot answer this question in the affirmative, it seems parties will need to prepare themselves for negative costs orders (regardless of whether they have been successful in the proceedings). The lasting effect of such negative costs order and whether they “will ‘encourage’ litigants to take a more ‘efficient approach to ligation’”, as Twomey J notes, “remains to be seen”.
The judgment helpfully looks at recent case law in which the Courts have interpreted section 169 of the 2015 Act and finds that it “provides a powerful financial incentive for litigants to be as efficient as possible with the use of court time”. Notably, Twomey J goes on to namecheck mediation as the “most obvious way, in which litigants might resolve their dispute in the most cost-effective manner possible”. In order for the Court to have due regard for sections 169(1)(a) and (c) of the 2015 Act (and whether the proceedings have been pursued in the ‘most cost-effective manner’), it will be necessary to consider whether the parties sought to mediate their dispute and/or any responses to a proposal to mediate. In this regard, Twomey J cited the approach of the Court of Appeal in the Mascarenhas case where it was held that a refusal by one party to accept an invitation to mediate the dispute should be met with a costs award penalty of 10%.
The Court also noted the high cost of litigation in Ireland and found that “in many cases, it will be difficult to see how a party could have conducted the case in the most cost-effective manner possible, if it did not consider mediation”.
The Court did acknowledge that there are certain circumstances in which a defendant, such as the State, will have had no choice but to incur legal costs (by defending legal proceedings initiated against it). However, again, in this scenario an offer of mediation will be an important factor in considering whether the parties have conducted the proceedings in the ‘most cost-effective manner possible’.
In the proceedings before the Court, Word Perfect, the unsuccessful party, claimed that the State had not conducted its case in the ‘most cost-effective manner possible’ and therefore it should not be liable for the unnecessary costs incurred. In response the State argued that it was entirely successful in the proceedings and should be entitled to 100% of its costs.
The Court here found that there were inefficiencies in the approaches of both parties. The Court found that the State, instead of seeking to have Word’s Perfect’s eligibility to challenge the Request for Tenders dealt with at preliminary application stage, allowed the case to go to trial on three ‘substantive’ issues concerning the legality of the Request for Tenders (as well as the eligibility point). It was estimated that approximately 20% of the costs were taken up with the eligibility point with all remaining time and costs spent on the three ‘substantive’ issues – Word Perfect therefore argued that it should only be liable for 20% of the State’s costs.
That being the case, the Court also found that Word Perfect chose to bring the proceedings in which it was entirely unsuccessful and so “it has only itself to blame for now having to bear the legal costs of its failed challenge”. Word Perfect, like the State, also failed to have the eligibility point dealt with as a preliminary issue. Having considered all of the circumstances of the case and the onus on both parties to conduct the proceedings in the ‘most cost-effective manner possible’, the Court found that the State should be awarded 50% of its costs.
As is clear from section 169 of the 2015 Act (and recent case law) it no longer follows that a winning party will automatically be entitled to 100% of its costs. This judgment highlights the factors that the Court will be required to have regard to in determining whether the parties have conducted the proceedings in a cost-effective manner. In this regard, the Court is “obliged to consider any acts or omissions by the parties regarding mediation before awarding costs to a party that is entirely successful”. It is clear from this judgment that parties choosing to unnecessarily trouble the courts with disputes that could be more efficiently resolved through alternative dispute resolution or where parties fail to sufficiently refine the parameters of their dispute will inevitably be met with negative cost consequences so as to encourage no further wastage of limited court resources.
 Such as: Chubb v. The Health Insurance Authority  IECA 183; Somers v. Kennedy  IEHC 78; Ryanair v. An Taoiseach  IEHC 673; and, Mascarenhas v. Karim & Anor.  IECA 48 (the “Mascarenhas” case)
 In the Mascarenhas case, the Court of Appeal was minded to apply a 10% reduction to the successful party’s costs due to his lack of candidness to the Court with regards to his immigration status; however, the appellants’ approach to the proceedings, specifically their refusal to engage in mediation, justified the Court not applying the 10% reduction in the successful party’s costs.
For more information in relation to this article please contact Clare Cashin, Gerald Byrne or Michael Cahill.