Court of Appeal overturns High Court Decision on Costs

In a 2022 judgment, the High Court held that the Minister for Public Expenditure and Reform (‘the State’) was not entitled to full costs in respect of the successful defence of public procurement proceedings, with the court finding that the State had not conducted the proceedings in the most cost effective manner possible.

However, the Court of Appeal in Word Perfect Translation Services Ltd v Minister for Public Expenditure and Reform [2023] IECA 189 has now overturned this decision and awarded the State it’s full costs.

High Court Decision

The High Court awarded the State 50% of its costs, with the primary reason for the reduction being that although the State succeeded on a preliminary point that the plaintiff was not an ‘eligible person’ to challenge a tender award, the State had failed to bring a motion to have the preliminary point decided before the trial. Instead, it was argued at trial, along with three substantive claims raised by the plaintiff in respect of the tender award.

The High Court held that the wording of Section 169(1) of the Legal Services Regulation Act 2015 (‘2015 Act’) meant that the court “must consider in every costs application….whether….the winning party conducted the case in a manner which justifies a lesser award” and that the decision by the State not to bring a preliminary application had clear financial implications for the other party as well as on court resources.

Court of Appeal Decision

The Court of Appeal outlined that there could be unintended consequences if a court was obliged, in every application for costs by a successful party, to consider if the parties conducted the case in the most cost-effective way possible. It noted that it would require a judge in every case to engage in an assessment of the litigation choices made by the winning party “from a vantage place where hindsight provides the perfect vision”.

The Court of Appeal further held that the High Court did not consider the issue of costs with the starting point being that the entirely successful litigant was entitled to its costs unless ordered otherwise, but instead the court commenced an assessment of whether the litigation had been conducted in the most cost-effective manner possible. The Court of Appeal found this to be an acute turnaround from the pre-existing provision that costs follow the event and a departure from the wording of the 2015 Act. While in some cases the same conclusion may be reached irrespective of what starting point is adopted, that may not always be the case.

Instead, the general discretion of the courts in connection with the ordering of costs is preserved and it is an entitlement of an entirely successful party to succeed in an award of costs unless the court orders otherwise. In “ordering otherwise”, the court has to have regard to the factors set out in the 2015 Act, which the Court of Appeal held continues the position that the parties must conduct litigation fairly, reasonably and proportionately to the issues at stake.

As such, the High Court, in considering a modified costs order, should have asked whether it was satisfied that the State had behaved unreasonably in failing to bring a preliminary motion on the eligibility point. In fact, the High Court had expressly held that there was no criticism of the manner in which the State conducted the litigation and the Court of Appeal confirmed that the State was entitled to its full costs.

Conclusion

The Court of Appeal has provided clarity on the approach to be adopted by the courts in considering cost applications. The principle that costs follow the event remains the starting position and the test to be applied in considering a modified costs order is whether the approach taken by the winning litigant was objectively reasonable in all of the circumstances of the case.

The Court of Appeal also emphasised that cost hearings ought not to be exercises in nit picking and instead, a broad-brush stroke approach must be taken to avoid costs applications spiralling out of control with implications for the administration of justice.