Beakonford Ltd v Stokes and Another

• Jurisdiction: Ireland
• Court: High Court
• Judge: Mr Justice Twomey
• Judgment Date: 22 January 2025
• Neutral Citation: [2025] IEHC 22
• Docket Number: RECORD NUMBER 2023/4600 P

Between

Beakonford Limited

Plaintiffs

and

Oonagh Stokes

and

Barbara Wilding

Defendants

[2024] IEHC 22

RECORD NUMBER 2023/4600 P

THE HIGH COURT

COMMERCIAL COURT

JUDGMENT OF Mr Justice Twomey delivered on the 22 ^st day of January, 2025

SUMMARY

1 . This is a case that concerns the use of hourly rates, or more accurately their non-use, in the estimation of fees due to lawyers in High Court litigation, in the context of a security for costs application.

2 . In particular it relates to the relevance of hourly rates when a court has to resolve the conflict between, on the one hand, the requirement (in the Legal Services Regulation Act, 2015 (“ 2015 Act”)) that High Court costs be ‘reasonable’ and, on the other hand, the fact that the costs, which are adjudicated by a State body (the Office of the Legal Costs Adjudicator), are, in practice, anything but reasonable, since they are at ‘millionaire’ 1 levels. This conflict requires consideration of how one determines what is meant by ‘reasonable’ litigation costs when it comes to the High Court.

3 . The background to this issue is that judges have little or no control over the amount of costs which have to be paid by a losing litigant to his opponent's lawyers. This is because while judges decide which party has to pay costs, it is the Legal Costs Adjudicator (“ LCA”), and previously the Taxing Master, who calculates the actual amount to be paid in costs in accordance with rules laid down by the Oireachtas, which are currently contained in the 2015 Act. Thus, a security for costs application is one of the few occasions in which the courts

have any insight to how costs are calculated, even though costs are an integral part of the administration of justice, since they will often exceed the damages awarded

4 . As a result, the judiciary, with no control over the level of litigation costs, has repeatedly complained about the ‘high costs of litigation’ 2 in the High Court. 3 Indeed, it is almost 60 years since the Supreme Court, in McCarthy v Walsh [1965] IR 246 at page 255, first referenced the very high cost of litigating in the High Court. Since then, the judiciary has repeatedly noted that ‘many people are unable to afford the often high costs of professional representation’; 4 that litigation costs in the High Court are ‘by, any standards, high’, 5 that they are ‘prohibitive’, 6 that they are ‘absurdly high’ 7 etc.

5 . More significantly, when it comes to the effect of these high costs, judges have pointed out that because the ‘costs of litigation generally soar’ this means that the ‘interests of justice are not served.’ 8 In fact, judges have also noted that high litigation costs ‘threaten to overwhelm’ the ‘fair administration of justice’. 9

6 . Since it is clear therefore that ‘prohibitive’ litigation costs are compromising the fair administration of justice, the importance of reducing High Court litigation costs cannot be overstated.

7 . Yet, despite this fact, and despite the many decades of judges complaining about the high costs of litigation, there has been no effective reduction in High Court litigation costs. Since any change to the rules governing the calculation of costs is a matter for the Oireachtas, this begs the question of whether the courts are simply restricted to highlighting the problem and calling, as the Supreme Court did several years ago, for the Oireachtas to give ‘urgent consideration’ to the reform of ‘the cost of going to court’? 10 In other words, are the courts resigned to witnessing the infliction of injustice by these ‘prohibitive’ costs on a daily basis (particularly on ordinary citizens in relatively minor disputes), even though the courts are supposed to administer justice?

8 . The fact that such injustice is a daily occurrence is illustrated by the recent case of Gilvarry v Naylor [2024] IEHC 668, where the costs were €1.5 million in an everyday family dispute over a father's will. The fact that this was a run of the mill dispute that could affect the average family in the State is illustrated by the fact that the father's estate was only worth

€450,000 (not much more than the average house price in the State). 11 Thus, although it might be hard for non-lawyers to believe, the costs were in fact over three times the value of the assets the subject of the dispute – this is as nonsensical as paying three times the value of a car for it to be repaired (but with car repairs, the payer has a choice not to repair the car, while a litigant does not have a choice not to be sued). Yet this is what occurred. As a result, the latest chapter in that case was not about the legal issues at stake, but rather about which lawyers would get paid first out of assets which were insufficient to cover all the legal costs

9 . It is difficult to describe ‘millionaire’ costs, such as these, as ‘reasonable’ in the context of a dispute over an estate worth €450,000. However, cases like Gilvarry v Naylor, where costs are out of all proportion to the value/importance of an everyday dispute, are so common that they are hardly newsworthy, such that it is difficult to avoid the conclusion that in another 60 years judges may still be pointing out the effect of ‘prohibitive’ High Court costs on ordinary citizens.

10 . Yet, since the role of the courts is to try to improve the system for litigants, 12 is there anything that the courts can do about the ‘prohibitive’ costs that ordinary citizens are forced, by the laws of this State, to pay to have their disputes (particularly relatively minor disputes) resolved?

11 . One possible answer may be the correct interpretation of the 2015 Act, particularly when one bears in mind that this Act was intended to reduce litigation costs. 13 In this Court's view, correctly interpreting that Act requires firstly, the use of hourly rates in calculating litigation costs and secondly, that those hourly rates be ‘reasonable’ per se. In this Court's view this must mean that the costs are ‘reasonable’ on objectively justifiable grounds, which does not mean that they are reasonable for a wealthy businessman (or indeed a person of no means), but rather for the average citizen. Thus, one does not determine if proposed High Court costs are reasonable by comparison with ‘millionaire’ costs paid in other cases in the past (or indeed by comparison with what corporate or wealthy clients in the ‘open market’ might agree to pay their own lawyers). Considering whether hourly rates are reasonable on objectively justifiable grounds has, at least, the potential to lead to a reduction in the costs which a losing litigant is forced by the State to pay — something which has been called for by the judiciary, without success, for at least 60 years.

Conflict between requirement in 2015 Act that costs be ‘reasonable’ and ‘millionaire’ costs

12 . This issue arose in this security for costs application because in order to determine the amount of security to be paid, this Court had to have to regard to the costs which the LCA is likely to adjudicate as ‘reasonable’ under the 2015 Act. Accordingly, this case was concerned with the law and the practice concerning how costs are estimated/adjudicated upon, and the likely level of those costs. Based on the expert evidence in this case, it appears to this Court that the current practice regarding the estimation/adjudication of legal costs is based on an incorrect interpretation of two separate provisions of the 2015 Act.

13 . This became clear because this Court was provided with three expert opinions on the likely costs in the case. One expert thought that the LCA would adjudicate the sum of €454,820.50 (incl. VAT) as ‘reasonable’ costs for one defendant's lawyers for a 6-day trial (plus preparatory work). This sum was made up of payments to a solicitor, a junior counsel, and a senior counsel, with the solicitor's fee 14 alone estimated to be €209,100, which is €170,000 (excl. VAT). A second expert in legal costs provided a very similar estimate of €411,429 (incl. VAT) for the litigation costs, with the fee for one solicitor estimated at €196,185, which is €159,000 (excl. VAT) for a 6-day trial (plus preparatory work).

It takes Taoiseach 8 months to earn lawyer's fee for 6 day trial (plus preparatory work)

14 . While the 2015 Act requires litigation costs such as these to be ‘reasonable’, it became clear to this Court that it can be difficult to appreciate how reasonable, or unreasonable, High Court litigation costs are, when they are put in the hundreds of thousands of euros, with no idea of how much of a lawyer's time underpins the figures. In this Court's view, litigation costs would be much easier to assess as regards whether they are ‘reasonable’ (as required by the 2015 Act) if they were put in terms which most people can relate to, i.e. euros per hour, so as to enable comparison with fees/rates for other services (and so determine if they are ‘ reasonable’ on ‘ objectively justifiable’ grounds). For example, to put the sum of €209,100 (€170,000, excl. VAT) into context, it would take the Taoiseach, on a salary of €241,480, 15 a full eight months to earn the sum which it is claimed is ‘reasonable’ to pay one legal practitioner for his time in a 6-day trial (plus preparation).

15 . It is for this reason that the most surprising thing about this particular costs' estimate (and indeed the estimates of the other two experts) is that there was no reference in the estimate to the time which the lawyers were estimated to expend, or their hourly rates, in order to justify that figure. In the context of the sum of €170,000 (excl. VAT), this meant that this Court was being asked to find that this sum was ‘reasonable’ remuneration for one legal practitioner for his costs for a 6-day trail (plus preparatory work) without the Court having any idea of how much time the legal practitioner was estimated to expend providing...