Word Perfect Translation Services Ltd v The Minister for Public Expenditure and Reform

• Jurisdiction: Ireland
• Judge: Mr. Justice Twomey
• Judgment Date: 07 April 2022
• Neutral Citation: [2022] IEHC 219
• Court: High Court
• Docket Number: [2021/556JR]

Between

Word Perfect Translation Services Limited

Applicant

and

The Minister for Public Expenditure and Reform

Respondent

[2022] IEHC 219

[2021/556JR]

THE HIGH COURT

COMMERCIAL

Costs – Eligibility – Request for Tenders – Respondent seeking costs – Whether the case was conducted in the most cost-effective manner possible

Facts: The respondent, the Minister for Public Expenditure and Reform (the State), did not seek to have the ‘eligibility’ of the applicant, Word Perfect Translation Services Ltd (Word Perfect), to challenge a Request for Tenders, dealt with as a preliminary issue by the High Court. Instead, the State allowed the case to go to trial on three ‘substantive’ claims regarding the legality of the Request for Tenders, as well as on the eligibility point. At the trial, the State won on the eligibility point and therefore it was unnecessary for the Court to adjudicate on Word Perfect’s three substantive claims regarding the Request for Tenders. Word Perfect claimed that if the State had conducted the case in the most cost-effective manner possible, which the State was obliged to do if it wanted all of its costs, it would have sought to have the eligibility point dealt with as a preliminary issue. On that basis, Word Perfect claimed that even though its entire case challenging the Request for Tenders had been dismissed, it should not be liable for the ‘unnecessary’ costs involved in dealing with the three ‘substantive claims’. For its part, the State pointed out that it was entirely successful in the proceedings and that, as such, it should be entitled to 100% of its costs.

Held by Twomey J that the case was not conducted in the most cost-effective manner possible and that this led to the unnecessary use of court resources and unnecessary costs to the parties. Twomey J noted that it was estimated that circa 20% of the costs were taken up with the ‘eligibility’ point, with the remainder of the time, and costs, spent on the three ‘substantive claims’. Twomey J held that the obligation to conduct the case in the most cost-effective manner possible applied not just to the State, but also to Word Perfect, and it did not seek to have the eligibility point dealt with as a preliminary issue; if Word Perfect had done so, it would have been in a stronger position to claim that it should pay only 20% of the State’s costs.

Twomey J held that the appropriate proportion of costs which should be paid by Word Perfect to the State was 50% of the State’s legal costs, which should be agreed between the parties or adjudicated upon by the Legal Costs Adjudicator, in the absence of agreement.

Costs awarded to the respondent.

(No. 2)

JUDGMENT OF Mr. Justice Twomey delivered on the 7 ^th day of April, 2022

SUMMARY

1 . The Supreme Court in Permanent TSB plc v. Skoczylas [2021] IESC 10 at para. 12 has made it clear that one of the functions of making costs orders is to ‘encourage’ an ‘ efficient approach to litigation’. At a time when there is a well-publicised shortage of judges and a backlog in the courts' system, it is even more important that costs orders encourage such efficiency by ensuring that scarce court resources are only used when necessary (i.e. if mediation or other forms of dispute resolution have failed or are inappropriate) and then only to the extent that is necessary (i.e. by only litigating those issues which are necessary to determine the dispute). Where this is not the case, there are likely to be negative costs consequences for the parties. Whether such negative costs orders will ‘ encourage’ litigants to take a more ‘ efficient approach to litigation’ remains to be seen. However, due to a relatively recent legislative change, it is significant that when a court exercises its function of making costs orders, it is now obliged to ask, in every application for costs by a party that has been entirely successful, have the parties conducted the case in the most cost-effective way possible?

2 . The existence of this obligation is clear from the wording of s. 169(1) of the Legal Services Regulation Act, 2015 (the “2015 Act”), which came into effect on 7 ^th October, 2019 and from recent judgments of the High Court and the Court of Appeal i.e.

• • The Court of Appeal in Chubb v. The Health Insurance Authority [2020] IECA 183, makes clear that s. 169(1)(a) and (b) of the 2015 Act places an obligation on a court to have regard to the conduct of parties when considering whether to award costs to a party that has been entirely successful in its proceedings. The mandatory nature of the obligation of a court is clear from para. 19(e) of Murray J.'s judgment in which he states that ‘ the matters to which the court shall have regard’ when deciding on costs, ‘include the conduct of the parties before and during the proceedings’ (Emphasis added).

• • In reliance on s. 169, the High Court in Somers v. Kennedy [2022] IEHC 78 at para. 10 refused to make an order for 100% of a winning party's costs. Butler J. refused to do so because of that party's failure to conduct the case ‘ in the most cost effective manner possible so that the ultimate costs burden – no matter who has to bear it – will be as low as possible.’ (Emphasis added)

3 . It is entirely logical that a court is obliged to ask whether the case has been conducted cost-effectively. This is because where a winning party has not conducted her case in the most cost-effective manner possible, it would be unjust for the losing litigant to have to discharge legal costs which were unnecessarily incurred by the winning litigant. As noted in Ryanair v. An Taoiseach [2020] IEHC 673 at para. 22 by Simons J. ‘one side should not have to bear costs which have been incurred unnecessarily by the other side.’ (Emphasis added)

4 . It can be seen therefore that s. 169 provides a powerful financial incentive for litigants to be as efficient as possible with the use of court time. Accordingly, it has the potential to lead to a significant change in the attitude of litigants and their lawyers regarding how they resolve disputes and a significant saving to court resources, in the public interest.

5 . The most obvious way, in which litigants might resolve their dispute in the most cost-effective manner possible is by the use of mediation, failing which there may be cost consequences. Thus, for example in the Court of Appeal decision in Mascarenhas v. Karim & Anor. [2022] IECA 48, a failure by one party to accept an invitation to mediate the dispute led to a significant difference in the costs which would otherwise have been payable to the winning party.

6 . While the present case does consider whether mediation was canvassed by the parties, its primary focus is on the cost consequences of the fact that the winning party, the State, did not seek to have the ‘eligibility’ of Word Perfect to challenge the Request for Tenders, dealt with as a preliminary issue by the court. Instead, the State allowed the case to go to trial on three ‘substantive’ claims regarding the legality of the Request for Tenders, as well as on the eligibility point. At the trial, the State won on the eligibility point and therefore it was unnecessary for this Court to adjudicate on Word Perfect's three substantive claims regarding the Request for Tenders.

7 . The losing party, Word Perfect, now claims that if the State had conducted this case in the most cost-effective manner possible, which the State is obliged to do if it wants all of its costs, it would have sought to have the eligibility point dealt with as a preliminary issue. On this basis, Word Perfect claims that even though its entire case challenging the Request for Tenders has been dismissed, it should not be liable for the ‘unnecessary’ costs involved in dealing with the three ‘substantive claims’. For its part, the State points out that it was entirely successful in these proceedings and that, as such, it should be entitled to 100% of its costs.

8 . However, as is clear from the wording of s. 169 and the case law, in order for a winning party to get 100% of its costs, it is no longer sufficient for that party to have been entirely successful in litigation. The party must also have conducted her case in the most cost-effective manner possible, failing which she is unlikely to get her full costs.

9 . For the reasons set out below, this Court concludes that this case was not conducted in the most cost-effective manner possible and that this led to the unnecessary use of court resources and unnecessary costs to the parties. It is estimated that circa 20% of the costs were taken up with the ‘eligibility’ point, with the remainder of the time, and costs, spent on the three ‘substantive claims’. Nonetheless, this Court will not restrict the State to 20% of its costs, but will instead award it 50% of its costs, for the reasons set out below. This includes the fact that the obligation to conduct the case in the most cost-effective manner possible applies not just to the State, but also to Word Perfect, and it did not seek to have the eligibility point dealt with as a preliminary issue. If Word Perfect had done so, it would be in a stronger position to claim that it should pay only 20% of the State's costs.

BACKGROUND

10 . In Word Perfect v. The Minister for Public Expenditure and Reform [2022] IEHC 54 (the “Principal Judgment”), Word Perfect, challenged the legality of a Request for Tenders by the State for the supply of Irish translation services on three substantive grounds, i.e. (i) the price floor for the translation services in the Request for Tenders was alleged to be unlawful, (ii) the turnover threshold for suppliers was alleged to be too low and (iii) the method of allocating contracts to suppliers (by rotation) was claimed to be unlawful.

11 . In its defence, in the Statement of Grounds of Opposition, as well as denying each of the substantive claims, the...