Legal Updates

In the recent High Court case of Word Perfect Translation Services Limited v The Minister for Public Expenditure and Reform (No.2) [2022] IEHC 219, the High Court (Mr Justice Twomey) considered the obligation of the wording of section 169(1) of the Legal Services Regulation Act 2015 (“the Act”) and its application to encourage a more efficient approach to litigation. In accordance with the Act, a court is obliged to ask, in every application for costs, have the parties conducted the case in the most cost-effective way possible. In doing so, the court can adjudicate on whether the winning party is entitled to its costs or whether the winning party or parties conducted proceedings in a manner that justifies a lesser award.

Facts

Word Perfect Translation Services Limited (“Word Perfect”) brought an action against the Minister for Public Expenditure and Reform (“the State”) challenging the legality of a Request for Tenders by the State for the supply of Irish translation services. Word Perfect was unsuccessful in its action but argued that the State did not conduct the proceedings in the most cost-effective manner, and that Word Perfect, therefore, should not be liable for any “unnecessary” costs in the proceedings.

Word Perfect’s substantive proceedings were grounded on three claims regarding a Request for Tenders by the State. The State denied the three claims raised by Word Perfect, but also raised a preliminary objection to the proceedings on the grounds of eligibility. The preliminary objection was not heard until the trial of the action. Word Perfect claimed that the State’s conduct in the proceedings was inefficient as the State should have brought a motion before the trial to deal with the preliminary objection, which would have saved court time and a large amount of the expense involved with discovery and expert evidence.

Finding

The court held that it was clear from the wording of section 169(1) of the Act and case law (referring, in particular, to the recent decisions in Chubb v The Health Insurance Authority [2020] IECA 183 and Somers v Kennedy [2022] IEHC 78), that 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 its case in the most cost-effective manner possible. If a party does not, then they are unlikely to get 100% of their costs.

The court held that the proceedings were not conducted in the most efficient manner possible. It was estimated that around 20% of the costs were taken up on the “preliminary objection” and the remainder of the time was spent on Word Perfect’s three substantive claims. However, the court did not restrict the State to 20% of its costs, but instead awarded the State 50% of its costs. In determining the appropriate reduction in legal costs when a winning litigant has not conducted its case in the most cost-effective manner possible, the court considered a number of non-exhaustive factors.

The conduct of both parties was one of the factors to be considered, with the court finding that the obligation to conduct a case in the most cost-effective manner possible applied not just to the State, but also to Word Perfect, who also failed to deal with the matter as a preliminary issue. The court noted that had Word Perfect done this, it would have been in a stronger position to claim that it should only pay 20% of the State’s costs.

The court commented that “one of the ways in which to seek to resolve a dispute in the most cost-effective manner possible is by suggesting or agreeing to mediation or other form of dispute resolution”, which is also referred to in section 169(1)(g) of the Act. While this section had no application to the proceedings at issue, the court noted that there is public interest in ensuring that court resources are not unnecessarily wasted, particularly where an offer of mediation might have led to a saving of those resources. The court explicitly noted that a court should consider whether parties decide to go to mediation to resolve their dispute and should also consider the acts or omissions by the parties regarding mediation before awarding costs to a party that is entirely successful.

Conclusion

The key take away from the above decision is that a dispute should be resolved in “the most cost effective manner possible”, failing which there could be severe cost consequences. In assessing the most cost-effective way to resolve a dispute, it is important that all parties to the dispute consider mediation and other forms of dispute resolution, together with any available procedural mechanisms, including preliminary applications.