“Reserving Costs” as the Default After an Unsuccessful Summary-Judgment Motion

Commentary on Xerotech Ltd v Ayro Inc ([2025] IEHC 439)

1. Introduction

In Xerotech Ltd v Ayro Inc, Ms Justice Emily Farrell of the Irish High Court reconsidered the orthodox approach to costs where a plaintiff’s application for summary judgment fails and the matter is remitted for plenary hearing. While the Court ultimately refused Xerotech’s motion for summary judgment, the decision’s real significance lies in its treatment of costs: instead of ordering “costs in the cause”, which remains the usual course, the Court reserved all costs of the proceedings to date. The judgment refines the cost-allocation principles laid down in ACC v Hanrahan and clarifies the circumstances in which a judge should reserve, rather than simply make costs “in the cause”, after an unsuccessful summary-judgment motion.

Parties:

• Plaintiff: Xerotech Ltd (in liquidation), an Irish company.
• Defendant: Ayro Incorporated, a US entity served ex-jurisdiction.

Core Claim: Xerotech sought US $1,830,059 as a liquidated contractual debt, plus interest. Ayro denied that any contract existed. In the alternative, Ayro argued that, if a contract existed, it had been repudiated, so only an unliquidated claim for damages lay.

2. Summary of the Judgment

1. The Court refused summary judgment, holding that Ayro had surpassed the low threshold for leave to defend by showing a bona-fide defence on two fronts: (a) no concluded contract; (b) if a contract existed, repudiation limited the plaintiff to a damages claim.
2. The proceedings were adjourned for plenary trial.
3. Costs Ruling: The Court reserved all costs of the summary-judgment motion and the proceedings to date, declining Ayro’s request for immediate costs and rejecting Xerotech’s call for “costs in the cause”.

3. Analysis

3.1 Precedents Cited

• ACC Bank plc v Hanrahan [2014] IESC 40: Supreme Court authority on cost orders following summary-judgment applications. It established that costs will usually be “in the cause” or reserved, unless the plaintiff has acted manifestly unreasonably.
• Cabot Financial (Ireland) Ltd v Kearney [2022] IEHC 247: Holland J awarded the defendant immediate costs because the plaintiff’s summary summons was incurably deficient. Justice Farrell distinguished that case, emphasising that Xerotech had at least pleaded a prima facie claim.
• Bank of Ireland Mortgage Bank v O’Malley [2019] IESC 84: referenced indirectly through Cabot. O’Malley sets high pleading standards for summary debt claims.
• Rules of the Superior Courts, Order 99 and s. 168–169 of the Legal Services Regulation Act 2015: statutory framework governing costs.

3.2 Court’s Legal Reasoning

1. Threshold for Summary Judgment. Justice Farrell accepted the Hanrahan test: summary judgment is granted only where it is “very clear” the defendant has no bona-fide defence. Ayro raised material factual disputes about contract formation and the proper cause of action. That sufficed.
2. Distinction between “costs in the cause” and “reserving” costs. • “Costs in the cause” means the eventual winner at trial recovers both trial costs and the costs of the interlocutory motion. • “Reserving” allows the trial judge to allocate the interlocutory costs separately, once factual findings are made.
3. Why reservation was appropriate. (a) The central factual disputes (contract formation, repudiation) overlap almost entirely with issues for trial. (b) Until those disputes are resolved, the Court cannot fairly say which party’s stance at the interlocutory stage was reasonable. (c) Clarke J’s observations in Hanrahan (paras 3.6-3.9) endorse such an approach where disputed facts predominate. (d) Xerotech was not manifestly unreasonable; it put forward a prima facie liquidated claim and only lost because factual contestations existed.
4. Rejection of Defendant’s “manifest unreasonableness” argument. Ayro argued that Xerotech should have abandoned summary judgment once Ayro’s affidavit was filed. Justice Farrell disagreed, holding the affidavit did not make it “sufficiently obvious” that only a damages claim existed, particularly as Ayro had steadfastly denied any contract at all.

3.3 Impact on Future Litigation

The judgment subtly but materially recalibrates the cost consequences of failed summary-judgment motions:

• Practical Effect: Reservation of costs becomes a more pronounced option where key factual issues overlap with trial, even if the plaintiff’s application was not unreasonable.
• Strategic Implications for Plaintiffs: Plaintiffs can pursue summary judgment without automatic exposure to immediate adverse costs, provided they can show a prima facie case and are not manifestly unreasonable.
• Strategic Implications for Defendants: Defendants overcoming a summary-judgment motion should not expect automatic cost awards; they must demonstrate “manifest” unreasonableness by the plaintiff.
• Judicial Economy: Trial judges retain flexibility to revisit interlocutory costs in light of later findings, promoting fairness and deterring tactical motions.
• Doctrinal Development: The case refines, rather than departs from, Hanrahan. It underscores that the binary choice (“costs in the cause” vs “defendant’s costs”) is not exhaustive; “reservation” may now be the favoured route where factual disputes are central.

4. Complex Concepts Simplified

Summary Judgment

A fast-track procedure where the plaintiff seeks judgment without a full trial, arguing the defendant has no arguable defence.

Leave to Defend

Permission granted to the defendant to contest the claim at a full trial. The threshold is intentionally low: the defendant need only show an arguable defence.

Costs “in the cause”

The party who ultimately wins the case recovers the costs of the interlocutory step.

Costs “reserved”

The decision on who should pay the interlocutory costs is postponed until after the trial, enabling the judge to make that decision in light of the full factual record.

Manifest Unreasonableness

A standard—drawn from Hanrahan—requiring more than mere lack of success. The moving party must have acted in a way that no reasonable litigant would (e.g. advancing a hopeless claim).

5. Conclusion

Xerotech Ltd v Ayro Inc does not revolutionise Irish civil-procedure law, but it significantly clarifies the nuanced discretion surrounding costs after an unsuccessful summary-judgment application. Justice Farrell’s decision illustrates that:

• The ordinary presumption that “costs follow the event” (s. 169 LSRA 2015) is tempered in the unique context of summary-judgment motions.
• Where factual disputes central to the interlocutory motion will be re-litigated at trial, reserving costs is often the fairest course.
• Immediate cost awards against unsuccessful plaintiffs are reserved for cases of manifest unreasonableness, such as pleading deficiencies or hopeless claims (Cabot).
• The decision equips trial judges with greater flexibility and offers litigants clearer guidance on the cost-risk landscape when choosing to pursue—or resist—summary judgment.

In the broader legal context, the judgment encourages proportionate litigation by balancing the need to deter unmeritorious summary-judgment applications against the risk of punishing plaintiffs simply because factual conflicts necessitate a plenary trial. By elevating the option of reserving costs, the Court aims to ensure that cost liability ultimately aligns with a fully informed view of the merits.