Costs Follow Practical Success: No Automatic Penalty for Reasonable Alternative Arguments

1. Introduction

This supplemental judgment clarifies how litigation costs should be allocated where the successful party advances several alternative arguments, but the proceedings are ultimately resolved on a narrower ground. Its central message is that reasonable alternative arguments do not automatically attract a costs penalty. Equally, overall success does not protect a party from the financial consequences of pursuing a distinct, weak and disproportionately expensive issue.

The proceedings concerned Verbenagrove Ltd, the tenant, and two individual landlords. The tenant sought a new tenancy under Part II of the Landlord and Tenant (Amendment) Act 1980. The landlords resisted that claim by asserting that rent arrears entitled them to re-enter the premises and that their re-entry defeated the tenant’s statutory entitlement.

The Circuit Court divided the proceedings into modules. The first addressed the landlords’ defence based on forfeiture and re-entry; the second fixed the terms of the new tenancy. The first module reached the High Court by way of a de novo appeal. The second module proceeded separately, and the order fixing the new tenancy’s terms was not appealed.

The substantive appeal had already been determined in Verbenagrove Ltd v. Evans [2026] IEHC 124, delivered on 4 March 2026. The present judgment concerns the allocation of costs, rather than a fresh determination of the tenant’s substantive rights. It also reserves a separate question about the basis on which those costs should be measured.

2. Summary of the Decision

The High Court held that the tenant was “entirely successful” in the first module because it achieved the practical result sought: defeating the landlords’ attempt to resist a new tenancy through purported forfeiture and re-entry. That status created a statutory presumption in favour of recovering its costs at both court levels.

Most of the landlords’ proposed reductions were rejected. The exception concerned the tenant’s unsuccessful claim to offset repair expenditure against rent in the Circuit Court. That claim generated substantial, separable costs and was considered weak from the outset.

The recoverable costs include the specified costs of two counsel, written submissions, stenography and reserved costs. Measurement is to be undertaken by the County Registrar under Order 61, rules 11 and 12, applying the Legal Services Regulation Act 2015. The order determines liability for costs; it does not approve every item or amount claimed.

3. The Statutory Framework: Success, Discretion and Proportionality

3.1 “Entirely successful” concerns the practical result

Under section 169 of the Legal Services Regulation Act 2015, an entirely successful party is presumptively entitled to costs against the unsuccessful party. A court departing from that position must explain why.

The judgment rejects an argument-by-argument understanding of complete success. A party may be entirely successful despite losing individual legal propositions, factual disputes or subsidiary claims. The primary question is whether it obtained the substantive result sought.

This distinction explains why the tenant’s unsuccessful repairs argument did not prevent it from being entirely successful overall. That failure affected the eventual costs allocation, not its initial entitlement to the statutory presumption.

3.2 The ultimate appellate outcome governs

On a de novo appeal from the Circuit Court, the High Court’s decision will generally determine which party succeeded in the proceedings. The successful party is presumptively entitled to costs both above and below, even if it lost at first instance.

Accordingly, the tenant did not lose its entitlement to Circuit Court costs merely because the High Court relied on different reasoning. The statutory focus is the ultimate outcome, not whether the appellate court endorsed every step of the lower court’s analysis.

3.3 Costs may be distributed between distinct issues

Sections 168 and 169 permit a distributive approach: litigation need not be treated as an indivisible whole. Costs may be allocated separately to identifiable parts of the proceedings.

However, the judgment places practical limits on this exercise. Relevant questions include:

• Was the issue distinctly pleaded or otherwise clearly identifiable?
• Did it require evidence that would not otherwise have been necessary?
• Did it occupy an identifiable part of the hearing?
• Was it reasonable to raise and pursue it to the extent undertaken?
• Did it materially affect the costs?

Separability alone is insufficient. The court should not undertake a minute accounting exercise that assigns a price to every small success or failure. A theoretically distinct issue may warrant no adjustment because its costs were negligible or because disentangling them would require disproportionate scrutiny.

4. Precedents Cited and Their Influence

Verbenagrove Ltd v. Evans [2026] IEHC 124

The principal judgment supplied the substantive outcome against which costs had to be assessed. It rejected the landlords’ forfeiture defence on the basis that an expired lease could not be forfeited and the tenant’s statutory occupation could be terminated only by court order.

It also contained findings relevant to the reasonableness of the alternative arguments. These included the landlords’ purpose in choosing their method of serving the forfeiture notice, their failure to issue VAT invoices, and the conclusion that late rent payment did not provide a good and sufficient reason to refuse the new tenancy.

The supplemental judgment therefore distinguishes carefully between an argument rejected, an argument accepted on narrower grounds, and an issue left undecided because another ground disposed of the appeal.

Little v. Chief Appeals Officer [2024] IESC 53

This Supreme Court authority explains the principal function of identifying an “entirely successful” party: it determines who receives the benefit of the statutory presumption and where the burden of justification lies.

Once the tenant established overall success, the landlords had to demonstrate why the considerations in section 169(1) justified a different allocation. The tenant did not have to establish success on every individual issue before invoking the presumption.

In the matter of M.V. Lady Magda [2021] IECA 51

The Court of Appeal’s reasoning, particularly at paragraphs 5 and 6, informed the objective meaning of reasonableness. Pursuing an argument honestly and believing that it will succeed does not, without more, establish that pursuing it was reasonable.

The judgment also cites the authority as In the matter of the MV Lady Magda [2021] IECA 51 when addressing unsuccessful appeals. An appellant cannot avoid the ordinary costs consequences merely because the appeal was reasonably brought or pursued in good faith.

These propositions operate in different ways. Objective reasonableness can protect a successful party against a proposed issue-based deduction, but an unsuccessful appellant’s good faith does not itself defeat the successful respondent’s presumptive entitlement.

Crofter Properties Ltd v. Genport Ltd [2007] IEHC 80, [2007] 2 I.L.R.M. 528

This was the central substantive authority. It addresses the legal character of occupation between the expiry of a tenancy and the determination of an application for a new tenancy under Part II of the 1980 Act. The High Court described it as the leading authority on section 28.

Its significance for costs arose because the judge, rather than either party, initially drew attention to it. The landlords argued that the tenant should not receive full costs for success on a point it had not identified.

The court rejected that argument in the circumstances. Once the point was raised, the tenant adopted it and the landlords disputed its application. The resulting argument therefore remained necessary to resolve the pleaded defence. The authority’s introduction by the court did not alter the costs generated by that continuing dispute.

Casey v. Minister for Housing, Planning and Local Government [2021] IESC 42

Paragraphs 37 to 46 supported the legitimacy of judicial engagement with legal questions arising on the pleaded case. An adversarial system does not require a judge to remain silent about a potentially decisive authority that the parties have overlooked.

A judge may invite submissions to avoid a legally incorrect or incomplete decision, or an unsatisfactory precedent. Here, fairness was preserved by adjourning the proceedings, permitting supplemental written submissions and hearing further oral argument.

The point was not detached from the dispute the parties had pleaded: determining whether re-entry defeated the statutory tenancy claim required consideration of section 28 and its leading authority.

Trafalgar Developments Ltd v. Mazepin [2020] IEHC 13

The tenant relied on this decision when seeking measurement on a legal practitioner and client basis. However, that application had been argued by reference to the legal position before the relevant provisions of the 2015 Act commenced.

The High Court therefore declined to assume that the former distinction between costs bases remained substantively unchanged. This authority prompted further inquiry rather than an immediate enhanced-costs order.

5. Reasonable Alternative Arguments: The Governing Principle

The judgment’s central clarification is that a litigant should not be required to select only its strongest argument on pain of an adverse costs order. Litigation involves uncertainty, and reasonable participation may require preserving alternative routes to the same result.

The assessment is objective and contextual. An argument may reasonably be pursued because:

• the relevant law or legislation is uncertain;
• the issue could materially affect the outcome;
• it answers an allegation or defence advanced by the opponent; or
• it protects the party against a position the opponent continues to maintain.

Reasonableness must be assessed against the circumstances confronting the parties when they litigated, not solely with hindsight. The eventual success of one ground does not retrospectively make every alternative unnecessary.

Nevertheless, the court retains power to discourage “luxurious litigation”. There must be a reasonable relationship between an issue’s potential significance and the resources devoted to it. Even a legally correct argument can justify a costs adjustment if its pursuit was unnecessary or disproportionate.

The controlling distinction is therefore reasonable litigation versus unnecessary expenditure, not simply winning versus losing individual arguments.

6. Application to the Disputed Issues

6.1 Repairs and equitable set-off: the justified reduction

The tenant argued that expenditure on repairs for which the landlords were responsible should be set off against rent. The Circuit Court declined to take that claim into account when assessing the forfeiture notice, and the tenant did not pursue it in the High Court.

The claim was sufficiently separate for distinct costs treatment. It required substantial documentary and oral evidence about the premises, responsibility for repairs and alleged expenditure. It also materially extended the Circuit Court hearing.

The High Court considered the claim weak. Rent had been withheld before a quantified set-off was notified, the asserted liability had not been ascertained, and the claim appeared to combine repair expenditure with an assertion that the contractual rent was excessive given the premises’ condition. These were case-specific reasons for the costs decision, not a comprehensive ruling on the availability of equitable set-off in other disputes.

How the court reached 40%

The repairs issue occupied approximately 40% of the Circuit Court hearing time. The court nevertheless attributed only 30% of each party’s costs to it. Hearing time was an imperfect proxy: oral evidence proceeds relatively slowly, whereas substantial preparation may lie behind comparatively short legal submissions.

The resulting calculation had two components:

1. The tenant could recover only 70% of its own Circuit Court costs.
2. The landlords were notionally entitled to recover 30% of their Circuit Court costs attributable to the unnecessarily pursued issue.

Rather than require both bills to be measured and then offset, the court assumed broadly comparable recoverable costs and allowed the tenant a net 40% of its costs. This was a practical approximation, not a prescribed formula for future cases.

No corresponding reduction was made on appeal. Although the landlords had addressed repairs in their initial written submissions, the tenant abandoned the issue approximately a month before the hearing. It generated no appeal evidence or oral argument. The residual preparation costs were de minimis in the context of a six-day appeal.

6.2 The landlords’ reasons for appealing

The landlords maintained that deficiencies in the Circuit Court’s reasoning, combined with a costs bill exceeding €400,000, left them no reasonable alternative but to appeal. They contrasted that demand with an estimated premises value of €750,000 and their position as private individuals.

The court separated the merits of the litigation from the amount of the costs claim. The landlords received a full rehearing and remained unsuccessful. Criticism of the lower court’s reasoning did not remove their liability for the successful tenant’s costs.

Nor was an appeal on the merits necessary to challenge an allegedly excessive bill. The appropriate remedy was measurement by the County Registrar under Part 10 of the 2015 Act, applying the requirements that costs be reasonably incurred and reasonable in amount. The judgment did not approve the bill’s amount.

The unappealed second-module order created a further difficulty. The landlords did not satisfactorily explain what practical advantage success in the first-module appeal alone would achieve while the order fixing the new tenancy remained in force. The court noted that they could have appealed that order as well.

6.3 The court’s identification of the decisive authority

The origin of the Crofter Properties point did not justify a reduction after the parties adopted opposing positions on it. The landlords continued to maintain that their re-entry was legally effective; the tenant pressed the authority in supplemental submissions and oral argument.

The court distinguished that course from a possible early concession. Had the landlords accepted the authority’s effect and withdrawn their defence, the parties’ earlier shared misunderstanding might have supported a different costs analysis. Instead, the continuing dispute required two additional hearing days.

The relevant consideration was therefore the parties’ response to the point, not who first discovered it.

6.4 Service of the forfeiture notice

The court separated two questions that the landlords’ submissions had treated as one:

• whether delivery complied technically with the lease’s notice provisions; and
• whether that delivery method revealed an intention to manufacture a forfeiture rather than recover rent.

The landlords succeeded on technical compliance. However, that narrow question consumed little time and did not justify granular costs allocation.

The tenant succeeded on the broader question of intention. The court found that the chosen method was technically compliant but least likely to bring the notice to the tenant’s attention in time. This conclusion drew on the parties’ established communications and the failure to send the notice to the tenant’s solicitors.

That broader issue remained reasonably relevant because the landlords had indicated that non-payment of rent might be used to challenge the new tenancy. Section 17(1)(a)(v) of the 1980 Act permits refusal for “good and sufficient reason”, and non-payment could potentially engage that provision. The tenant was entitled to protect its position against that possibility.

6.5 Whether re-entry was peaceable

The tenant also argued that, even if re-entry were legally available in principle, the actual entry was not peaceable. The issue involved evidence about access, locks and the locksmith’s actions.

The court held that this was a reasonable alternative answer to a defence introduced by the landlords themselves. It had support in case law concerning the breaking of locks and remained relevant while the landlords maintained that their entry was legally effective.

The High Court deliberately left the issue undecided because the statutory-occupation ground disposed of the appeal. Deciding it would also have required consideration of whether to depart from a decision of coordinate jurisdiction. The landlords could not count that absence of a ruling as success on their side.

6.6 VAT invoices and rent payment

The landlords had elected to charge VAT on the letting. Section 97(1)(c)(i) of the Value-Added Tax Consolidation Act 2010 permitted that election through a written lease provision, and section 66 imposed the associated invoicing obligation.

Despite charging VAT, the landlords stopped issuing invoices. After the purported forfeiture, the tenant offered to pay the arrears subject to receiving the invoices and placed an equivalent sum in escrow. Payment followed when the invoices were eventually issued.

The High Court did not endorse a general proposition that a tenant may always withhold rent whenever VAT invoices are disputed. It instead upheld the tenant’s position on narrower facts: the tenant acted reasonably, the landlords acted unreasonably, and the late payment did not justify refusing the new tenancy.

The argument was reasonable to pursue because, if accepted in its broader form, it could have removed the alleged arrears underpinning forfeiture. It also occupied little hearing time. Neither the narrower reasoning adopted nor the limited resources involved justified a costs reduction.

7. The Reserved Question: How Should the Costs Be Measured?

The judgment distinguishes the allocation of costs from their basis of measurement. It decided who should pay and in what proportion, but did not decide the tenant’s request for legal practitioner and client costs.

Under the former Order 99 regime, party-and-party recovery was expressed in terms of costs “necessary or proper”, while solicitor-and-client recovery excluded costs unreasonably incurred or unreasonable in amount. The recast Order 99, rules 10 and 11, directs both bases to section 155 and Schedule 1 of the 2015 Act, which apply requirements of reasonable incurrence and reasonable amount.

The court requested further submissions on:

1. the practical substantive difference, if any, between the two bases under the current regime; and
2. the criteria governing a direction for legal practitioner and client measurement.

It would therefore be incorrect to read this judgment as either awarding enhanced costs or abolishing the distinction between costs bases. Both the legal analysis and its application to the alleged conduct were reserved.

Submissions were directed for 19 October and 9 November 2026, with a mention on 1 December 2026 to ascertain whether further oral submissions were sought.

8. Potential Impact

More disciplined issue-based costs applications

Parties seeking reductions should identify genuinely separable work, explain why pursuing it was unreasonable or disproportionate, and demonstrate a material costs consequence. Merely listing arguments on which the winner did not prevail is insufficient.

Protection against hindsight

The decision supports reasonable alternative pleading and argument, particularly where those alternatives answer a defence the opponent continues to advance. It discourages retrospective criticism based solely on the court’s eventual choice of a decisive ground.

Practical treatment of appellate success

For de novo Circuit Court appeals, the judgment reinforces that final substantive success generally governs the presumption for costs at both levels. Different reasoning does not, by itself, undermine the first-instance costs entitlement.

Judicial intervention does not erase costs consequences

A court-raised authority does not deprive the eventual winner of costs simply because its lawyers initially overlooked it. Once the point is identified, decisions to concede, persist or narrow the dispute become particularly important.

Proportionate estimation rather than false precision

The repairs calculation demonstrates a willingness to use broad-brush adjustments where separate measurement would create unnecessary expense. It also warns against treating hearing duration as a mechanically accurate measure of costs.

Important limits

The judgment is not a licence to advance every conceivable argument. Nor does it establish a general right to withhold rent over VAT invoices, decide whether the particular re-entry was peaceable, or settle the current distinction between ordinary and legal practitioner and client costs.

9. Complex Concepts Simplified

Statutory presumption

A starting entitlement that applies unless the opposing party establishes a sufficient reason to depart from it.

De novo appeal

A fresh hearing of the dispute, rather than merely a review for errors in the original decision.

Distributive costs order

An order allocating costs differently between distinct parts of the litigation instead of applying one result to everything.

Equitable set-off

A claim that a sufficiently connected cross-demand should reduce the amount otherwise payable. Its availability was not comprehensively determined here.

Statutory occupation

Occupation protected by legislation while a new-tenancy application is pending, rather than simply by the expired lease.

De minimis

Too minor, in context, to justify a separate adjustment.

Costs measurement

The assessment of recoverable items and amounts after entitlement has been decided. A costs order does not guarantee recovery of the whole bill, or actual payment if the paying party lacks resources.

10. Conclusion

The judgment reconciles two objectives: protecting successful parties from having to fund the reasonable vindication of their rights, and preventing them from transferring unnecessary expenditure to their opponents.

Its central lesson is that costs follow practical success, subject to objective reasonableness and proportionality. Reasonable alternatives are not penalised simply because a narrower argument ultimately succeeds. A distinct and costly weak claim, however, can substantially reduce recovery—as the tenant’s 40% Circuit Court award demonstrates.