Factual and Procedural Background
This judgment concerns an appeal by way of case stated from the Appeal Commissioners, arising out of a principal judgment delivered on 14 January 2022. The appeal involves a dispute between the Appellant and the Revenue Commissioners regarding the applicability of certain tax provisions and whether a particular transaction constituted a "tax avoidance transaction" under relevant tax legislation. The proceedings included consideration of four main issues, primarily focusing on the applicability of section 955(2) of the Taxes Consolidation Act 1997 (TCA) and the characterization of the transaction under section 811 TCA. The hearing spanned three days, with both parties achieving partial success on different issues. This judgment specifically addresses the costs of these proceedings.
Legal Issues Presented
- Whether the Appellant should be entitled to costs on the basis of having won the "event" under the pre-2015 Act regime or whether the concept of being "entirely successful" under sections 168 and 169 of the Legal Services Regulation Act 2015 applies.
- How to apply the principles governing costs where parties have been only partially successful on different issues within the same proceedings.
- Whether the court should exercise its discretion to award full costs to the Appellant despite partial success, or apportion costs between the parties based on their respective successes.
Arguments of the Parties
Appellant's Arguments
- The Appellant contended that he had won the "event" and therefore should be entitled to all his costs.
- He argued that the Revenue Commissioners were incorrect in suggesting that success on all questions in the case stated was necessary to be regarded as "entirely successful".
- The Appellant maintained that partial success should not limit his entitlement to costs, especially given the legal complexity and reasonableness of raising all issues.
Respondent's Arguments
- The Revenue Commissioners submitted that there should be no order as to costs because both parties were only "partially successful" on different issues.
- They argued that the Appellant succeeded only on the substantive issue, while Revenue succeeded on the time limit issue, and thus costs should be apportioned accordingly.
- They contended that the Appellant was not "entirely successful" within the meaning of section 168 of the 2015 Act, and that the partial successes effectively cancel each other out.
- Revenue also emphasized that the Appellant and other appellants would not gain significantly beyond the correction of an erroneous tax assessment.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Veolia Water UK plc v. Fingal County Council (No. 2) [2007] 2 I.R. 81 |
Identifying the "event" for costs purposes: a party bringing proceedings to secure a substantive or procedural entitlement will be regarded as having succeeded even if not successful on every point. |
The court used this to explain the old rule that costs follow the event and that a party may be deemed successful overall despite losing on some points. |
| Chubb European Group SE v. The Health Insurance Authority [2020] IECA 183 |
Clarification of costs principles under the 2015 Act, including the preservation of court discretion and the meaning of "entirely successful". |
The court relied on this to explain that partial success does not preclude a costs award and that discretion must be exercised considering separate and distinct issues. |
| Higgins v. Irish Aviation Authority [2020] IECA 277 |
Confirmed that partial success does not automatically limit costs recovery to only the successful elements. |
Supported the view that courts retain discretion to award full or partial costs notwithstanding partial success. |
| Náisiúnta Leictreach Contraitheoir Eireann Cuideachta Faoi Theorainn Rathaíochta v. The Labour Court [2020] IEHC 342 |
Methodology for identifying the winner of a case by reference to relief obtained, separate issues, or specific arguments. |
The court applied this to reject argument-by-argument analysis and to focus on separate and distinct issues for costs purposes. |
| Kennedy v. Healy [1897] 2 I.R. 258 |
Demonstrated distributive identification of the "event" where a party may succeed on one cause of action but fail on another within the same proceedings. |
Referenced to distinguish the present case where issues were directed to the same ultimate purpose, unlike the separate causes of action in Kennedy. |
| Kenny Lee v. Revenue Commissioners [2021] IECA 114 |
Consideration of costs where statutory provisions were unclear and parties acted reasonably in adopting their positions. |
Distinguished by the court as not applicable here, since the Appellant was not in a special category warranting different costs treatment. |
Court's Reasoning and Analysis
The court began by recognizing that the pre-2015 Act rule of "costs follow the event" would entitle the Appellant to all costs given his success on the overall "event" of setting aside the Notice of Opinion. However, the enactment of sections 168 and 169 of the Legal Services Regulation Act 2015 introduced a new framework emphasizing whether a party was "entirely successful" and preserving judicial discretion.
Applying the principles from Veolia, Chubb, and Higgins, the court noted that partial success does not automatically limit costs recovery to only the successful elements, but discretion must be exercised considering the complexity and conduct of the case.
The court rejected the approach of detailed argument-by-argument cost allocation, favoring analysis by separate and distinct issues as endorsed in Náisiúnta Leictreach and Higgins. It found the Appellant partially successful because he prevailed on the substantive tax avoidance issue but failed on the time limit issue under section 955(2) TCA.
Despite this partial success, the court determined that the Appellant was reasonably entitled to challenge all issues raised, including the retrospective operation of legislation enacted after the appeal was initiated. The issues were argued concisely over three days, with substantive issues occupying roughly half the hearing time.
The court emphasized that adopting the Revenue Commissioners’ approach—apportioning costs strictly by success on individual issues—would produce an unjust result, forcing the Appellant to bear significant costs despite prevailing on the central substantive point.
The court also rejected Revenue’s submission that appellants would gain significantly beyond correcting an erroneous tax assessment and dismissed any suggestion that taxpayers should receive different costs treatment in tax litigation.
Ultimately, the court exercised its discretion to award the Appellant all costs of the case stated, including the costs application hearing, subject to a stay pending Revenue’s intended appeal.
Holding and Implications
The court’s final decision is to award the Appellant all costs of the case stated, including the costs of the costs application itself. This award is subject to a stay pending the outcome of the Revenue Commissioners’ appeal of the principal judgment.
The direct effect of this decision is that the Appellant will recover full costs from the Revenue Commissioners for the proceedings at first instance. The court’s reasoning clarifies that under the 2015 Act, partial success does not preclude a full costs award and that courts retain broad discretion to achieve a just overall result. No new binding precedent on costs principles was established beyond applying existing case law to the facts of this appeal.