Kavanagh v Hilliard & Anor (Approved)

Factual and Procedural Background

This opinion concerns an application by the Defendants for an interim costs payment by the Plaintiff pursuant to an order of costs dated 20 February 2020 (the "February 2020 Order"). The February 2020 Order was made following the dismissal of the Plaintiff's interlocutory application for injunctions against the Defendants. The Court ordered the Plaintiff to pay the Defendants' costs of that application and refused a stay on the costs order. The Plaintiff failed to engage with attempts to agree the costs figure, prompting the Defendants to issue the present application for an interim costs payment on 12 February 2021.

It later emerged that the Plaintiff had attempted to lodge an appeal against the costs order in June 2020, limited to the question of costs, but the Court of Appeal had no record of receiving the Notice of Appeal. Leave was granted to extend the time for filing the appeal, and the motion was adjourned pending determination of the appeal. The Court of Appeal dismissed the appeal on 3 July 2023, allowing the Defendants to proceed with the application for interim payment.

The underlying interlocutory application involved complex legal issues concerning the Plaintiff's appointment as receiver by Company A (the mortgagee over the Defendants' properties) and the remedies sought. The injunction application was heard over two days in October and November 2018, resulting in dismissal and a costs order against the Plaintiff. Despite correspondence and a draft Bill of Costs sent in March 2020, the Plaintiff did not respond, and the Defendants sought adjudication of costs.

Legal Issues Presented

1. Whether the Court should order an interim payment on account of costs pursuant to Order 99, rule 2(5) of the Rules of the Superior Courts, given the Plaintiff's undisputed liability for costs under the February 2020 Order.
2. The appropriate amount and terms of any such interim costs payment.
3. Whether any undertakings or conditions (such as ringfencing of funds) should be imposed in relation to the interim payment, especially in light of pending bankruptcy proceedings involving the Defendants.
4. The appropriate costs order in relation to the application for interim payment itself.

Arguments of the Parties

Defendants' Arguments

• The Plaintiff's liability for costs is undisputed following dismissal of the appeal.
• An interim payment is appropriate to avoid undue delay given the complexity of the interlocutory application and the significant costs incurred defending it.
• They provided a solicitor's undertaking to repay any overpayment following adjudication.
• Payment of at least 50% of the claimed costs would be appropriate.
• The Defendants sought an order for the costs of this application, arguing they were substantially successful and that the Plaintiff's conduct necessitated the motion.
• They offered to hold 50% of the payment on account in a solicitor's client account pending resolution of costs taxation.

Plaintiff's Arguments

• The Plaintiff did not contest liability or the principle of an interim payment but focused on the amount and terms.
• Pending bankruptcy and personal insolvency proceedings involving the Defendants and Company A, a major creditor, raised concerns about fairness and the risk of dissipation of funds.
• The Plaintiff proposed any interim payment be ringfenced in a solicitor's client account pending resolution of insolvency proceedings.
• The Plaintiff argued the amount should be approximately one-third of the claimed costs (circa €35,000) and that no payment should be required until a formal Bill of Costs was furnished.
• The Plaintiff criticised the Defendants for issuing the motion without prior warning and opposed an award of costs for the interim payment application, contending that such applications should not generate further cost orders.

Table of Precedents Cited

Court's Reasoning and Analysis

The Court began by outlining the background and the complexity of the interlocutory injunction application that resulted in the February 2020 costs order against the Plaintiff. The Plaintiff's failure to engage with attempts to agree costs and the delay caused by an unprogressed appeal weighed in favour of granting the interim payment.

The Court emphasized the public interest in ensuring that successful parties and their legal representatives are not left out of pocket for extended periods, especially given the adversarial nature of civil litigation and the necessity of legal representation. Interim cost payments serve to prevent financial hardship and promote equality of arms.

The Court rejected the Plaintiff's submission that the interim payment should be ringfenced pending the outcome of separate bankruptcy proceedings. It held that such collateral considerations are irrelevant to the entitlement between the parties in these proceedings. Moreover, the Court clarified that legitimate and undisputed legal costs are not "dissipation" of assets.

The Court accepted the solicitor's undertaking provided by the Defendants to repay any overpayment following adjudication, which aligned with the Practice Direction HC71 and Order 99, rule 2(5).

In determining the amount of the interim payment, the Court noted the absence of a general rule such as one-third of the claimed costs and considered the particular circumstances, including the lengthy delay and the complexity of the underlying application. The Court provisionally set the interim payment at €67,750, representing approximately 50% of the claimed High Court costs plus an allowance for the successful appeal costs, subject to adjudication and agreement.

Regarding the costs of the interim payment application, the Court found that the Defendants were substantially successful and that the Plaintiff's lack of engagement justified awarding costs to the Defendants. The Court rejected the Plaintiff's argument that awarding costs on such applications would create an unfair burden, explaining that reasonable interlocutory applications normally attract costs orders following the event.

Holding and Implications

The Court's final decision is to DIRECT the Plaintiff to make an interim payment of €67,750 within seven days on account of the costs awarded to the Defendants under the February 2020 Order and the appeal costs. This payment is subject to adjustment following adjudication, with the Defendants' solicitor required to repay any overpayment.

The Court also ORDERS the Plaintiff to pay the Defendants €6,000 plus VAT for the costs of the interim payment application itself, in lieu of adjudication.

The Court declined to impose a requirement that the interim payment be ringfenced in a solicitor's client account, finding no legal basis or fairness in doing so. The ruling enforces the principle that costs orders should be implemented without undue delay once liability is established and that collateral insolvency proceedings do not affect such entitlements.

No new legal precedent is established; rather, the decision applies established principles to the facts, balancing fairness, public interest, and procedural propriety in interlocutory cost payments.