AIB Mortgage Bank v Kelly & Ors (Approved)

Factual and Procedural Background

The proceedings were initiated by Company A, a mortgage bank, seeking to recover a liquidated debt pursuant to loan agreements entered into by several individuals, including the deceased. The deceased's estate is represented by the executors, who were joined as defendants. The deceased had passed away prior to the commencement of proceedings, and probate was granted to the executors on 8 July 2016.

The claim was pursued by summary summons and summary judgment was sought on the basis of documentary evidence establishing the debt. One defendant initially advanced an argument that changes in interbank lending rates rendered the loan agreements void, but no substantive defence was put forward by the executors on behalf of the estate. The executors sought to preserve the possibility of relying on this defence if successful but ultimately did not oppose the proceedings.

Summary judgment was entered against the deceased's estate in the sum of €2,176,445.65 after a hearing on 31 October 2024, with costs awarded in favour of the plaintiff bank. Subsequently, the executors applied for an order to recover their legal costs from the insolvent estate, seeking recognition of those costs as administration expenses with priority under the Succession Act 1965.

Legal Issues Presented

1. Whether the court has jurisdiction under section 168(1)(b) of the Legal Services Regulation Act 2015 to order that the executors' legal costs be paid out of the property of the deceased's estate in debt collection proceedings.
2. Whether the executors are entitled to recover the legal costs incurred in defending or addressing the proceedings as administration expenses with priority under the Succession Act 1965.
3. The appropriate method and quantum for measuring the executors' legal costs, including the court's jurisdiction to assess costs in gross under Order 99, rule 7(2) of the Rules of the Superior Courts.

Arguments of the Parties

Executors' Arguments

• The executors sought an order allowing them to recover legal costs incurred in relation to the proceedings out of the estate property, relying on the court's jurisdiction under section 168(1)(b) of the Legal Services Regulation Act 2015.
• They contended that given the insolvency of the estate, recognition of their costs as administration expenses was necessary to ensure priority in payment.
• The executors submitted a detailed legal costs accountant's report to assist the court in assessing the quantum of costs.
• They maintained that their initial reluctance to consent to judgment was to preserve potential defences but did not oppose the substantive claim.

Company A's Arguments

• Company A was put on notice of the costs application and did not dispute the court's jurisdiction to make an order for costs against the estate.
• Company A supported the entry of summary judgment based on the documentary evidence and the absence of a credible defence.
• Company A accepted that costs could be ordered as administration expenses but the opinion does not detail any specific submissions on the quantum of costs.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Gilvarry v. Naylor [2024] IEHC 688	Priority of legal costs as administration expenses under the Succession Act 1965.	Referenced to support the proposition that legal costs ordered against an insolvent estate may have priority as administration expenses.
Taaffe v. McMahon [2011] IEHC 408	Interpretation of Order 99, rule 7 regarding the High Court's jurisdiction to measure costs in gross.	Used to confirm that the High Court can make an appropriate assessment of costs in straightforward cases without detailed adjudication.
Landers v. Dixon [2015] IECA 155, [2015] 1 IR 707	Clarification of the judicial exercise in fixing a gross sum for costs under Order 99, rule 7.	Applied to emphasize that the court must exercise jurisdiction judicially and have sufficient material to make an informed costs assessment.
Leary v. Leary [1987] 1 W.L.R. 72	Judicial principle that cost assessments must not be arbitrary or without evidential basis.	Cited to underline the requirement for a defensible basis for the costs sum fixed by the court.

Court's Reasoning and Analysis

The court first considered the jurisdiction under section 168(1)(b) of the Legal Services Regulation Act 2015, confirming that it extends beyond probate litigation to any proceedings concerning the estate of a deceased individual. The court accepted that it has power to order legal costs to be paid out of the estate property and that such costs, if ordered, rank as administration expenses with priority under the Succession Act 1965.

The court examined the nature of the proceedings, noting they were straightforward summary summons proceedings based on clear documentary evidence with no credible defence from the executors. The executors' initial reluctance to consent to judgment was to preserve possible defences but they ultimately did not oppose the claim.

Regarding costs measurement, the court emphasized its jurisdiction under Order 99, rule 7(2) to assess costs in gross where appropriate, distinguishing this from detailed adjudication by the Chief Legal Costs Adjudicator. The court held that this case met the criteria for such an approach due to its straightforward nature and the availability of a legal costs accountant's report.

The court disallowed certain costs that were unnecessary or unopposed, such as attendance at the substantive hearing and costs related to affidavits filed after the hearing. It allowed reasonable fees for counsel and solicitor, limiting the solicitor's fees to not exceed those of counsel given the counsel-led nature of the work. The court also disallowed fees for unopposed adjournment applications.

In balancing the interests of justice and the insolvency of the estate, the court concluded that further detailed adjudication of costs would be an unnecessary expense detrimental to the estate's creditors and beneficiaries.

Holding and Implications

The court ORDERED pursuant to section 168(1)(b) of the Legal Services Regulation Act 2015 that the executors' legal costs incurred in or incidental to the proceedings be paid out of the property of the deceased's estate.

Costs were measured in gross under Order 99, rule 7(2), with the following amounts allowed (exclusive of VAT): counsel's fees of €4,750, solicitor's general instructions fee of €4,750, postage and sundries of €800, and scheduled items of €350. The executors are entitled to recover VAT accordingly.

An ancillary order declared that these legal costs constitute administration expenses under the First Schedule of the Succession Act 1965, ensuring their priority in payment from the insolvent estate.

The decision directly affects the parties by confirming the executors' entitlement to recover reasonable legal costs from the estate despite its insolvency, but does not establish new precedent beyond the application of existing statutory provisions and case law.