Factual and Procedural Background
The Plaintiffs are commercial entities that lease a portfolio of aircraft, including engines, to airline operators worldwide, including airlines based in Russia. Following the invasion of Ukraine by Russia on 24 February 2022, the European Union imposed extensive sanctions targeting the Russian aviation sector. These sanctions banned the delivery of aircraft and spare parts to Russia, required termination of leases with Russian entities by 28 March 2022, and prohibited insurance and maintenance of such aircraft.
The Plaintiffs successfully recovered six aircraft leased to Russian airlines in jurisdictions outside Russia but were left with nine aircraft still leased to Russian airlines. Despite lawful demands for return, the Russian lessees did not return these aircraft. The Plaintiffs initiated proceedings claiming indemnity under their insurance policies for the value of the remaining aircraft.
The Defendants are various insurers who provided insurance coverage to the Plaintiffs under composite policies comprising "all risks" coverage (excluding war risk perils) and separate war risk coverage. Different Defendants provided either all risks cover, war risk cover, or both, with each liable severally for their respective shares.
Similar proceedings were brought by other aircraft lessors against their insurers, resulting in six sets of proceedings case-managed and tried concurrently (the "Aviation Proceedings"). The Plaintiffs' primary claim was that their aircraft were lost due to war risk perils, seeking indemnity from War Risk Insurers, with an alternative claim under all risks cover if war risk cover was not applicable.
During the trial, most claims were settled confidentially with no orders as to costs. However, the Plaintiffs discontinued their claim against certain Defendants who were All Risk Insurers (the "Remaining All Risk Defendants"), leading to a dispute over legal costs. This judgment concerns the costs dispute arising from the Plaintiffs' discontinuance of their claim against the Remaining All Risk Defendants.
Legal Issues Presented
- Whether the Court should order the Plaintiffs to pay the legal costs of the Remaining All Risk Defendants following discontinuance of the claim against them, pursuant to section 169(4) of the Legal Services and Regulation Act 2015.
- Whether the Court should exercise its discretion to depart from the default rule that a party who discontinues proceedings must pay the other party's costs, considering the particular circumstances of the case.
- The appropriate quantum and limitation of costs payable by the Plaintiffs to the Remaining All Risk Defendants, given the concurrent nature of the Aviation Proceedings and the percentage of coverage provided by the Remaining All Risk Defendants.
Arguments of the Parties
Plaintiffs' Arguments
- The Remaining All Risk Defendants failed to engage properly or indicate their position on the Plaintiffs' initial insurance claim, necessitating the institution of proceedings.
- The existence of a 50/50 Provisional Claims Settlement clause required the All Risk Insurers to indemnify 50% of the claim pending final settlement, which was not complied with, forcing litigation.
- The Remaining All Risk Defendants maintained inappropriate points and defences late into the proceedings, increasing costs.
- The unusual nature of the Aviation Proceedings, where six cases were tried concurrently with overlapping legal teams and evidence, means the Plaintiffs should not be liable for more than a proportionate share of the overall costs.
- The Remaining All Risk Defendants provide only approximately 28% of the Plaintiffs' all risks cover, so costs should be capped accordingly.
- The Plaintiffs propose either no order as to costs or a capped costs order reflecting these factors.
Remaining All Risk Defendants' Arguments
- They deny any failure to engage or investigate the claim prior to proceedings.
- The 50/50 Settlement Clause is not binding on the Plaintiffs and was not engaged, as there was no agreement on liability between insurers.
- Their costs claim relates only to the defence of the present proceedings, not the other Aviation Proceedings.
- The costs cannot be capped or limited by reference to the overall Aviation Proceedings, as different insurers and law firms were involved in different cases.
- The Plaintiffs discontinued their claim late in the proceedings after full trial preparation and evidence, so the default costs rule should apply.
- The Court should not depart from the usual position that a party who discontinues a claim must pay the other party's reasonable costs.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Chubb European Group SE v. Health Insurance Authority [2022] 2 IR 734 |
Summarised principles on the Court's discretion in awarding costs under the 2015 Act and Rules of the Superior Courts. |
Guided the Court's analysis on the entitlement to costs and the exercise of discretion considering conduct and circumstances. |
| Word Perfect Translation Services Ltd v Minister for Public Expenditure and Reform [2023] IECA 189 |
Confirmed that a successful party is not required to show cost-effectiveness; costs hearings should take a broad brush approach. |
Supported the Court's refusal to engage in nit-picking over costs and to apply a broad approach in assessing conduct-related costs issues. |
| Shell E & P Ireland Ltd v McGrath (No. 3) [2007] 4 IR 277 |
Where proceedings are discontinued, defendants are entitled to costs incurred to date. |
Supported the default position that the Plaintiffs must pay the Remaining All Risk Defendants' costs incurred defending the proceedings. |
| Callagy v Minister for Education (Unreported Supreme Court, 23 May 2003) |
Discontinuance of proceedings entails liability for defendants' costs unless relief is granted. |
Reinforced the principle that a plaintiff discontinuing proceedings must pay defendants' costs unless the Court orders otherwise. |
Court's Reasoning and Analysis
The Court began by identifying the default legal position under section 169(4) of the Legal Services and Regulation Act 2015: a party discontinuing proceedings is liable for the reasonable costs of the other party. The Remaining All Risk Defendants, having had the claim discontinued against them, are considered entirely successful and thus entitled to their costs unless the Court orders otherwise.
The Court acknowledged its wide discretion to depart from the default rule but emphasized that such departure requires clear, specific reasons relating to the case's circumstances. The Court examined the Plaintiffs' arguments seeking relief from the default costs position.
Regarding alleged failure to engage pre-proceedings, the Court found no breach of duty or failure by the Remaining All Risk Defendants. The Defendants engaged fully once proceedings commenced, and the Plaintiffs continued to prosecute the claim until late in the trial, accepting the inherent costs risk.
The 50/50 Provisional Claims Settlement clause was considered but found not to apply, as the necessary preconditions—agreement among insurers on liability—were never met. The clause was not pleaded nor part of the agreed issues and did not justify departing from the default costs rule.
On the maintenance of issues, the Court noted that although some points were maintained late, these were common to all defendants and did not materially increase costs attributable solely to the Remaining All Risk Defendants. The Court declined to speculate on the merits of disputed issues or litigation strategies.
The Court considered the unusual nature of the Aviation Proceedings, which involved six cases tried concurrently with overlapping legal teams and shared evidence. While acknowledging cost savings, the Court rejected the Plaintiffs' proposal to cap costs payable to the Remaining All Risk Defendants by reference to a proportion of the overall costs or percentage of coverage. The Court emphasized that costs must be assessed based on the actual costs incurred by the Remaining All Risk Defendants in defending only the present proceedings, not the other related cases.
The Court recognized the expertise of the Legal Costs Adjudicator in assessing the quantum of costs and declined to impose a cap or limit on costs at this stage, leaving detailed assessment to the adjudication process.
Ultimately, the Court concluded that the Plaintiffs knowingly took the risk of discontinuing their claim against the Remaining All Risk Defendants after full trial preparation and evidence, and must bear the costs consequences.
Holding and Implications
The Court's final decision is as follows:
The Plaintiffs are ordered to pay the reasonable legal costs of the Remaining All Risk Defendants incurred in defending the present proceedings, including reserved costs, on a party and party basis, to be adjudicated in default of agreement.
The proceedings are formally struck out as against the Remaining All Risk Defendants due to the Plaintiffs' withdrawal of their claim.
The Court declined to impose any cap or limitation on costs payable based on the overall Aviation Proceedings or insurance coverage percentages, leaving detailed quantum assessment to the Legal Costs Adjudicator. The Court emphasized that the Remaining All Risk Defendants cannot recover costs incurred in other proceedings or costs expressly waived in settlement agreements.
No new legal precedent was established; the decision affirms the application of established principles governing costs liability upon discontinuance of claims and the Court's discretion in such matters.