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Howley v McClean; Howley v Howard (Unapproved)
Factual and Procedural Background
This Supreme Court judgment concerns costs following two taxpayer defendants’ unsuccessful challenge to fee arrangements used by the Plaintiff, a statutory tax collector. The arrangements included conditional “uplift” fees linked to the amount of unpaid tax recovered. The Plaintiff had obtained judgments for substantial sums against both defendants. [1][2][3]
In its earlier merits judgment, the Court upheld the fee arrangements, although its reasoning differed appreciably from that of the Court of Appeal. It held the conditional uplift arrangement lawful under section 149(1)(a) of the Legal Services Regulation Act 2015 and also addressed the lawfulness of “no foal, no fee” arrangements; the latter observations were strictly obiter, meaning they were not necessary to determine the case. [4][5]
The remaining question was the allocation of costs between the Plaintiff and the defendants. The two amici curiae agreed to bear their own costs. [2]
Legal Issues Presented
- Whether the Plaintiff’s complete success entitled him to costs under section 169(1) of the Legal Services Regulation Act 2015, or whether the reasonableness and public importance of the defendants’ challenge justified departing from that presumptive entitlement. [6][7]
- Whether the proceedings qualified, in substance, as public-interest litigation despite arising through a defence to tax-debt recovery proceedings. [8][9][10][11]
- Whether the exceptional public benefit of the litigation justified not merely protecting the unsuccessful defendants from an adverse costs order, but awarding them some of their own costs against the successful Plaintiff. [12][13]
Arguments of the Parties
Plaintiff’s Arguments
- The Plaintiff relied principally on his complete success and the resulting presumptive entitlement to costs under section 169(1). [6]
Defendants’ Arguments
- The defendants argued that it was reasonable to litigate the legality of the conditional uplift agreement and whether an allegedly champertous agreement could provide a defence to proceedings. [7]
- They relied on their success in obtaining a departure from the Court of Appeal’s reasoning on the latter issue and on concessions made by the Plaintiff concerning the extent to which he intended to charge the uplift fee. [7]
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| [2026] IESC 34 | The earlier merits judgment addressing maintenance, champerty and conditional legal fees. | Provided the substantive background and demonstrated the complexity and systemic significance of the issues clarified by the appeal. [1][4][14][15] |
| [2024] IESC 53 | Guidelines for costs discretion in public-interest proceedings, including the higher threshold for awarding costs to an unsuccessful party against the State. | Supplied the principal framework. The defendants substantially satisfied the guidelines and narrowly met the exceptional threshold for a partial costs award. [16][17][12][18][13] |
| [2023] IESC 25 | The unsuccessful substantive proceedings underlying the preceding costs authority. | Mentioned as background: the claimant’s challenge concerning a refused allowance had failed. No separate costs principle was drawn from it. [19][20] |
| [2020] IESC 73 | A point of general public importance is necessary, but insufficient, to justify exempting an unsuccessful claimant from costs. | Quoted through the principal costs authority; the Court found that the present appeal involved important issues arising from unclear legislation and difficult case law. [21][22][14] |
| [2022] IESC 26 | The significance of litigation for the wider category of affected persons is relevant, notwithstanding a litigant’s personal interest. | The defendants’ pursuit of personal advantage did not outweigh the appeal’s considerable implications for litigation practice. [23][24] |
| [2021] IECA 114 | Even a weak but arguable case may justify protection from costs where clarification is required because legislation is avoidably unclear. | The Court held this particular guideline inapplicable because the defendants’ arguments could not be described as weak. [25][26] |
| [2009] IESC 39 | Protection from costs may be appropriate for a genuine test case selected to determine issues governing a larger cohort of claims. | Quoted through the principal authority; the present proceedings were not a test case in that sense. [27][26][28] |
| [2007] IEHC 334; [2011] 1 IR 443 | The potential costs protection available in genuine test-case litigation. | Cited alongside the preceding authority; the Court found the test-case guideline inapplicable. [27][26][28] |
| [2021] IEHC 11 | The potentially significant deterrent effect of costs on those affected by a legal issue. | The Court treated deterrence as probably neutral here, balancing the existing substantial judgments against the general deterrent effect of additional costs. [29][30][31][32] |
| 275 US 87 at 100 (1927) | The civic importance of taxation, expressed as “what we pay for civilized society”. | Supported the Court’s recognition that the defendants’ serious tax defaults weighed against favourable treatment on costs. [33] |
Court’s Reasoning and Analysis
Starting point and statutory discretion
The Plaintiff’s complete success created a presumptive entitlement to costs under section 169(1), but did not eliminate the Court’s discretion to consider other matters, including whether litigating the disputed issue was reasonable. [6][7]
Public-interest character of the proceedings
The Court found that the proceedings substantially met the public-interest criteria in the principal costs authority: they concerned a statutory body, raised a question of general public importance and affected interests beyond those of the defendants. [34][35][36][37][8]
Although these were debt-recovery proceedings rather than a conventional public-law challenge, the Plaintiff’s statutory tax-collection functions were crucial. The allegation that those functions were being exercised through champertous arrangements sufficiently connected the defendants’ tort-based defence with public law. The public-law criterion was therefore satisfied in substance. [9][10][11]
Importance, substance and wider benefit
The issues were genuinely substantial: the legislation was convoluted, and the overlapping case law was difficult to reconcile. The clarification also had systemic importance because “no foal, no fee” arrangements play a key role in access to justice. [14][15]
The defendants’ personal interest did not negate the wider benefit. The decision had considerable implications for litigation practice, and the principal beneficiaries of clarification were litigants, legal practitioners and the legal system rather than the defendants themselves. [24][38]
The guidelines concerning weak claims arising from unclear legislation and genuine test cases did not apply. The deterrent effect of costs was probably neutral. The Court emphasised that the guidelines informed discretion rather than operating as statutory requirements. [26][28][31][32][18]
Why a partial award was justified
Awarding costs to an unsuccessful party required more than merely declining to award costs against that party. The higher threshold demanded litigation of real substance producing clarification on a matter of fundamental public importance. The Court considered this appeal an almost paradigmatic example because the clarification was necessary, overdue and significant to the legal system. [12]
The defendants had also needed to appeal to obtain clarification of whether a champertous contract could provide a defence to otherwise valid proceedings. Their case narrowly satisfied the exceptional standard for a positive costs award. [39][13]
Nevertheless, a full or near-full award was inappropriate. The defendants remained unsuccessful, the proceedings arose from their unpaid taxes, and they had made wholly unsubstantiated fraud allegations in the High Court and Court of Appeal. Those considerations retained substantial weight against them. [40]
Balancing those factors against the systemic benefit and the important revisions obtained to the Court of Appeal’s reasoning, the Court considered a limited award of half the defendants’ Supreme Court costs appropriate. [41][42]
Holding and Implications
No order for costs in the High Court or Court of Appeal; the defendants awarded 50% of their Supreme Court costs. Those costs were to be adjudicated if not agreed. [43]
The Plaintiff received no costs despite succeeding on the merits, while the defendants recovered only a limited proportion of their Supreme Court costs. The decision applied the existing statutory discretion and public-interest guidelines to the exceptional circumstances of this litigation. [18][33][13][42][43]
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