Costs award reduced by 50% despite being successful in proceedings

Published 17 marzo 2023

In the recent case of Word Perfect Translation Services LTD v. Minister for Public Expenditure and Reform [2022] IEHC 219 the Commercial Court has provided a useful reminder to litigants and defendants alike of the obligation to conduct litigation in the most cost-effective manner possible or otherwise risk losing the entitlement to recover full costs when successful in a claim.

Word Perfect Translation Services Ltd (“Word Perfect”) had provided translation services to the State, but entered into a dispute over the legality of a ‘Request for Tenders’ for the supply of Irish translation services. The State claimed that Word Perfect was not eligible to challenge the Request for Tenders as it had never submitted a tender in the first place. At trial the State won on the eligibility point and therefore it was not necessary for the Court to consider the substantive claims regarding the Request for Tenders.

The Commercial Court stated that it is obliged, by virtue of s169.(1) of the Legal Services Regulation Act 2016 (the “2019 Act”) which came in to force on 7 October 2019, to ask, in every application for costs by a party that has been entirely successful “have the parties conducted the case in the most cost-effective way possible?”.

The Commercial Court therefore considered the conduct of the State and held that it had the option to pursue the eligibility point as a preliminary issue but failed to do so. This failure had clear financial implications on the costs of resolving the dispute. It concluded that the case was therefore not conducted in the most cost-efficient manner as was possible, and that this led to unnecessary costs and use of Court resources. The Commercial Court therefore only awarded 50% of the costs to the State.

To echo the words of Mr Justice Twomey in his judgment, s.169 of the 2019 Act is therefore a "powerful financial incentive for litigants to be efficient as possible" when conducting litigation. It is hoped that it could change the attitudes of parties in how disputes are resolved by, for example, using preliminary applications, exploring mediation or other forms of alternative dispute resolution in order to encourage
efficient litigation.