Costs

Two main principles form the bedrock of a Court's jurisdiction to award costs.  First, the award of costs is at the discretion of the Court, and second, unless otherwise ordered by the Court, costs shall follow the event (in other words the unsuccessful party in any proceedings pays the costs of the successful party).

Following an amendment to the Rules of the Superior Courts in February 2008, the High Court or the Supreme Court, upon determining any interlocutory application, are required to make an award as to costs, except where it is not possible to adjudicate on liability for costs on the basis of the interlocutory application.  

This effectively restrains a Court's discretion to award costs, in that it limits its ability to postpone the making of a determination in relation to costs of an interlocutory application only to cases where it is not possible to adjudicate upon liability for costs at that stage. 

In the recent case of Tekenable Limited v Michael Morrissey, John Ghent and Critical Village Limited, 2012, Ms Justice Laffoy reinforced the reluctance of the Courts to award costs at interlocutory stage despite the Rules.  

Background

The Plaintiff applied to the Court for its costs of a motion for an interlocutory injunction which it brought against the Defendants.  The First and Second Named Defendants were former employees of the Plaintiff, and the Third Named Defendant was a Company which the former employees set up on leaving the employment of the Plaintiff.

The Plaintiff initiated proceedings against the Defendants for breach of contract, and in particular, breach of the confidentiality clauses contained in their contracts of employment.

Interlocutory injunctions were sought restraining the Defendants from using confidential information, but the matter was resolved by an undertaking given to the Court by the Defendants on foot of an agreement reached between the parties.  However, it was envisaged that the substantive proceedings would continue. 

Decision

Ms Justice Laffoy considered the Court's jurisdiction under Order 99 of the Rules and concluded that it would be inappropriate to adjudicate on the issue of costs at the interlocutory stage in circumstances where:

  • The Court did not have to adjudicate on whether an interlocutory injunction in the terms sought by the Plaintiff would have been granted or refused;
  • The Court Order, on consent, did not amount to an adjudication on the Plaintiff's application such as would allow the Court to form a view as to whether there was an "event" consequent of which liability for costs could be attributed; and
  • Due to the agreement between the parties, the issues which arose in the interlocutory application, the purpose of which was to maintain the status quo pending the hearing of the substantive action, were moot.

Ms Justice Laffoy could see no purpose, and considered it inappropriate, for the Court to express a view at that stage as to whether an injunction in the terms sought would have been granted or otherwise.

Even if the Plaintiff's application had proceeded, irrespective of whether the Court would have decided to grant or refuse the injunction, the Court would probably have adopted the approach that, in circumstances where such an application turns on the merits of the particular case, it would be unsafe to deal with the costs at that stage, as the picture might look very different when the matter comes on for trial, in which case the appropriate course of action is to reserve the costs to the trial.

There will undoubtedly be cases where the Court will consider it appropriate to exercise its discretion and award costs on an interlocutory injunction application which has come to an end because the defendant has done, or has undertaken to the Court to do, what the plaintiff has requested, and the Court is satisfied that it can justly adjudicate upon liability for costs at the interlocutory injunction application stage.   However, this was not the position in the case at hand as it was still the subject of the substantive proceedings, which went beyond the undertaking given by the Defendants. 

Ms Justice Laffoy concluded by saying that it would be "wholly inappropriate" for the Court to do anything other than to reserve costs to the trial judge.    

Action

Ms Justice Laffoy suggested that, when compromising an application for an interlocutory injunction in circumstances where it is intended that the substantive action is to proceed, parties should carefully consider including the following in their settlement agreement:

  • A provision for dealing with which of the parties are to bear the cost of the application; and 
  • A provision reserving the adjudication as to costs to the trial judge. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.