On 15th June 2017, the Supreme Court gave a decision in the case of Isabelle Sheehan (a minor) v David Corr which has been described by the Law Society as a “landmark decision on legal costs”.

The matter arose on foot of a medical negligence action in which the costs were taxed by the Taxing Master, with the general instructions fee being the main item of contention. Same had been claimed in the sum of €485,000.00 and after an initial ruling in 2012 and a further ruling in 2014 on foot of objections raised, the instructions fee was assessed at €276,000.00.

The High Court

An application for review of the Taxing Master’s ruling was made to the High Court and was dismissed by the President of the High Court on 27th February 2015, who found that there were some errors on the part of the Taxing Master but none were such “to warrant any interference in the allowance made in respect of the solicitor’s instructions fee in this case.”

The Court of Appeal

The solicitors for the Plaintiff then appealed the matter to the Court of Appeal, with judgment given on 10th June 2016.

Seven grounds of appeal had been identified on behalf of the Plaintiff, with the Court upholding the appeal and on four of those grounds. In a judgment delivered by Mr. Justice Cregan, the Court held that the Taxing Master was incorrect in the methodology he had used. In assessing the instructions fee, he should have

“considered the time and labour expended by the solicitors and… assessed the number of hours spent, the seniority of the solicitor involved, the hourly rate for each solicitor and the appropriate professional charge for each element of the professional service.”

The Court held that the Taxing Master should not have taken “intangibles” such as the novelty, skill, complexity, specialised knowledge and responsibility into account at the start of his analysis, but rather at the end after he had examined the time spent on the case.

The Taxing Master had disallowed fees in relation to two senior solicitors attending the trial however the Court of Appeal found that there was a requirement for same and that it was an injustice not to allow those fees.

An issue also arose regarding the applicability of the economic downturn to the measurement of costs. Both the Taxing Master and High Court referred to same as a reason for reducing the professional fee, however the Court of Appeal held that this was an error in principle and it should have been applied to all levels of the assessment of the fees.

It was this judgment and in particular the following comments made by Mr. Justice Cregan which had the potential to significantly alter how costs are taxed and which also caused such alarm to plaintiff solicitors. He stated that every bill of costs must set out the “time and labour spent on…each element of the case” and only when a proper bill of costs is drawn up setting out the time spent on a case should the Taxing Master assess it in accordance with criteria set out by the Court. This approach would require time costing procedures to be applied by all firms in all cases, at an additional cost to those firms who did not already have such systems in place.

The Supreme Court

The Defendant to the action was then granted leave to appeal this decision pursuant to Article 34.5.3° of the Constitution. Such appeals are only permitted if the decision raises a matter of public importance or if it is in the interests of justice. The former applied in this instance.

The following four questions were put forward for consideration by the Supreme Court on appeal:-

“1. To what extent, if any, may considerations as to the amount of time actually spent on a case be elevated above the relevant criteria mandated by Order 99, Rule 37(22) for the fixing of costs? [Examples of some of the other criteria in Order 99 include the complexity of the matter, number of documents and the amount of money involved]

2. If the amount of time spent is the central part of the analysis of the Taxing Master in assessing costs, should the Taxing Master allow a retrospective reconstruction of the time spent on a case and if so in what circumstances? [This would apply to both the solicitor and barristers]

3. Is it within the discretion of the Taxing Master to disallow the costs of two solicitors in dealing with part of a case, and if so how may that discretion be reviewed by a court?

4. To what extent, if at all, are general economic conditions relevant to the instruction or brief fees, and if so relevant, how is that economic circumstance to be assessed?” [This issue could become particularly relevant in light of the upcoming Brexit and the threats to the economy that have been highlighted as a result]

In a judgment of Ms. Justice Laffoy (with which Denham CJ, O’Donnell J, McKechnie J and Clarke J concurred) the Supreme Court answered these questions as follows:-

1. The amount of time actually spent on a case should not be elevated above the relevant criteria set out in Order 99.

On a practical note, the Court held that “there is no requirement in law that a solicitor or a barrister keep contemporaneous records of time spent on a case, but bearing in mind that the Taxing Master has to ascertain the nature and extent of the work done by a solicitor or a barrister on a case, and put a value on that work, it may, in certain circumstances, be prudent for the solicitor or the barrister to keep contemporaneous time records with a view to assisting the Taxing Master in that task, if taxation of the costs arises. The Court of Appeal erred in finding, by implication, that such a requirement exists.”

2. The Taxing Master has the power to allow or direct a retrospective reconstruction of time and this is a discretionary power.

3. It was within the discretion of the Taxing Master to disallow the costs of the two solicitors. That discretion should be exercised in a manner which enables him to perform his statutory function and in a manner which is fair and reasonable.

4. General economic conditions are relevant to the assessment of the instructions fee or brief fee, with the impact of same to be assessed by reference to appropriate evidence.

Having regard to the above, the Court decided to remit the entire general instructions fee to the Taxing Master for re-assessment.

Observations on the Current Regime

In the judgment, a number of interesting observations were made about the current system of taxation. It was noted that amendment of the Rules of the Superior Courts relating to costs was long overdue and that it was not satisfactory that a party who is paying the professional fee is presented with pages of narrative, at the end of which is a single fee for the work described. It was up to the legislature to produce a system which was “more scientific, rigorous and ultimately better value for money.”

Until the legislature amends the current position, solicitors “should endeavour to present bills of costs with supporting evidence which are of greater assistance to the Taxing Master than is prescribed by Order 99 in its existing form.”

It was also noted that while an independent process by which disputed costs can be adjudicated upon is an indispensable part of the justice system, there should be a “cost effective and time efficient way” in which this process can be conducted, with the Court noting that the taxation and review took a total of seven days at hearing. The substantive action had only run for five days.

In relation to the issue of time recording, while the Court has confirmed that time is but one of the elements to be considered by the Taxing Master and that time recording is not mandatory, it was noted that efforts should be made to go above and beyond what is currently prescribed by the Rules of the Superior Courts and provide supporting evidence to back up the fees being sought.

From a practical point of view, it is notable that the Plaintiff’s costs have still not been concluded, over five years on from the interim settlement order made on 26th October 2011, leaving both parties with no discernible end in sight to this long-running case. A lot can be said for sensible negotiation of legal costs or mediation of costs by an independent legal costs accountant to be agreed between the parties to avoid protracted court hearings.