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You are here: BAILII >> Databases >> Irish Court of Appeal >> Howley v McClean & Anor (Approved) [2025] IECA 77 (28 March 2025)
URL: http://www.bailii.org/ie/cases/IECA/2025/2025IECA77BinchyJ.html
Cite as: [2025] IECA 77

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THE COURT OF APPEAL

 

Court of Appeal Record No.: 2024/78

High Court Record No.: 2021/66R

Neutral Citation No.: [2025] IECA 77

 

 

 

Whelan J.

Binchy J.

O'Moore J.

 

 

BETWEEN/

 

JOSEPH HOWLEY

 

PLAINTIFF/

RESPONDENT

 

- AND -

 

 

PAUL HOWARD

 

DEFENDANT/

APPELLANT

 

 

- AND -

 

 

 

Court of Appeal Record No.: 2024/77

High Court Record No.: 2021/76R

 

 

 

JOSEPH HOWLEY

 

PLAINTIFF/

RESPONDENT

 

- AND -

 

 

UNA MCCLEAN

 

 

DEFENDANT/

APPELLANT

 

 

JUDGMENT of Mr. Justice Binchy delivered on the 28th day of March 2025

 

1.             In these proceedings, the respondent, who is the Collector General, claims unpaid taxes, interest and penalties from each of the appellants.  The appellants are both life partners and business partners and the two sets of proceedings have progressed in tandem.  In the case of the first named appellant, the amount claimed in the summary summons dated 8th November 2021 was €1,210,704.32 together with interest thereon in the sum of €1,103,106.76, bringing the total claim to €2,313,811.08.  The claim for interest was increased in the statement of claim delivered on 19th December 2022, bringing the total claim, as of that date to €2,419,603.064.

2.             In the case of the second named appellant, the amount claimed in the summary summons was €302,535.41, together with interest in the sum €297,006.34, bringing the total claimed in the summary summons, which in this case issued on 22nd November 2021 to €599,541.  In a statement of claim delivered on 19th December 2022 the claim for interest was increased, so that the total claimed as of that date was €625,513.76.  In each case, statutory interest is claimed from the date of issue of the statement of claim onwards.

3.             Prior to the issue of proceedings, the appellants had appealed assessments raised by the respondent to the Tax Appeals Commission ("TAC").   In the case of the first named appellant, Mr. Howard, the taxes related to the years 2002 - 2014 (inclusive) and in the case of the second named appellant, Ms. McClean, the assessments related to the years 2002 - 2014.  TAC issued its determinations in the appeals on 26th August 2021.  It found that there were no valid appeals made by the first named appellant for the years 2002, 2013 and 2014, and that in relation to all other years, the appeals failed.  All of the appeals lodged by the second named appellant also failed.  The result of TAC's determinations was to affirm the assessments raised by the respondent.  As a result, the assessments made against the appellants are deemed to be final and conclusive, pursuant to s. 949(3) of the Taxes Consolidation Act, 1997 (as amended).

4.             On 14th October 2021, before proceedings issued, the Revenue Commissioners issued a final notice to each of the appellants calling upon them to discharge the outstanding taxes.  On 27th October 2021, each of the appellants submitted a phased payment plan to the Revenue Commissioners in which each acknowledged in writing the amount of unpaid tax due and owing by them to the respondent.  Those proposals were rejected by the respondent and proceedings issued in each case on 8th November 2021.

5.             Summary judgment was granted to the respondent on 8th April 2022, but, following an appeal to this Court, the proceedings were remitted to plenary hearing.  In amended defences delivered on 11th April 2023, each of the appellants, while admitting that taxes were due to the respondent, disagreed with the amounts claimed, but the principal defence advanced by them in the proceedings and the only issue falling for determination in these appeals is the appellants' claim that the respondent is not entitled to maintain the proceedings in each case on the basis that the fee agreement entered into between the respondent and his solicitors on 29th January 2020 (the "Contract") constitutes a champertous agreement.

6.             In a judgment delivered on 16th January 2024, the High Court (Michael Quinn J.) found the amounts claimed by the respondent to be duly proven, having regard to the determinations made by the Tax Appeal Commission.  He further concluded, following an extensive consideration of the provisions of the Contract and a comprehensive review of the law of maintenance and champerty in this jurisdiction, that the Contract is not champertous. The judge also held that even if he was incorrect in his conclusion that the Contract is not champertous, champerty cannot not be relied upon as a defence to the proceedings, and the appellants would have other remedies available to them in the event that they succeeded in defending the proceedings.

7.             In a further conclusion, arising out of a subsequent amendment to the Contract made between the respondent and his solicitors during the course of these proceedings, the High Court judge rejected the submission of the respondent that that amendment agreement rendered the proceedings moot. 

8.             Having so found, by order made and perfected on 6th February 2024, the High Court judge ordered that the respondent do recover as against the first named appellant the sum of €2,531,229.36 together with the costs of these proceedings and that the respondent recover as against the second-named appellant the sum of €653,407.21 together with the costs incurred by the respondent in those proceedings. 

9.             The appellants have each appealed from the judgment and orders made by the High Court, and as in the High Court, each of these appeals have travelled together, and the appellants have relied upon the same grounds of appeal.  The principal grounds of appeal are that the High Court judge erred in failing to find that the contract was not champertous and contrary to law, and further erred in failing to find that champerty is not a defence to the proceedings. 

The Contract

10.         The solicitors acting on behalf of the respondent in these proceedings are Ivor Fitzpatrick & Co., 44-45 St. Stephen's Green, Dublin 2.  On 29th January 2020, the solicitors entered into an agreement with the respondent for the provision of legal and related services in the collection of certain revenue debt.  These solicitors are one of six firms on a panel retained by the respondent for the collection of unpaid taxes.  For present purposes, the relevant provisions of the Contract appear at clauses 5.1-5.3 of the Contract.  Those provisions provide as follows: -

"5.1 The major portion of the renumeration under this contract will be in form of commission expressed as a percentage of amounts collected.  Legal costs shall be recovered from the debtor to the greatest extent possible.  Revenue acknowledges that in the nature of the work, there will be some cases where costs will be incurred but no recovery is possible.

5.2 [In the judgment under appeal, the High Court judge broke this clause down into its individual sentences for ease of reference, and I will adopt the same format]:

i         In cases where an Order for Judgment in the relevant Court is obtained, Revenue may also seek an order of the Court for costs to be taxed in default of agreement.

ii.      The Firm shall, in such cases, be entitled to charge for its services and outlay incurred.

 iii.    For the purposes of taxation of such costs Revenue shall be entitled to claim costs on the basis of work done, time spent and other factors found in O.99 r.37(22) of the Rules of the Superior Courts ordinarily addressed in the taxation of such costs.

iv.      On completion of taxation of costs the Firm shall be entitled to render an account and Invoice to Revenue calculated on the basis set out in this paragraph, but the Firm shall take into account such sums as have already been billed and paid by the Collector General pursuant to the provisions of clause 5.3 below.

v.       The amount due on the Invoice will become payable by Revenue to the Firm insofar as Revenue is successful in recovering those costs from the defaulting taxpayer pursuant to the order for costs or pursuant to the agreement for payment of costs by the defaulting tax payer.

vi.      For the avoidance of doubt if Revenue is not successful in recovering costs as taxed or as agreed from the defaulting taxpayer then the renumeration of the Firm will be limited to those payments set out in clause 5.3 below.

vii.     Any excess due to the Firm over and above this will be waived by the Firm.

5.3 The following table sets out details of the remuneration payable under this contract.

Action stage

Fee payable

Commission excluding VAT at 23% payable if collection is completed after the action stage shown and before further action.

Issue of a demand.

€27 plus VAT.

2% of the first €4,000 and 0.5% of the balance of tax and interest collected.

Issue of proceedings.

€145 plus VAT plus outlay, less fees and outlay already paid in respect of this referral.

 

 

4% of the first €4,000 and 2% of the balance of tax and interest collected.

Judgment obtained (including registration of a Judgment where required) 

€210 plus VAT plus outlay less fees and outlay already paid in respect of this referral.

For enforcement of judgment where collection is achieved.

€270 plus VAT plus outlay less fees and outlay already paid in respect of this referral.

7% of the tax and interest collected.

For enforcement of Judgment where enforcement is completed (case withdrawn from solicitor) without collection; or where enforcement is terminated by Revenue before completion and before collection is achieved

2.75% of the first €4,000 and 2% of the balance, to a maximum fee of €5,000 plus VAT plus outlay, less commission and outlay already paid in respect of this referral (or revised referral if appropriate).

Withdrawal Fee can only be claimed where the Firm has brought the case to enforcement stage and advised Revenue of same. All withdrawal applications must be claimed the month following the withdrawal.

For complex work where input to cases at Senior/Partner level is necessary.

€210 plus VAT per hour.

€210 plus VAT per hour where interpretation of the law requires Senior/Partner input.

 

11.         I pause here to mention that by the Contract date, the terminology of taxation of costs had long been superseded by the coming into force of the relevant costs provisions of the Legal Services Regulation Act, 2015 (the "2015 Act") and the coming into operation of an amended O.99, RSC on 3rd December 2019, so that references to taxation had been replaced by references to adjudication of costs, and from this point onwards I will use the language of adjudication rather than taxation where the issue arises.

12.         In addition to pleading that the Contract is champertous, the appellants further pleaded that the Contract: -  

"provides for a scheme of remuneration where the solicitor is paid a fee for work done but then represents to the Defendant that work has been done on a different basis and seeks a higher payment.  Such payment amounts to a contingency fee arrangement and provides that the solicitor's remuneration is only paid if the sums alleged to be due if (sic) actually collected and amounts to a fraud on the paying party since he is being informed that a particular sum (sic) is due to the Plaintiff when that is not the case since the Plaintiff will never collect any sum greater than the sums actually paid out by him prior to the order for costs".

Amendment of Contract 14th February 2023

13.         On 14th February 2023, the respondent and the solicitors agreed to amend the Contract (the "amendment agreement").  This is addressed at para. 76 of the judgment under appeal, wherein the High Court judge records that clause 2 of the amendment agreement provides as follows: -

"Amendment.

On and with effect from the date of this Agreement, the Parties agree that clause 5.2 of the contract be deleted in its entirety. This variation retrospectively applies to all cases, to cases currently in progress including any cases commenced prior to the signing of the agreement, and to future cases."

14.         The High Court judge noted that the amendment agreement was entered into after this Court had remitted the proceedings to plenary hearing, and that in submissions, it was stated on behalf of the respondent that he had entered into the amendment agreement in circumstances where, while maintaining the view that the Contract was not champertous, he wished to ensure that there would be no further controversy on the issue in this or in other cases involving other taxpayers. 

15.           However, in an amended defence dated 11th April 2023, the appellants contended that the amendment agreement is not an enforceable contract at law, since there is no consideration recited therein.  Therefore, it was pleaded, the amendment agreement is not an enforceable contract at law and the Contract continues to govern the relations between the respondent and his solicitors.  The appellants relied upon the rule in Pinnel's case in this regard.

Judgment of the High Court

The issues identified

16.         Having found that the amounts claimed by the respondent as against the appellants in each case were proven, the High Court judge went on to consider the argument that the Contract is champertous.  He summarised the relevant provisions of the Contract and the amendment agreement and identified the following questions for determination so far as the defence of champerty is concerned:

(1)          Is the agreement champertous or does it savour of champerty?

(2)          If so, does that amount to a valid defence such that the defendant can avoid judgment being granted against it?

(3)          Does the agreement provide for or permit a plaintiff to perpetuate a fraud or misrepresentation on the defendant which for public policy reasons should deny the plaintiff of an entitlement to judgment?

(4)          If relevant, what is the effect of the amendment agreement?

The applicable principles

17.         The judge then proceeded to consider relevant authorities, and, having done so, he arrived at the following conclusions (para. 102): -

"1. Champerty is still a tort and an offence in the State (see Persona, Greenclean and O'Keeffe). 

2. Champerty is the giving of assistance to a party to litigate in return for a share of the proceeds.  The phrase "campi partitio" ("division of the field") was used by Lord Denning MR in Wallersteiner (op cit). 

3. The fundamental "leitmotif" of champerty, as Hogan J. put it in Greenclean, is the policy of avoiding trafficking in litigation. 

4. The rule cannot be invoked as a bar to the pursuit of an otherwise sustainable or statable action (O'Keeffe v. Scales). 

5. If a defendant succeeds in its defence and establishes that the action has been maintained in a champertous manner then it may have a remedy against the party, such as in this case the solicitor, who has provided the offending assistance. (O'Keeffe v. Scales and Greenclean)."

18.         With the exception of conclusion 4, there is no dispute between the parties that the above principles may be drawn from the authorities, and are applicable in this jurisdiction.  So far as concerns No. 4, the appellants maintain that the High Court judge erred in this conclusion, and I will address this when addressing the appellants' grounds of appeal.

The Contract analysed

19.         The High Court judge then proceeded to consider the Contract in the light of the principles that he had identified.  His analysis of the effect of clause 5.2 is very useful and I will therefore quote his conclusions in this regard verbatim.  The analysis tracks the sentence by sentence break down of the clause by the High Court judge earlier in his judgment (see para. 108): -

"1. If a judgment is obtained for the amount of taxes claimed Revenue may seek an order for costs "to be taxed in default of agreement" (Sentence (i)).  This is no more than a statement of the fact that Revenue may in any case apply for such an order. 

2. Where an order for costs is made against the taxpayer the solicitors are then entitled to charge for their services and outlays and may invoice on the basis of "O.99 costs".  In doing so it must give credit to the Revenue for any amounts previously billed and paid pursuant to para. 5.3 of the Contract (Sentences (ii) and (iii)).  This is no more than a statement that in such cases the firm may issue an invoice to Revenue for the full amount taxed, or now adjudicated, pursuant to O.99 and on such invoices it must give credit for previously paid costs. 

3. The amount of the "O.99 invoice" will only be payable by Revenue to the solicitor if the costs are recovered from the taxpayer.  If they are not so recovered then the balance or shortfall not recovered is waived. (Sentences (v), (vi), and (vii)).

4. The third sentence says that when costs have been submitted for taxation Revenue are "entitled" to claim by reference to work done by the solicitor on the basis of the factors described in O.99 r.37. (22).  This means no more than that Revenue may submit such "full" costs for taxation by reference to O.99. Whether such costs will be allowed is a matter for the Legal Costs Adjudicator.  This court is required to decide a different question, namely whether these provisions in the Contract are champertous or permit, as the defendants submits, a fraud to be perpetrated on the defendant(s)."

20.         The judge then proceeded to consider O.99, r. 37(22) as well as s. 155 of the 2015 Act.  At para. 111 he stated: -

"111. A party can only recover from the paying party those costs which he has actually occurred (sic) or those for which he is liable.  This is the "indemnity" principle.  See Attorney General (McGarry) v. Sligo County Council & Ors [1991] IR 99."

Costs do not form part of the proceeds of litigation

21.         At para. 113, the judge arrived at his first key conclusion, that is that the "proceeds" or "fruits" of the litigation are the recovered taxes, surcharges and interest and not the costs.  Explaining this he said: -

"Where judgment is obtained and an order for costs made, the obligation to pay those costs is an additional liability found by the court to be payable by the defendant so that the plaintiff may recover its debt in full.  It is not an additional bonus or other benefit conferred on the plaintiff which he would 'share' with his solicitor.  The contract in this case does not alter this description.  It means simply that in a case where judgment is granted and an order for costs made that the solicitor is entitled to his "ordinary" O. 99 costs subject to two limitations.  The limitations are firstly that when it comes to invoicing and payment the solicitor must give credit for any payments previously made pursuant to clause 5.3.  Secondly if the costs are not recovered in full the solicitor will waive any shortfall."

22.         The judge further concluded (at para. 115) that: -

"The court having made an order for costs against the taxpayer, there is nothing to preclude Revenue from claiming at such an adjudication the full amount of costs which would be payable if assessed in accordance with O. 99, r. 37, subject to the indemnity principle. (See paragraph 111)."

No "contingent bonus"

23.         The High Court judge then considered, and rejected, an argument that clause 5.2 of the Contract operated so as to confer a "contingent bonus" upon the respondents' solicitors i.e., subject to allowing credit for any sums already received, the solicitors would be entitled to require the respondent to pay to the solicitors, following upon adjudication and recovery of the amount so adjudicated, a sum in excess of that to which the respondent is otherwise entitled to recover under clause 5.3.  The judge rejected that argument on the basis that the agreement merely provided for the recovery of ordinary party and party costs, and payment to the solicitors for the respondent, if recovered.  He found nothing extraordinary or unlawful in this arrangement, or in the fact that, if the respondent fails to recover any difference between the fixed fees provided for in clause 5.3, and the fees as determined on adjudication, his solicitors would waive the difference in the event that it is not recovered by the respondent from the appellants.  At para. 119 the judge held: -

"I do not believe that this can properly be characterised as a "division of the spoils" or of the "fruits" of the litigation.  It is no more than recovery and payment of the ordinary level of costs, subject to the control and insofar as they are to be recovered from the taxpayer, their quantum must be determined by the Legal Costs Adjudicator, unless of course agreed with the defendant."

24.         The judge observed that such an arrangement is not prohibited by s. 149 of the Legal Services Regulation Act, 2015, and if O.99 costs are recovered all that occurs is that the respondent recovers the entire of the debt, including surcharges and interest and secures, following adjudication, reimbursement of any costs previously paid or payable to his solicitor. 

Misrepresentation argument

25.         The judge then proceeded to address the appellants' argument that the arrangement involved the fraudulent misrepresentation by the respondent of the true position as to the costs payable by it in the litigation.  He observed that that argument assumes that the respondent would, at adjudication, withhold or conceal the existence of his terms of engagement with his solicitors.  He was not willing to determine the case on the basis of such an assumption and accordingly rejected that argument. 

Legal Services Regulation Act, 2015

26.         The judge also considered the provisions of ss. 149-151 and s. 157(6) of the 2015 Act.  He noted that s. 151 of the 2015 Act makes provision for the making of agreements between legal practitioners and their clients as regards the amount and manner of payment of all or part of the legal costs that will be incurred by the client.  He expressed the view that the Contract is clearly an agreement to which s. 151 applies.  He noted that under s. 157(6) of the 2015 Act, a Legal Costs Adjudicator shall not confirm a charge in respect of a matter or item if the same has not been included in a notice issued by the legal practitioner under s. 150, or an agreement entered into between the practitioner and the client under s. 151.  He further noted that the Legal Costs Adjudicator has power to require production of documents and that the Contract is not excluded from such production.  He concluded: -

"In circumstances where the terms of the plaintiff's solicitor's engagement were accessible on a public website, and where the defendant was furnished with a copy of the Contract with Ivor Fitzpatrick & Co., the proposition pleaded by the defendant that the contract permits of a fraudulent misrepresentation is unsustainable."

Adjudication

27.         The judge further noted that if a defendant wishes to make an argument that, on a proper construction of the Contract the plaintiff's costs should be limited to those paid pursuant to clause 5.3, and not ordinary O.99 costs, it is open to him to make such a submission at the adjudication.  The judge said that he did not agree with such construction, but that that was not a matter for him, and it was not for the High Court to preclude such a submission to the Legal Costs Adjudicator.  Moreover, he added, that will not arise in this case in light of the amendment agreement.

Is champerty a defence?

28.         The judge considered the judgment of the Supreme Court in O'Keeffe v. Scales [1998] 1 I.R. 290 and also the decision of Hogan J., then in the High Court, in Greenclean Waste Management Limited v. Leahy [2014] IEHC 314.  Having regard to the conclusions of Lynch J. in O'Keeffe v. Scales as interpreted by Hogan J. in Greenclean, the judge concluded that champerty only has a relevance to the appellants' potential objection to the measurement and recovery of costs, and is not a defence which can be invoked to defeat the claims for assessed taxes. 

Did the amendment agreement render the champerty defence moot?

29.         Before considering the issue of mootness, the judge firstly considered whether or not it was open to the defendants to question the efficacy of the amendment agreement, having regard to the fact that they are not parties to the same, and he concluded that they were not entitled to do so.  

30.         The judge then considered the respondent's argument that the amendment agreement rendered the champerty defence moot. He rejected this argument  on the basis that if it were to be found (on appeal) that, notwithstanding his earlier findings, champerty is good defence to the proceedings, then there would be some force in the appellants' submission that the proceedings are tainted by champerty, and having regard to the importance of the rule he did not consider that the appellants should be closed out from making such an argument on by reason of the amendment agreement. 

31.         In his conclusions, at para. 150, the judge made the following pertinent observations about the duties of the respondent: -

"The court should be slow to distinguish this plaintiff from any other plaintiff who sues to recover debts.  However, there is an important distinction which cannot be ignored. The plaintiff is the Collector General of Taxes charged by the Taxes Consolidation Act with the duty to collect all taxes for the benefit of the Central Fund.  He does not exercise the same discretion or make the same type of profit oriented decisions which inform private parties or commercial enterprises who extend credit and make their own policy as to recovery of debt.  There is no evidence that his decisions to pursue unpaid taxes are or can be influenced by the terms on which he retains solicitors to enforce collection."

 

Grounds of Appeal

32.         The following grounds of appeal were relied upon by the appellants at the hearing of the appeal:

(i)            The High Court judge erred in failing to find the Contract champertous and forbidden by law;

(ii)         The judge erred in holding that costs recovered in legal proceedings do not form part of the fruits of litigation;

(iii)       The judge erred in holding that champerty is not a defence to a claim for unpaid taxes;

(iv)        The judge erred in holding that the appellants could not challenge the amendment agreement;

(v)          The judge erred in finding that the provisions of the Contract were publicly available on a website, and that defendants would therefore be aware that they may be presented with bills of costs that are higher than those payable by the respondent to his solicitors;

(vi)        That in arriving at his conclusions the judge failed to have regard to the obligation of the Collector General, a statutory officer acting on behalf of the State to behave impeccably in carrying out his duties;

(vii)     The judge erred in taking into account the functions of the respondent as Collector General and in holding that there is no evidence that the decisions of the respondent to pursue unpaid taxes are or can be influenced by the terms upon which he retains solicitors to it enforce collection.  The appellants say that the respondent did not make that argument and submit that the issue for determination is whether a solicitor on a share of the fruits of the litigation might advise so as to prolong the litigation, which would not otherwise occur.

                                                            

Submissions

Submissions of the appellant

33.         The appellants submit that the fee arrangements provided for in the Contract are champertous for several reasons.  Firstly, they contain a contingency fee element which they submit is of its very nature champertous and prohibited.  In this regard they rely upon a decision of the Court of Appeal of England and Wales in Wallersteiner v. Moir (No.2) [1975] QB 373 at 401 where Scarman L.J. stated: -

"A contingency fee, that is, an arrangement under which the legal advisors of a litigant shall be remunerated only in the event of the litigant succeeding in recovering money or other property in the action, has hitherto always been regarded as illegal under English law on the ground that it involves maintenance of the action by the legal advisor.  Moreover, where, as is usual in such a case, the remuneration with the advisor is to be, or to be measured by, a proportion of the fund or of the value of the property recovered, the arrangement may fall within that particular class of maintenance called champerty."

34.         Similar views were also expressed by Lord Denning M.R. in Wallersteiner.  The appellants also rely upon Baranowski v. Rice [2014] NIQB 122, a decision of the High Court in Northern Ireland in which an arrangement not unlike the arrangement at issue in these proceedings was considered.  In Baranowski, Stephens J. identified three categories of success fee arrangements: -

"(i)    Where the lawyer will recover some of the client's winnings ("a contingent fee").

(ii)         Where the lawyer will recover his normal fees plus a success uplift ("a conditional uplift case").

(iii)        Where the lawyer will only recover his normal fees ("a conditional normal fee case").  As can be seen a conditional normal fee entitles a solicitor to no more than his ordinary costs if he wins and he risks obtaining less if he loses."

35.         The appellants submit that the arrangements as between the respondent and his solicitors falls within both the second and third categories identified by Stephens J. on the basis that the sums collected over and above the amounts agreed under the Contract - and in this context the appellants are referring to clause 5.3 of the Contract as being the amounts agreed under the Contract - represent "winnings" for the respondent.

36.         It is also submitted on behalf of the appellants that costs recovered in proceedings constitute "proceeds" or "fruits" of litigation as much as any other element claimed in the proceedings, and the High Court judge erred in coming to a contrary view.  As authority for this proposition, the appellants rely upon Lett & Co. Limited v. Wexford Borough Council and Ors. [2016] 1 I.R. 418, a judgment of the Supreme Court (Laffoy J.) given in the context of an application to charge costs pursuant to s. 3 of the Legal Practitioners (Ireland) Act, 1876 (the "1876 Act") which, in material part, provides as follows: -

"In every case in which an attorney or solicitor shall be employed to prosecute or defend any suit matter or proceeding in any court of justice, it shall be lawful for the court or judge before whom any such suit matter or proceeding has been heard or shall be depending to declare such attorney or solicitor entitled to a charge upon the property recovered or preserved; and upon such declaration being made such attorney or solicitor shall have a charge upon and against and a right to payment out of the property of whatsoever nature tenure or kind the same may be, which shall have been recovered or preserved through the instrumentality of any such attorney or solicitor, for the taxed costs, charges, and expenses of or in reference to such suit matter or proceeding...." 

37.         In her judgment Laffoy J. stated that: "It is well settled that such costs are chargeable as property recoverable or preserved" [Emphasis added].

38.         The appellants submit that the arrangements contemplated by the Contract whereby an initial bill is submitted by the respondents' solicitors in accordance with clause 5.3 of the Contract and thereafter subsequent bills are prepared firstly for adjudication and, secondly  following upon adjudication (if the amount adjudicated is different) are predicated upon an assumption that the amount rendered in the course of the adjudication process will be greater than that previously submitted pursuant to clause 5.3, and that this is improper in circumstances where the respondent has no legal liability to discharge the same to his solicitors.  Moreover, it is contrary to the indemnity principle as identified in Attorney General (McGarry) v. Sligo County Council [1991] 1 I.R. 99.

39.         In the course of his submissions to this Court, counsel for the appellant, consistent with the plea made in the defences of the appellants recited at para. 12 above, submitted that the arrangements between the respondent and his solicitors constitute a fraud on the defendants, in that they provide for the presentation of a bill by the solicitors for the respondent, at the conclusion of proceedings, on the basis of O.99 of the RSC, in circumstances where the contractual arrangements between the respondent and his solicitors provide for a lesser costs liability on the part of the respondent to his solicitors.

40.         As to the consequences of a champertous agreement, the appellant submitted that, as a State body the respondent must be held to a higher standard than other litigants. In this regard the respondent relies upon the judgment of Clarke J. (as he then was) in Rás Medical Ltd. v. Royal College of Surgeons [2019] 1 IR 63 in which Clarke J. held that State bodies are obliged to conduct litigation "with all cards face upwards on the table".  Furthermore, it was submitted that the courts must ensure the integrity of the court process and should not lend assistance to the respondent.  Therefore, it was submitted, the consequence of  the respondent having entered into a champertous agreement is that it defeats the action on the grounds of the principle ex turpi causa non oritur actio and in this regard the appellants relied upon the decision of the High Court in Heaphy v. Murphy and Ors. [2018] IEHC 141.

41.         Finally, it was submitted by the appellants that it is not open to the respondent to rely upon the amendment agreement because there is no provision for consideration therein, and accordingly it is unenforceable having regard to the well-established rule in Pinnel's case.    

Submissions of the respondent

42.         The respondent submits that Wallersteiner does not represent the law in this jurisdiction.  The respondent also relies upon the decision of Stephens J. in Baranowski, and refers to para. 24 of his judgment, wherein he stated, as regards the law in this jurisdiction: -

"24. ...A conditional normal fee agreement is not prohibited and is permitted at common law see Fraser v Buckle [1996] 1 IR 1, McHugh v Keane unreported 16 December 1994 and Synott v Adekoa [2010] 1 IEHC 29 January 2010.  See also the position in relation to after the event insurance in [Greenclean].  A different approach was taken by the courts in Ireland developing the common law than was taken by the courts in England and Wales...."

43.         The respondent submits that "no foal no fee" arrangements are relatively commonplace and have been utilised in many high profile constitutional and personal injury cases.  The respondent refers to the reference to such arrangements by Denham C.J. and by Clarke J. (as he then was) in Persona Digital Telephony Ltd. and Sigma Wireless Networks Ltd. v. Minister for Public Enterprise and Ors [2017] IESC 27.  In Persona, Clarke J. (as he then was) and Denham C.J. each spoke about the access to justice problems that can arise by reason of the law of champerty.  Each of them made passing reference to the fact that very many personal injury cases, including complex medical negligence cases are taken on a "no foal no fee basis".  While that was not the nature of the arrangement before the Supreme Court in Persona, the point being made was that if such arrangements were to be struck down as being champertous, it would cause very serious access to justice problems.

44.         While acknowledging that the observations made by each of the former Chief Justices were obiter, and that in making the observations that they did in Persona neither was intending to endorse other more sophisticated contingency fee arrangements, the respondent submits that it is clear from these comments that the statement of the law in Wallersteiner relied upon by the appellants does not accurately represent the law of champerty in Ireland.

45.         Moreover, the respondents submits that the arrangement provided for in clause 5.2 of the Contract does not involve the payment to the solicitors of any kind of uplift or success-based fee, it simply entitles the solicitors to be paid their normal adjudicated costs by the respondent in the event that those costs are recovered from the appellants.  In every other case, the solicitors are entitled to be paid the fees provided for under clause 5.3 of the Contract, be that more than or less than whatever might be the costs as adjudicated.

46.         The respondent further submits that even if the fee arrangements between the respondent and his solicitors could potentially give rise to champerty, this alone does not constitute a good defence to the respondent's claims against the appellants.  In this regard the respondent relies upon the decision of the Supreme Court in O'Keeffe v Scales.

47.         The respondent denies that there has been any failure to disclose the Contract, and submits that the appellants' submission that there has been a misrepresentation as to the contractual fee arrangements between the respondent and his solicitors is based on an erroneous assumption that the respondent would in the future misrepresent that position at adjudication.

48.         Finally, the respondent maintains that he is entitled to rely upon the amendment agreement, that clause 5.2 is no longer of any relevance and that the appellants cannot assert that the amendment agreement is unenforceable, not being parties to the same.

                                                      

Discussion and Decision

49.         In Greenclean, Hogan J. provided the following definitions of maintenance and champerty, at para. 10: -

"Maintenance may be defined as the improper provision of support to litigation in which the supporter has no direct or legitimate interest.  Champerty, on the other hand: "is an aggravated form of maintenance and occurs when a person maintaining another's litigation stipulates for a share of the proceeds of the action or suit": Camdex International Ltd. v. Bank of Zambia [1998] Q.B. 22, 29, per Hobhouse L.J. Champerty may thus be described with only a little exaggeration as a secular form of simony within the legal system, for, as Hobhouse L.J. aptly put it in Camdex International, what "is objectionable is trafficking in litigation."

50.         It is difficult to understand how the effect of clause 5.2 of the Contract could   accurately be said to amount to a form of maintenance or champerty.  The respondent is charged with the collection of taxes and has a statutory obligation to pursue those who fail to pay taxes due.  It follows that these proceedings would be brought irrespective of the fee arrangements entered into between the respondent and his legal advisors.

51.         Moreover, the respondent is an emanation of the State, which itself in its various guises is the single largest purchaser of legal services in the State, and the respondent has no need of the financial support of his legal advisors to maintain whatever litigation he deems it necessary to bring in order to discharge his functions.  There is, therefore, a distinct air of unreality in the case being made by the respondent, that the fee arrangements provided for by clause 5.2 of the Contract could amount to the provision of support to the respondent in his proceedings against the appellants for collection of taxes, let alone that it could amount to champerty.

52.         While it is a ground of appeal that the High Court judge erred in having regard to the statutory functions of the respondent, and the appellants make the point that the respondent did not make that argument in the High Court, nonetheless it is the appellants who are alleging that clause 5.2 of the Contract is champertous, and it follows that the burden of proof is on them to establish that this is so.  Moreover, it is apparent from the definition of champerty that it is a form of maintenance and so therefore it is arguable that, in order to establish champerty it is necessary to establish, on the balance of probabilities, that the effect of the impugned arrangements is to maintain or support the continuance of the litigation.  It is difficult to imagine why any litigant would enter into an arrangement that is otherwise champertous if that was not its effect.

53.         The appellant's case as to champerty rests entirely on the proposition that the respondent and his solicitors have, by clause 5.2 of the Contract, agreed to share the proceeds of the litigation, and they also place reliance upon the conditional nature of the fee, i.e. that the solicitors will only be entitled to the fees as adjudicated if they are actually recovered.  The appellants, relying upon Wallersteiner, submit that it is the contingent nature of the fee that constitutes maintenance.  However, this argument runs into the obstacle that there is no authority for the proposition that the views of Scarman L.J. or Lord Denning M.R. in Wallersteiner represent the law in this jurisdiction.  In fact, Wallersteiner does not appear to have been considered at all in any of the reported cases that have addressed this issue.  While the observations of Clarke J. (as he then was) and Denham C.J. in Persona about "no win, no fee" arrangements must be treated with caution because they go no further than to recognise the significance of such arrangements in terms of access to justice, the fact remains that such arrangements are every bit as pervasive today as they were at the time that those observations were made in Persona.  Against this background, it would require more than a single authority from the neighbouring jurisdiction, dating back to 1975, and which does not appear to have been the subject of previous discussion not to mention approval in this jurisdiction, to conclude that it does indeed represent the law here.

54.         To accept Wallersteiner as representing the law in this jurisdiction would, in my judgment, amount to an extension of the law of champerty as it now stands in this jurisdiction with potentially very undesirable knock-on effects.  In O'Keeffe v. Scales, which I consider in more detail below, Lynch J. expressly stated that the law of champerty should "not be extended in such a way as to deprive people of their constitutional right of access to the courts to litigate reasonably stateable claims", and the judgments of Denham C.J. and Clarke J. in Persona appear to lend support to that view.  For these reasons I would expressly reject the argument that Wallersteiner represents the law in this jurisdiction.

55.         Moreover, I consider that the analysis of the High Court judge at para. 113 of his judgment (see para. 21 above) as to the legal effect of the Contract is correct.  It entitles the relevant solicitors' firms to charge the respondent such party and party costs as may be adjudicated, subject to two conditions, the first being that the firm must credit any sums already paid to it by the respondent, and the second being that, insofar as the sums adjudicated exceeds the sum provided for by clause 5.3 of the Contract, it must have been recovered, otherwise the solicitor must waive any shortfall.  Other than by placing reliance on Wallersteiner, which I have already addressed, the appellants have not explained how such an arrangement constitutes maintenance of litigation.

56.         For the foregoing reasons, I do not consider that the appellants have satisfied the burden on them to demonstrate that the fee arrangements between the respondent and his solicitors constitute champerty.  It follows from this conclusion that they cannot be said to amount to champerty either, but there is an additional reason why this is so, and that is, as the High Court judge also concluded, that costs cannot be considered to be the proceeds of the litigation, and it is to that issue that I now turn.

 

                         Are Costs the Proceeds of Litigation?

57.         The appellants' argument that the costs of litigation are the proceeds or "fruits" of litigation is a simple one.  They say that costs recovered in proceedings are as much the fruits of the litigation as any other element of the claim, and they rely on Lett & Co. v. Wexford Borough Council [2016] 1 I.R. 418 in support of tis submission.  In passing, I observe that there is no reference to Lett in the appellant's written submissions to the High Court or this Court, and I can only assume that the attention of the High Court judge was not drawn to this authority.  That said, however, the appellants did include it in their book of authorities, and counsel for the appellant opened it very briefly to the Court at the hearing of this appeal.

58.         Lett certainly does make it clear the effect of s. 3 of the 1876 Act is that costs recovered in legal proceedings are liable to be charged in favour of an applicant solicitor every bit as much as other property recovered in the proceedings.  So, the argument goes, if costs are to be considered "property" recovered in proceedings for the purpose of the 1876 Act, it follows that they should be so considered for the purposes of the law of champerty.

59.         The respondent submits that while costs do form part of the claim, they are nonetheless distinct from the claim itself as they form a separate liability owing to a plaintiff who has had to incur costs in order to recover judgment.  So therefore, costs cannot be equated with the damages sought in the proceedings; rather they are a separate expense incurred along the way in the recovery of such damages.  This submission aligns with the conclusion of the High Court judge on this issue.

60.         It is of course the case that costs recovered by a plaintiff in legal proceedings belong to the plaintiff.  This follows from the fact that it is the plaintiff who claims the costs, and must claim the costs of the proceedings in order to be able to recover the same.  But it does not follow that the costs form part of the proceeds of the litigation in every context in which that term is used, and specifically when considering the law of champerty.  Litigants do not issue proceedings to recover costs, they issue them to recover losses or damages sustained at the hands of another, and it is those losses or damages, if recovered, that are the proceeds or "fruits" of the litigation.  Costs are claimed in order to make whole the plaintiff at the conclusion of the litigation and so as to ensure the plaintiff is not at a loss as a result of the defendant's conduct which necessitated the litigation.

61.         Moreover, the proposition that costs are not to be considered the proceeds of litigation finds some support in the prohibition upon solicitors sharing professional fees with non-qualified persons, to be found in article 3 of S.I. No. 343/1988 (the Solicitors (Professional Practice) Regulations, 1988) which provides: -

"A solicitor shall not agree to share his professional fees with any person, not being either a solicitor or a duly qualified legal agent in another country".

62.         While this prohibition clearly applies to all solicitors fees, and not just fees incurred in litigation, nevertheless it serves to underline that there is a clear distinction to be drawn between the costs incurred and recovered in proceedings, which may not be shared by the solicitor with his or her client and monies recovered in the same proceedings by way of damages.  Monies recovered by a solicitor on behalf of a client as professional fees in the course of litigation may not be shared with the client.  They are recovered on behalf of the client so as to enable the client to discharge his or her costs liability to the solicitor, or to reimburse the client those costs to the extent that they have already been paid.

63.         For these reasons I can find no error in the conclusion of the High Court judge that "the 'proceeds' or 'fruits' of the litigation are the recovered taxes, surcharges and interest and not the costs", and I would dismiss all grounds of appeal related to this conclusion.

                                  

Can Champerty be a Defence to Proceedings?

64.         In O'Keefe v. Scales, Lynch J. made it absolutely plain that the law relating to champerty and maintenance should not be deployed so as to deprive people of their constitutional right of access to the courts to litigate reasonably stateable claims.  Lynch J. also expressed the opinion that, provided the plaintiff had a stateable cause of action, the action in that case should not be stifled on the basis that it might be champertous.  He went on to then address the remedy that the defendant would have if she successfully defended the proceedings, which he considered would be an action in damages against the tortfeasor i.e., the solicitor who unlawfully assisted in maintaining the action.

65.         The circumstances in which these issues came to be considered in O'Keeffe v. Scales were as follows.  The plaintiffs had included in their claim amounts owing to their solicitor which it was claimed had been incurred as a result of the negligence of the defendant, their former solicitor.  The defendant brought an application to dismiss the proceedings on the grounds that the inclusion of sums owing to their solicitor in the proceedings was champertous.  That application was dismissed in the High Court, and again on appeal to the Supreme Court.  Lynch J., speaking for the Supreme Court observed that: -

"While the law relating to maintenance and champerty therefore undoubtedly still subsists in this jurisdiction, it must not be extended in such a way as to deprive people of their constitutional right of access to the courts to litigate reasonably stateable claims."

Regarding the appeal before him, Lynch J. held as follows (at p. 297): -

"Assuming in the present case that [the Plaintiffs] have a reasonably stateable cause of action (and it has not been suggested that they have not) I do not see that it would be a valid ground for stifling their cause of action before a plenary hearing, even if their action could be said to be maintained in a champertous fashion by Mr. Murnaghan, which I am not satisfied is the case."

66.         At the conclusion of his judgment, Lynch J. considered the implications of his conclusions for the applicant, in the event that she were to be successful in defending the proceedings.  He considered that her remedy in those circumstances would be that she would have a cause of action against the solicitor for the damage caused to her by conducting the proceedings in a champertous manner.

67.         In response to the submission that this is authority from the Supreme Court that champerty cannot be a defence to proceedings, the appellant submits firstly that these comments of Lynch J. are obiter, and secondly that the case is distinguishable because the application in that case was made at interlocutory stage, and the issue was about whether or not the defence could stifle an action before plenary hearing.

68.         I have great difficulty with the submission that the observations of Lynch J. are obiter.  They appear to me to be central to his conclusion in that case.  He could not have been more clear in holding that the law of champerty should not be extended in such a way as to deprive litigant's of their constitutional right of access to the Courts, and, applying that principle to the case before him he refused the relief sought, while at the same time identifying the defendant's remedy if she were to succeed after the plenary hearing.  It is not apparent to me how any of this can be said to be obiter, and at the hearing of this appeal counsel for the appellant did not advance any persuasive argument in support of this submission.

69.         As to the point that O'Keeffe v. Scales is distinguishable because it involved an interlocutory application to stay proceedings, whereas these proceedings went to a full plenary hearing, while that distinction is plain it does not appear to me to be meaningful.  I say this because the substance of the argument the appellant makes is the same, whether it is made at the interlocutory stage or after a full hearing, and that is that the proceedings should be dismissed, regardless as to their merits, because they are champertous or savour of champerty.  If anything, the argument against that proposition is even stronger in this case, in circumstances where, after a full hearing, it is apparent that the appellants have no answer at all to the substantive proceedings, and no longer even pretend otherwise in this appeal.

70.         Counsel for the appellant was unable to advance any authority for the proposition that champerty constituted a defence to proceedings.  He did place reliance on the decision of the Supreme Court in Persona, but that case does little to advance his argument.  In Persona, the issue of champerty was raised not by the defendant but by the plaintiff which sought the approval of the court for a proposed third-party funding arrangement.  The court declined the approval sought, finding the proposed arrangement to be champertous, but the question of champerty being a defence to the proceedings simply did not arise, and indeed the proceedings are continuing.

71.         It was also submitted on behalf of the appellant that the proceedings should be dismissed on the grounds that the respondent, by entering into a champertous agreement, violated the principle of ex turpi causa non oritur actio and in this regard the appellants relied upon the decision of the High Court in Heaphy v. Murphy and Ors. [2018] IEHC 141.  However, this submission is misconceived.  The essence of that principle is that the action itself derives from a dishonourable cause.  This is well illustrated by Heaphy itself, in which the High Court dismissed an action in which the plaintiff had sought compensation for injuries sustained in a car accident, by reason of the fact that the court found that the plaintiff himself had instigated the car chase that resulted in the accident.  Even though nobody likes paying tax, I did not understand the appellants to argue that an action for recovery of unpaid taxes can be said to arise from the dishonourable or wrongful conduct of the respondent, who has a statutory duty to collect taxes.

72.         I am satisfied that the decision of Lynch J. in O'Keefe v Scales represents the current state of the law on this issue.  Champerty cannot be deployed as a defence to a stateable cause of action.  A successful defendant who can establish that the action was maintained by champerty has their remedy in tort against the tortfeasor.

 

The Misrepresentation/Fraud Argument

73.         This argument is addressed in detail by O'Moore J. in his judgment also delivered today, and with which I fully agree.  I can see no error in the conclusions of the High Court judge on this issue i.e., that the argument is predicated on the assumption that the respondent would, had the Contract not come to light in the course of these proceedings, have concealed it from the Costs Adjudicator.  The High Court judge quite rightly refused to entertain such a proposition.

74.         In the course of discussion with this Court about this argument, counsel submitted that it was inevitable (prior to the amendment of the Contract) that all bills submitted for adjudication by the respondent's solicitors would  be for amounts in excess of that for which the respondent could have any liability to his solicitors under clause 5.3 of the Contract, and that this would amount to a fraud.  Firstly, I would observe that while it is likely that in very many cases the bill sent for adjudication would be for a greater amount than the bill prepared pursuant to clause 5.3 of the Contract it does not follow that this would always be so.  To take one possible scenario, clause 5.3 of the Contract entitles the solicitors to charge a fee at the rate of 7% of the amount collected at the enforcement stage of the process.  It seems highly unlikely that a fee charged at this rate in cases of significant indebtedness would be approved at adjudication, and so it is equally unlikely that anything in excess of that amount would be claimed from the defaulting taxpayer.

75.         But even taking this argument at its height, such conduct could not possibly amount to a fraud or misrepresentation of any kind, unless the respondent concealed the Contract from the Costs Adjudicator, and I have already addressed that issue.  It amounts to no more than an argument that the respondent would not have been entitled to recover costs based on the larger bill, having regard to the Contract and also to the indemnity principle, as per McGarry v. Sligo County Council.  The appellants would have been entitled to make that argument to the Costs Adjudicator, had matters got to that point, and the respondent would have been entitled to argue to the contrary.  They clearly will not need to do so now, in light of the amendment agreement.

76.         The accusation of fraud or misrepresentation or however it is to be characterised was, in my view, entirely without foundation and is to be deprecated.  It should never have been made in the first place, never mind re-agitated before this Court on appeal.                                                               

                                                         

Conclusions

77.         In light of my conclusions above, it is unnecessary to address any of the remaining grounds of appeal.  For the reasons already discussed, I am satisfied that the costs provisions of the Contract relied upon by the appellants did not constitute maintenance and champerty, and that even if they did, that could not amount to a defence to the proceedings.  I am also satisfied that the costs arrangements between the respondent and his solicitors as embodied in the Contract could not possibly amount to a fraud or misrepresentation on the part of the respondent or his solicitors, and that those arguments must also be rejected.

78.         Since the respondent has been entirely successful in this appeal, as that term is used in s. 169 of the Legal Services Regulation Act, 2015, my preliminary view is that the respondent is entitled to an order for the costs incurred by him in resisting this appeal.  If the appellants wish to contend for a different order, they may do so by way of written submissions, not to exceed 1,500 words, to be filed within 14 days from the date of delivery of this judgment. In such event, the respondent shall file any replying submissions he may wish to make, also not to exceed 1,500 words, within a further 14 days.

79.         As this judgment is being delivered electronically, Whelan and O'Moore JJ. have authorised me to indicate their agreement with it.


Result:     Appeal dismissed.

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