High Court: Vulture fund fails to persuade court that it should depart from normal costs rule

A vulture fund must pay the costs of a debtor who was successful in overturning an order for possession in respect of his home in Clontarf.

The fund contended that the High Court should depart from the normal rule that costs follow the event, arguing that, inter alia, the debtor owed a significant sum of money to the fund and an order for costs against them would be unjust.

Making an order for costs in favour of the debtor, Mr Justice Garrett Simons said orders for costs were not intended to serve some wider distributive justice and that money would only cover the costs of the legal team in any event.

Procedural History

Tanager DAC is a secured creditor of Ronan Ryan, holding a charge over Mr Ryan’s interest in his family home in Clontarf, Dublin. In the Circuit Court in March 2019, Mr Ryan consented to the making of an order for possession in respect of his home, subject to a four month stay on execution.

Mr Ryan was supposed to have delivered up possession in July 2019; however, in June 2019, Mr Ryan obtained a protective certificate under the Personal Insolvency Act 2012. The protective certificate prevented Tanager from executing the order for possession, pending the outcome of an application for approval of a personal insolvency arrangement.

In the Circuit Court in July 2019, Tanager sought to have the protective certificate set aside, however, Judge Lambe refused to grant Tanager an order pursuant to section 97 of the Personal Insolvency Act 2012.

In the Circuit Court in August 2019, Tanager were successful before Judge Linnane, who made an order pursuant to s. 96(3) of the Personal Insolvency Act 2012 giving leave to Tanager to execute the March 2019 order for possession against Mr Ryan.

Order for possession not a bar to debt restructuring

In the High Court in October 2019, Mr Justice Simons delivered his judgment on the appeal brought by Mr Ryan against the August 2019 Circuit Court order.

Mr Justice Simons was satisfied that Mr Ryan met the criteria to make an application for a personal insolvency arrangement under section 91 of the Personal Insolvency Act and a protective certificate pending the outcome of this, and that the existence of an order for possession was not a bar to the restructuring of the debt.

The fact that Mr Ryan did not disclose the existence of the order for possession in his application for the protective certificate was an omission which was immaterial, and Mr Justice Simons said it would undermine the objective of expedition underlying the legislation “if creditors were, as a matter of routine, to make applications to set aside orders based on inaccuracies or omissions which are immaterial”.

In those circumstances, Mr Justice Simons set aside the August 2019 Circuit Court order.

Application to depart from

Notwithstanding that Tanager was unsuccessful in resisting Mr Ryan’s appeal to the High Court, Tanager submitted that the Court should make nor order as to costs and that each party should bear its own costs.

Tanager submitted that:

  1. The appeal represented a form of “test case” in that the principal judgment is the first judgment of the High Court interpreting section 96 of the Personal Insolvency Act 2012;
  2. The special costs rules under section 97 of the Personal Insolvency Act 2012 should be applied, by analogy, to an application under section 96;
  3. It would be unjust to make a costs order in favour of Mr Ryan in circumstances where it is common case that he owes a significant amount of money in mortgage arrears to Tanager;
  4. In exercising its discretion in relation to costs, the court should have cognisance of the fact that the principal judgment contains a finding that Mr Ryan breached his duty of disclosure under section 118;

Firstly, Mr Justice Simons said that section 96 of the Personal Insolvency Act 2012 was “neither ‘opaque’ nor ‘ill worked out’”, and there was no suggestion prior to the delivery of his principle judgment “that the interpretation of the section had given rise to doubt or concern in the practical operation of the legislation”. He said that Tanager’s “mistaken reliance on section 96 arose primarily as the result of an unwillingness on the part of Tanager to face up to the reality of the amended insolvency legislation”. Furthermore, considering Re Finnegan (A Debtor) (No. 2) [2019] IEHC 137, the absence of a public authority as a party to the proceedings applied “a fortiori to the present case”. Moreover, Mr Justice Simons said the commercial interest in the present proceedings meant that there was no requirement for “the ‘carrot’ of a special rule in relation to costs in order to cajole them into bringing the arguments before the court”. Considering all of the above, Mr Justice Simons concluded that there was no public interest element to justify departing from the normal rule that costs follow the event.

Secondly, Mr Justice Simons said that if the Oireachtas had intended for the normal rule in relation to legal costs to be disapplied under sections 96 and 97, it would have stated so. As such, he said the application under section 96 (which was the subject of the August 2019 order set aside in the High Court) was not subject to the special costs rule under section 97(4).

Dismissing Tanager’s third argument, Mr Justice Simons said that “the making of costs orders is not intended to serve any wider purpose of distributive justice” and emphasised that the proceeds of an order for costs would not accrue to Mr Ryan’s personal advantage – the money is paid to the solicitor and counsel acting on Mr Ryan’s behalf.

Finally, Mr Justice Simons said there was insufficient nexus between the breach of section 118 and the appeal proceedings to justify a departure from the ordinary costs rule.

© Irish Legal News Ltd 2021

Other judgments by Mr Justice Garrett Simons