High Court: Michael Flatley fails to convince High Court arbitration clause in insurance policy is ‘unfair term’

By Gillian O'Hanlon BL, case reporter

Delivering judgment for the High Court, Mr Justice Michael Twomey stated: “This court rejects Mr Flatley’s claim that Hiscox, in trying to get Mr Flatley to arbitrate, rather than litigate, its dispute with him, is seeking to ‘avoid their responsibility to [him]’. On the contrary, it seems to this court that it is Mr Flatley who is seeking to avoid his responsibility to Hiscox. This is because, in the plain English terms of the arbitration clause, he agreed to arbitrate any dispute he had with Hiscox. However, he is seeking to avoid his responsibility to Hiscox, by now seeking to litigate his dispute with Hiscox.”

Background

The plaintiff, a famous dancer and businessman, engaged AON plc to negotiate an insurance policy for his house at Castlehyde, Co Cork, on which he had spent around €29 million in renovations.

Pursuant to the terms of the insurance policy agreed with the sixth defendant, Hiscox Société Anonyme, the plaintiff was required to pay an annual premium of €69,285 and agreed that if a dispute over the policy arose, then any such dispute would be resolved by arbitration.

The plaintiff claimed under the policy in respect of allegedly defective works carried out on his Castlehyde property, which claim was disputed by Hiscox. The plaintiff issued proceedings in respect of the works, later joining Hiscox as a co-defendant. Hiscox applied to stay the proceedings and to refer the dispute to arbitration pursuant to the policy terms and Article 8(1) of the UNCITRAL Model Law.

The plaintiff claimed inter alia that in obtaining insurance cover for his Irish home, he was acting as a ‘consumer’ and asserted that the arbitration clause in the insurance policy was an ‘unfair term’ in a consumer contract as prohibited by the Consumer Rights Act 2022, as the clause did not make it clear that he would not have to bear his own costs of the arbitration.

That assertion was based on s.132(1) of the 2022 Act, which states inter alia that:

The High Court

Mr Justice Twomey observed that the thrust of the plaintiff’s claim was that the reference to the payment of his own costs in s.132(1)(e) meant that “for an arbitration clause in a consumer contract to be fair, the arbitration must never be at a cost to a consumer such as Mr Flatley. Thus Mr Flatley is claiming that he should never be liable for his own legal costs, and/or Hiscox’s legal costs, even if he were to lose the arbitration.”

The plaintiff having argued that Hiscox should have amended the arbitration clause following the 2022 Act to make it clear that he would not have to ‘bear his own costs’, the judge pointed out that “the real life effects” of that interpretation would mean that “a consumer could decide to institute baseless or groundless arbitration proceedings against a trader, and the trader would have to discharge the trader’s own legal costs for winning the arbitration, but also pay the consumer’s legal costs for bringing the baseless/groundless claim”.

Opining that such an interpretation would encourage lawyers to take “groundless and baseless” arbitration claims on the basis that they would always be paid for doing so, Mr Justice Twomey considered that the plain and literal meaning of s.132(1)(e) is that “a term in a consumer contract in relation to arbitration is unfair if that term provides that the consumer is required to pay his own costs” and thus had no application to the arbitration clause in circumstances where it made no reference to costs at all.

The court reiterated that “one cannot extrapolate from the wording of s. 132(1)(e), as Mr Flatley’s counsel has sought to do, a right of lawyers, to, in effect, be paid their legal costs for bringing unmeritorious arbitration claims, on behalf of consumers, against traders, who might be unfortunate enough to be wrongly pursued by those consumers”.

Turning to the plaintiff’s remaining arguments, Mr Justice Twomey reasoned that contrary to the plaintiff’s contention that the arbitration would not be governed by law contrary to s.132(1)(d) of the 2022 Act, the arbitration clause was one governed by the Arbitration Act 2010 and so was “governed by law” as per Marshall v Capital Holdings Ltd t/a Sunworld [2006] IEHC 27.

The court did not accept the plaintiff’s argument as to the “lack of transparency” of the arbitration clause as defined in s.134(2) of the 2022 Act, finding that “it must follow that a clause does not lack transparency if it fails to contain wording, which has been found to be based on a misinterpretation of the relevant legislation”.

In response to the plaintiff’s argument that he was not aware of the arbitration clause when he agreed to the policy and that AON had not brought it to his attention, Mr Justice Twomey stated that “there is no evidence that Mr Flatley’s agent, AON, was not aware of the arbitration clause before Mr Flatley agreed to the policy. Mr Flatley must be deemed to be aware of that which his agent is aware. Accordingly, Mr Flatley’s claim that he was personally not aware of the arbitration clause does not, in this court’s view, get him anywhere.”

The court also rejected the argument that Hiscox’s decision to terminate the policy before its expiry date amounted to “bad faith” by reference to s.130(1) of the 2022 Act, such as to render the arbitration clause unfair. Mr Justice Twomey made it clear that “the termination of a contract does not impact on whether a consumer contract contains an unfair term or not. The arbitration clause is either an unfair term or it is not an unfair term, and a decision by Hiscox to terminate the policy has no impact on whether it is unfair. Hence this alleged lack of good faith on the part of Hiscox in terminating the policy, has no bearing on whether the terms of the policy are unfair…”

The court concluded that the substance of the dispute was whether certain matters were covered by the insurance policy and whether Hiscox was liable, and so fell within the terms of the arbitration clause.

Conclusion

Accordingly, the High Court made orders referring the matter to arbitration.

Michael Flatley v Austin Newport Group Limited & Ors [2024] IEHC 359

Killian Flood: Government delay to civil justice reform speaks to a wider indifference to the court system

By Killian Flood BL

In May 2022, the Department of Justice published the Implementation Plan on Civil Justice Efficiencies and Reform Measures, a document borne out of the recommendations made by Mr Justice Peter Kelly in his 2020 report on the administration of civil justice. The plan included a wide range of reforms to civil procedure, including extensive changes to the Rules of Court designed to reduce delay and costs in proceedings.

The procedural reforms contained in the implementation plan included expanding the use of case management, limiting the number of adjournments available to parties, providing for automatic discontinuance of proceedings and standardising court forms across the various jurisdictions. However, many reforms also targeted specific practice areas, such as requiring plaintiffs in personal injuries actions to clearly distinguish between pre-existing injuries and those the subject of the claim.

Many of the reforms to court procedure required legislation and, quite appropriately, the Department set out a timeline in the implementation plan for this legislation to be enacted. By their own schedule, the Department was to have a court reform bill drafted in 2022, which was to be enacted in the first half of 2023.

Fast forward to June 2024 and the reform bill has not been drafted. Worse still, the legislation is not on the government’s programme for priority drafting in Spring 2024. As such, it appears that legislative reform to court procedures has been put on the backburners as the present government enters its final year before the next general election.

A frustrating development

The delay to procedural reform is a frustrating development because these reforms are vital to the proper administration of justice. To take one example, the implementation plan includes reforming the law on lis pendens. Very often, a borrower seeking to delay or halt a land sale by a bank or receiver will issue frivolous proceedings against the bank and register a lis pendens (literally “litigation pending”) over the property with the Land Registry. Would-be buyers are notified that there is pending litigation regarding the property and, typically, they are scared off, reducing the value of the property and preventing a sale.

The only way to remove the lis pendens is for the bank to bring an application to court, usually the High Court. Obviously, this is tremendously costly and, moreover, it can take months or years for a case to progress if the application is contested. Such cases are obviously an abuse of process, but it is an abuse of process that is facilitated by the Rules of Court, given how easy it is to register a lis pendens and how hard it is to remove it.

The implementation plan would reform the law by limiting the registration of lis pendens to 28 days and providing that the time limit could only be extended if the registrant brought an application on notice to the bank. Accordingly, the burden of proof would shift onto the registrant to establish that it was appropriate for the lis pendens to be registered. Failure to do so would result in the lis pendens being vacated in early course.

This is the kind of valuable reform that is lost due to government inaction, which is particularly ironic as the reforms are described as “facilitating easier, cheaper and quicker access to civil justice”. While there is no doubt that the reforms are significant and require careful legal drafting, we should also be much further along in the legislative process. What was the point of commissioning the Kelly Report if action was not going to be taken?

A wider indifference

Moreover, the failure to implement the civil justice reforms speaks to a wider indifference that successive governments have shown to the legal system as a whole. It took industrial action before the government reversed FEMPI-era cuts to criminal barristers, and even now the 10 per cent increase in fees does little to undo the damage of a decade of underfunded criminal justice.

Greater resourcing of the judiciary has been needed for some time. Successive presidents of the High Court have decried the lack of judges, and while the government has recently expanded the judiciary, many more judges are needed in the Circuit and District Courts. For example, the Circuit Court in Bray (hardly a backwater town) has only four weeks of civil court sittings in 2024, leading to massive backlogs in the system. The rest of the legal diary is primarily taken up by criminal cases, as family cases only get five weeks during the year.

It is utterly unsustainable to have such limited time available to civil cases, which vary widely from personal injuries to possession to licensing disputes. No amount of reform to procedure can make up for the fact that there is simply not enough judicial time for cases to be heard.

Back in Dublin, many courts in the Four Courts are in dire need of renovation. Ugly IT systems are haphazardly slapped onto creaking furniture that might have been fashioned a century ago. Paint is peeling off the walls in places, while makeshift courtrooms in Áras Uí Dhálaigh are insultingly tight for space. Many courtrooms more closely resemble a decaying 1970s office than a modern, functional seat of justice.

Although such work is technically the responsibility of the Courts Service, government policy plays a role in determining where the money goes. I’m not asking for marbled floors and gilded skirting boards — just benches that don’t resemble historic church pews. Surely these kinds of renovations do not form part of the Courts Service’s 10-year modernisation programme, which has so far focused on digital innovations to the court system.

Judges and court staff are working on top of one another in the Four Courts, while the new family and Supreme Court complex has been delayed for close to a decade. The latest word is that development will break ground on the Hammond Lane site in 2026, some six years after it was supposed to be completed.

Taking everything into account, it is safe to say that the civil justice system works in spite of government assistance. For too long, the smooth operation of the courts has been dependent on lawyers, judges and court staff doing the best with what they’ve been given and making the system work.

Improving the administration of justice starts with political will and funding. Budget 2024 provided €183 million to the Courts Service, although a breakdown of where this money is being spent is hard to find.

This government has talked a good game as it relates to reforming civil procedure. As it enters its final year, it remains to be seen when reform will come, if at all.

2024 Dye & Durham Irish Law Awards winners announced

The annual event aims to identify, honour, and publicise outstanding achievements, while also recognising those who have dedicated their lives to serving in the legal profession.

Among many other winners on the night, the regional awards for Law Firm of the Year, sponsored by Dye & Durham, went to Alistair Purdy & Co for Connacht/Ulster, Dentons for Dublin, McCarthy + Co Solicitors LLP for Munster and Susan Webster & Company for Leinster.

The overall award for Law Firm of the Year was ultimately presented to McCarthy + Co Solicitors LLP.

Special merit awards were presented to Áine Hynes SC and Darren Lalor BL, and the lifetime achievement award was presented to retired High Court judge Mr Justice Michael White.

The full list of winners can be found on the awards website.

Meta delays AI training roll-out in Europe following Irish regulator intervention

The social media giant said last Monday that its generative AI features need to be trained on European data to reflect “the diverse languages, geography and cultural references of the people in Europe who will use them”.

The data in question would include “information that people over 18 in Europe have chosen to share publicly on Meta’s products and services, such as public posts, public comments, or public photos and their captions”.

Meta also said it was already “in consultation with our lead privacy regulator in the EU, the Irish Data Protection Commission, and have incorporated their feedback to date to ensure that the way we train AI at Meta complies with EU privacy laws”.

However, the DPC subsequently asked Meta to hold off pending further engagement.

In a statement published Friday, the DPC said: “The DPC welcomes the decision by Meta to pause its plans to train its large language model using public content shared by adults on Facebook and Instagram across the EU/EEA.

“This decision followed intensive engagement between the DPC and Meta. The DPC, in co-operation with its fellow EU data protection authorities, will continue to engage with Meta on this issue.”

Meta agreed but said it was “disappointed by the request… particularly since we incorporated regulatory feedback and the European DPAs have been informed since March”.

“This is a step backwards for European innovation, competition in AI development and further delays bringing the benefits of AI to people in Europe,” it said in a statement.

“We remain highly confident that our approach complies with European laws and regulations. AI training is not unique to our services, and we’re more transparent than many of our industry counterparts.

“We are committed to bringing Meta AI, along with the models that power it, to more people around the world, including in Europe. But, put simply, without including local information we’d only be able to offer people a second-rate experience. This means we aren’t able to launch Meta AI in Europe at the moment.

“We will continue to work collaboratively with the DPC so that people in Europe have access to — and are properly served by — the same level of AI innovation as the rest of the world.

“This delay will also enable us to address specific requests we have received from the Information Commissioner’s Office (ICO), our UK regulator, ahead of starting the training.”

Browne Jacobson reports double-digit turnover boost to £118m

The firm, which opened a Dublin office in 2022, has more than doubled its turnover in the past decade, from £50 million in 2014.

William Darmody was recently appointed as partner and head of the firm’s Irish corporate team.

Richard Medd, managing partner at Browne Jacobson, said: “I’m so proud to announce yet another set of impressive financial results for the firm, which show us continuing a powerful growth trajectory.

“That success is built on progress across all of our offices and sectors, and rewards our continued commitment to our balanced practice supporting business and society. It also allows us to invest even more in our people, technology and processes to ensure we can continue to delight clients and support them in their biggest challenges.”

He added: “Our geographic footprint also continues to expand with a new office in Cardiff and the first full year of trading for our Dublin office, which extends our reach into the EU.

“We also have plans to significantly increase our headcount in key growth markets across the UK and Ireland office network over the next few years, and will continue to explore options to grow our talent base and client offer.

“Since becoming managing partner four years ago, I have seen the firm go from strength to strength during an unprecedented period of change. Completing another exciting year with further growth puts us in an even stronger position to deliver for our clients, provide great opportunities to our people and ensure we remain at the forefront of society’s biggest issues.”

Immigration permission registrations and renewals to be civilianised in Cork and Limerick

From 8 July 2024, the registration office of the immigration service delivery (ISD) of the Department of Justice will have responsibility for first-time registrations and renewals for non-EU/EEA/UK/Swiss nationals residing in the two counties.

Following the transfer, around 80 per cent of all national registrations and renewals will have transferred from An Garda Síochána to the Department of Justice.

The civilianisation of the immigration residence permission registration process was recommended by the Commission on the Future of Policing in Ireland in 2018.

In 2023, there were some 10,000 first registrations and 22,000 renewals of permission carried out by gardaí in Cork and Limerick.

From 8 July 2024, first-time registrations for applicants residing in Cork and Limerick will be required to register their immigration permission at the registration office located at 13-14 Burgh Quay, Dublin 2. Appointments can be booked by phone to 1800 800 630 between 9am and 5pm from Monday to Friday.

Applicants residing in Cork and Limerick will be able to renew their immigration permissions online from 8 July 2024 and will not need to attend the Burgh Quay registration office or their local Garda station in person.

Justiec minister Helen McEntee said: “I am committed to pursuing all opportunities to civilianise administrative functions within An Garda Síochána, in line with the recommendation contained in the Commission on the Future of Policing in Ireland report.

“Nationwide, over 100 gardaí have been assigned to immigration duties, including registration. Civilianising registration functions releases valuable garda hours to focus on operational and enforcement matters, such as deportations and investigations.

“The transfer of registration functions for counties Cork and Limerick represents an important step forward in this effort.

“My Department is working to modernise its immigration processes and provide more efficient services for customers.

“Individuals in Cork and Limerick will now be able to renew their immigration permissions online, thereby removing the requirement for customers in these counties to attend in person appointments.”

The Department of Justice said it anticipates that the nationwide transfer of registration functions “can be substantively completed by early 2025”.

IPLS director recognised in King’s birthday honours

Professor Barbara Jemphrey has been named Member of the Order of the British Empire (MBE) for services to education.

She joined the IPLS in 2001 after 12 years working as a solicitor, both in a private practice and in-house. She was appointed as a senior lecturer in 2007 and then as director in June 2019.

Queen’s vice-chancellor Professor Sir Ian Greer said: “I would like to offer my congratulations to the Queen’s staff and those in our wider university community who have been recognised in this year’s birthday honours — this is a testament to their hard work and dedication in their respective fields.

“These colleagues are helping to shape a better world by driving forward our university’s work in changing lives for the better by providing educational opportunities, driving prosperity, and finding solutions to the many major and existential challenges facing our communities and the wider world since 1845.”

McGrath Mullan certified by Great Place to Work Institute

The firm has been awarded certification by the Great Place to Work Institute because of its commitment to fostering a supportive, inclusive and empowering work environment.

“Our certification reflects the positive experiences and feedback of our team members, and we could not be prouder,” the firm said in a statement.

Founded in 1999, McGrath Mullan LLP has a team of nine solicitors specialising in areas including immigration law, personal injury, commercial property, family law and probate.

England: Legal aid lawyers take lord chancellor to court

The case before the High Court in London revolves around access to legal aid for immigration and asylum lawyers and is being brought by Duncan Lewis solicitors.

Mr Chalk, the Lord Chancellor, is accused of failing or refusing to raise rates for what is called “controlled work” — legal aid work in the immigration and asylum field.

Demand for this kind of work outstrips supply, with thousands of people unable to access legal aid. Lawyers and NGOs said that the UK government is fully aware of the problem as it has provided evidence in response to consultations in which it has stated that there are “devastating consequences” of inadequate legal aid.

Jeremy Bloom, of Duncan Lewis solicitors, said: “It is heartbreaking for us, but over the last five years we have had to make massive reductions in the number of legal aid asylum claims and appeals that we take on.

“Legal aid will never be wildly profitable, and that’s OK. But providers of legal aid cannot continue taking on work that causes financial losses. It is not sustainable, and the losers are the people who need representation.”

Nick Emmerson, president of the Law Society of England and Wales, said: “The civil justice system is in a precarious state and ultimately the ones who will suffer are those trying to seek justice.”

Honduras: Government to build ‘mega-prison’ to deal with gangs

President Xiomara Castro announced the new project along with other emergency measures such as giving the military a greater role in tackling organised crime and prosecuting drug traffickers as terrorists.

The 20,000-capacity prison will be built in the country’s eastern province of Olancho.

President Castro’s policies are seen as a stark U-turn — the left-winger formerly had a more progressive stance on crime. But her administration is now asking the country’s congress to amend the penal code so that the authorities can detain suspected gang leaders without having to file charges or carry out mass trials.

In El Salvador, the government has had success in defeating the gangs which once controlled large parts of the country. In the past two years around 70,000 people, or two per cent of the adult population, have been jailed there. Most of those imprisoned were suspected of gang membership.

And finally… green light

Tens of thousands of England supporters descended on Gelsenkirchen for their team’s opening match against Serbia yesterday, which England won 1-nil.

Ahead of the match, a spokesperson for Gelsenkirchen Police said: “It’s no problem for fans to smoke cannabis on the street.

“If we see a group of people drinking alcohol and looking a bit aggressive, and another group smoking cannabis, of course we’ll look at the group drinking alcohol.

“Drinking alcohol can make someone more aggressive, and smoking cannabis puts people in a chill mood. We want to prevent violence and keep people safe.

“Our focus will be on fans who are drinking and potentially getting violent — that’s why we in place safety precautions on alcohol.”

Riot police ultimately did have to intervene in scuffles before and after the match, with one England fan and seven Serbia fans reportedly facing criminal charges.

Germany recently became the first major European country to legalise cannabis for personal recreational use.