The Supreme Court Judgment
Hogan J, giving judgment for the Supreme Court, upheld the judgments of the High Court and the Court of Appeal albeit on different grounds. Hogan J held that the conditional uplift arrangements were not champertous in light of section 149(1) of the Legal Services Regulation Act 2015, which provided:-
“149. (1) A legal practitioner shall not charge any amount in respect of legal costs if—
(a) they are legal costs in connection with contentious business expressed as a specified percentage or proportion of any damages (or other moneys) that may be or become payable to his or her client, other than in relation to a matter seeking only to recover a debt or liquidated demand…”,
Section 149(1) effectively restated in statutory form the general prohibition of champerty as it prevented a solicitor from charging a percentage fee of damages or other moneys recovered on behalf of a client, other than where the claim was for a debt or liquidated sum. Hogan J. further stated, but for the intervention of section 149 (and its statutory predecessor, section 68 of the Solicitors (Amendment) Act 1994), such an arrangement in debt or liquidated damages claims would have been unlawful at common law.
It is important to note, the Supreme Court expressly recognised a party is entitled to raise champerty as a defence in proceedings. The prevailing legal position required a party to initiate separate proceedings against the allegedly champertous party.
No Foal No Fee
Although strictly obiter as Revenue indicated that they were not relying on the clause in question as the basis for its claim in costs, the Court considered the legality of “no foal no fee” arrangements generally under Irish law.
The review conducted by Hogan J. of the authorities in Ireland and in England and Wales revealed the variety of arrangements that can properly be described as “no foal no fee”. Whilst no foal no fee arrangements most commonly arise in cases where a solicitor agrees not to charge any fee save to the extent that his or her client obtains an order for costs against another party who is a mark for costs, they also extend to other arrangements, including where a firm charges an enhanced fee (the present Howley case), a reduced fee (Aratra Potato Co Ltd), or where a firm agrees to either be renumerated out of the monies recovered in the case or not at all (McHugh v. Keane). The characteristic in common is that fees depend upon the occurrence of a future event. However, they are to be distinguished from a contingency fee or a conditional uplift fee in which that future event is an award of damages and the fees are calculated as a percentage or portion of that award.
Hogan J, having carefully analysed the prevailing view at common law both in Ireland and in England and Wales, concluded that “no foal no fee” arrangements were not unlawful in Irish law. In doing so, the Court distinguished the Irish position from an important line of authority in England and Wales that had concluded such arrangements were unlawful. Hogan J observed:
“In Ireland, the law relating to maintenance and champerty must be applied having regard to constitutional principles, including, in particular, the right of access to the courts. In that context, a practice which has become embedded in the administration of justice, and which operates to facilitate such access, should not be declared unlawful save on compelling grounds.”
Hogan J. also acknowledged the force of the arguments of the appellant that no foal no fee arrangements did not reflect the indemnity principle. The indemnity principle, described as the basis of party and party costs, provides, in essence, that a successful party cannot recover sums from an unsuccessful party on taxation that it was not under any legal liability to discharge. Hogan J. concluded the indemnity principle was not absolute and must yield to the practical operation of a no foal no fee system in this jurisdiction.
Summary
The following points are of critical importance:-
1. It is only lawful for solicitors to charge fees contingent on the sums actually recovered by their clients in claims for debts or liquidated sums, by virtue of section 149(1) of the Legal Services Regulation Act 2015.
2. Champerty can be raised as a defence to proceedings in the Irish Courts.
3. Although the conclusion on this point is obiter, the Supreme Court considered “no foal no fee” arrangements are not unlawful at common law in Ireland.
4. “No foal no fee” arrangements are not confined to situations where a solicitor agrees not to charge any fee save to the extent that the client obtains an order for costs against another party who is a mark for costs, but also apply to the charging of enhanced fees or reduced fees. The Supreme Court concluded that the indemnity principle was not absolute and must yield to the practical application of “no foal no fee” arrangements.
