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THE HIGH COURT
[2025] IEHC 235
[Record No. 2024/157 COS]
IN THE MATTER OF
SK FISHING LIMITED
AND
IN THE MATTER OF
THE COMPANIES ACT, 2014
JUDGMENT of Mr Justice Liam Kennedy delivered on 15 May 2025.
Introduction
1. This judgment concerns the costs of a motion to stay winding up proceedings pending the arbitration of disputes between these (and possibly related) parties. Such applications are generally straightforward, as are the associated cost orders. However, this scenario is more complex and both parties sought costs. It is necessary to explore the background.
2. A textbook example might involve two parties to an arbitration clause in a contract being required to submit issues to arbitration. The Courts will give effect to such commitments pursuant to the Arbitration Act 2010 ("the 2010 Act"), which incorporates the UNCITRAL Model Law ("the Model Law"). However, this was not a typical case in which one party had issued proceedings without regard to an arbitration clause. The stay was sought in Companies Act winding up proceedings and the company was not a party to the arbitration clause, although its principals were parties to the winding up proceedings and the issues in the proceedings were related to the issues encompassed by the clause. The complicated relationships had spawned interrelated proceedings, namely: (a) these proceedings (seeking the winding up of a company established by the principals to the agreement containing the arbitration clause); (b) plenary proceedings (for the dissolution of a partnership between the same parties); (c) arbitration proceedings commenced by the Applicant by notice of arbitration dated 10 October 2024. The Applicant sought to stay the winding up proceedings pending resolution of the arbitration. The reliefs sought were an order pursuant to Article 8(1) of the Model Law, as incorporated by s.6 of the 2010 Act, referring the dispute to arbitration and an order staying these proceedings under the Court's inherent jurisdiction.
The parties and entities
3. The original parties agreed to carry on business together and their agreement included an arbitration clause. However, the structure evolved, complication the application of the clause. In practice, three entities were introduced to the parties' joint operations - the company which is the subject of these proceedings, the partnership which is the subject of the dissolution proceedings and another related company, Ronieran Ltd.
4. Furthermore, after the death of one of the principals in February 2021, his widow/executrix effectively became his successor and stepped into his shoes in the business either under the original agreement or on the basis of a new partnership on identical terms, including as to arbitration ("the Respondent/Petitioner"). Neither party suggested that anything turned on whether she was bound by the original agreement or by a subsequent one on identical terms - it was agreed that either way the arbitration clause would apply. For the sake of simplicity, when I refer to the principals, I am, where the context requires, including the Respondent/Petitioner as party in her own right and as her late husband's representative.
The Joint enterprise
5. The original principals agreed to carry on business together as commercial fishermen, making a substantial investment in a vessel and the enterprise operated since 13 September 2010. Their agreement contained the broad arbitration clause invoked by the Applicant.
6. Disputes have arisen, which this judgment need not examine. Suffice to note that both sides have exchanged allegations as to the other's conduct of the business, including the management of its affairs, funds and finances. The Respondent/Petitioner issued these proceedings on 28 June 2024 seeking the winding up of the company and issued the partnership proceedings four days later.
7. If litigation is commenced relating to a dispute governed by an arbitration agreement, Article 8 of the Model law entitles the defendant to seek a stay pending arbitration (provided that they have not already submitted their first statement on the substance of the dispute before seeking ). However, matters were complicated because the Applicant had, according to the Respondent Petitioner, not only delayed but has submitted his first statement on the substance of the dispute , thereby waiving any entitlement to seek such a stay. The involvement of the two companies and the partnership further complicated matters because those entities were not parties to the arbitration clause, although their principals were. The Applicant argued that the entities were owned and operated by the principals as part of a joint enterprise and the issues in respect of the entities, including the issues arising in these proceedings, were part of the joint enterprise and thus governed by the arbitration clause. Accordingly, these proceeding should be stayed pending the arbitration.
The Arbitration Clause
8. The agreement between the original principals - the cooperation agreement - ("the Agreement") provided for the acquisition of a vessel and the sharing of income and expenditure. The arbitration clause stipulated that:
"All disputes which arise between the parties in connection with this agreement, or the subject matter in this agreement, shall be decided by an arbitrator".
The Referral to Application
9. The Applicant's 10 October 2024 referral to arbitration:
a. Was headed:
"(1) Winding Up Petition in respect of SK Fishing Limited (the 'Company') Record No. 2024/157 COS ('the Winding-Up Proceedings')
(2) Dissolution of Partnership Record No. 2024/3412 ('the Partnership Proceedings')."
b. stated that the Applicant thereby referred to arbitration
"the disputes between our respective clients in relation to winding up of the partnership and the sale and distribution of the partnership assets including, but not limited to:
(i) A claim for damages for breach of fiduciary duty by Ms Joyce for her failure to renew the licence on the MFV Fertile;
(ii) An account of the sums due to Mr Murphy and/or Ronieran Limited in relation to costs incurred and work done in respect of partnership assets;
(iii) The determination of whether either party has wrongfully withdrawn funds from the partnership assets;
(iv) The determination as to whether a new partnership as entered into between Mr Murphy and Ms Joyce after the death of Mr Joyce;
(v) The determination of whether any of the partnership assets can be distributed to the partners in specie;
(vi) the determination of the proper mode of winding up of SK Fishing Ltd; and the determination of the amounts to be distributed to each partner following the final winding up of SK Fishing Limited and the partnership.
(vii) The determination of the amounts to be distributed to each partner following the final winding up of the SK Fishing Ltd and the partnership."
Accordingly, in commencing arbitral proceedings, the Applicant appeared to be seeking to ensure that any such proceedings would encompass the issues in these winding up proceeding and those in the partnership dissolution proceedings.
Proposal to stay these proceedings pending arbitration
10. On 10 October 2024, four months after the institution of these proceedings, the Applicant's solicitor wrote to the Respondent/Petitioner 's solicitors informing them of the referral to arbitration of the dispute between their clients "'in relation to the winding up of the partnership and the sale and distribution of the partnership assets". The Applicant then arranged for the appointment of an arbitrator in accordance with the clause.
Applicant's basis for seeking a stay
11. The Applicant's affidavit stated that;
"The Company's purpose is to defray the costs incurred in the fishing enterprise and its income is derived exclusively from the share of the cash that it is entitled to receive under the Co-Ownership Agreement. Although it is not a party to that agreement, it has been receiving its share in respect thereof since 2010. Furthermore, the only directors and shareholders of the Company are parties to the Co-Ownership Agreement.
... the dispute arising in respect of the Company are referrable to the operation of the Co-Ownership agreement. I also believe that, despite the Petitioner's view to the contrary, a liquidator appointed by this Honourable Court would not in any event have the power to determine the matters in dispute between the parties.
... the appointment of a liquidator the Company would result in incurring significant and unnecessary costs and time to resolve a dispute which arises primarily from the operation of the Co-Ownership Agreement, and is required to be resolved pursuant to the terms of that agreement.
...referral to arbitration of the matters outlined in the notice of arbitration will resolve the issues in dispute between the parties. Once a dispute is resolved, the only issue remaining will be the distribution of the monies held by the Company in accordance with the outcome of the resolution of the dispute. Therefore, it will in those circumstances be entirely unnecessary for the Company to be wound up pursuant to an Order of this Honourable Court. Instead, the dissolution of the Company can be affected by a voluntary strike off or a simple members voluntary liquidation.
Conclusion
... the Petitioner's proposed winding up of the Company by Court Liquidation has and will incur unnecessary costs and Court time to resolve the matters in dispute between the parties which can be determined by arbitration."
The Respondent Petitioner's response to the stay application
12. Although the Respondent/Petitioner did not file a replying affidavit, there was no objection to its reliance on the position as set out in the inter partes correspondence. By letter dated 8 January 2025, its solicitors informed the arbitrator that their client was contesting the referral and noted that this motion was pending, i.e. the Applicant's motion to stay the winding up proceedings pending the outcome of the arbitration. They suggested that a proposed preliminary meeting should be deferred until the High Court had determined the stay issue.
13. By letter dated 10 January 2025 the Applicant's solicitors replied that no such postponement was required "pending the resolution of the winding up" because:
"the question of whether a winding up order has been made in respect of the company is not relevant to the determination of the matters referred to arbitration."
14. The Respondent/Petitioner's solicitor's response dated 16 January 2025:
a. expressed their client's
"real concern that our respective clients could embark on the arbitration only to conclude - because the particular circumstances and issues as to the scope of the arbitration to which they give rise - that the arbitration was unable to determine the disputes arising, so that they would both have gone to substantial trouble and cost for little or no benefit by way of resolve disputes."
b. sought clarification in relation to the referral to arbitration with a view to unnecessary and wasteful disputes and costs as to the scope of the arbitration.
c. noted that the Applicant's 10 January 2024 letter suggested that the arbitration could proceed before the application to the High Court for a stay had been determined suggesting that:
" you see no overlap between the winding up petition proceedings and the matters referred to arbitration (though it seems that there must be overlap in relation to the matters at paragraph (iii), (v) and (vi) of your referral. If however you see overlap, then we ask why your client has sought a stay from the High Court by reference to your client's referral to arbitration...".
d. stated that the Applicant was not entitled to seek a mandatory stay pursuant to Article 8(1) since the referral followed the submission of his first statement on the substance of the matters before the court in the winding up proceedings and because the High Court had exclusive jurisdiction to wind up the company.
e. suggested that if, as they believed to be the case, there was an overlap, it was preferable to deal with the stay application before the arbitration proceeded.
f. sought clarification of the referral's reference to an issue as to whether either party wrongfully withdrew funds from partnership assets, asking whether this included the company's assets or shares.
g. noted that the Respondent/Petitioner's allegations included the Applicant's alleged withdrawals from the company (rather than from the partnership) so, absent leave of the court for derivative action proceedings, such claims needed to be made by the company rather than by its shareholders.
h. asked whether it was intended that the arbitration should deal with such claims by the company against either principal, in which case confirmation was sought that the Applicant would not defend those allegations on the basis that the company (rather than the Respondent Petitioner) was the proper claimant
i. queried whether the company was alleged to be party to the arbitration agreement and sought clarification as to whether, if those claims were to be included in the arbitration they would be addressed as derivative claims by either party on behalf of the company.
j. pointed out that it would also be preferable if any arbitration could encompass the issues in the plenary proceedings and proposed that the parties should agree a formal submission to arbitration.
15. The Applicant's solicitors' response:
a. stated that
"4. The partnership was partly operated through companies, both as SK Fishing Ltd. and Ronieran Ltd.. There are no members or directors of the two companies who were not parties to the arbitration. The arbitration agreement is broad enough to encompass disputes 'in connection with [the partnership agreement] and the subject matter in' that agreement. On that basis, we are of the view that the parties should be free to advance claims on behalf of the companies. This is on the understanding that any costs orders in relation to unsuccessful claims by either company are to be made against the party advancing the unsuccessful claim.
5. If a claim on behalf of a company is successful, the award is to be in favour of the company, not the individual party".
b. agreed that the matters the subject of the plenary proceeding should be brought into the arbitration and proposed that the scope of the arbitration be set out in detail in points of claim/counterclaim and in the defences.
Agreed Submission to Arbitration
16. Ultimately the parties agreed a formal submission (which incorporated, went beyond and superseded the original arbitration clause) as follows:
a. The parties to the submission included both companies and their principals, the parties to this motion. The Respondent/Petitioner was a party both in her own right and as her late husband's executrix .
b. The recitals referred to the original reference to arbitration, stating that:
"The parties have agreed to expand the scope of that arbitration and have entered into this Agreement for that purpose and to give the appointed arbitrator ... jurisdiction to hear and determine that wider arbitration, and to make provision generally for the expanded arbitration."
c. The first clause stated that:
"The Arbitrator shall have jurisdiction to hear and determine any and all disputes, questions and differences arising between or among [the Applicant, the Respondent/Petitioner, her husband's estate and the two companies], out of or in connection with any of the Vessel, the ownership, operation, maintenance, or repair of the Vessel; the licence, tonnage and wattage associated with the Vessel, the fishing business carried on using the Vessel (irrespective of by whom or what partnership), the catches of the Vessel and the proceeds of sale thereof; the Company, and its property, income and outgoings..."
d. The submission stipulated that the arbitration issues included:
(a) the matters originally referred to arbitration by the Applicant (and it replicated the detail of the latter's original submission);
(b) the claim for relief which was the subject of the plenary proceedings seeking dissolution of the partnership and the taking of accounts;
(c) & (d) any claim by the Respondent/Petitioner, her husband's estate, or the company against the Applicant or Ronieran Ltd. in connection with relevant matters or vice versa; and
(e) any claim by the company against the Respondent/Petitioner or her husband's estate in connection with any relevant matter.
e. specified that the companies' claims would be brought by way of derivative actions and provided for the costs of such claims
f. allowed for the arbitration of claims for monies allegedly wrongfully paid to either principal's family on the basis that any such money would be recoverable from the relevant principal
g. provided for the staying of the winding up petition pending the arbitration following which either principal could present the award to the High Court and seek the determination of the winding up proceeding on the basis of the award.
The Applicant's submission
17. The Applicant argued that it had been substantially successful in its application for a stay and was entitled to his costs pursuant to s.169 of the Legal Services Regulation Act 2015. Alternatively, if the application was rendered moot by the revised submission to arbitration, he was entitled to costs according to the principles laid down in the Court of Appeal's decision in Hughes v Revenue Commissioners & Anor [2023] 3 IR 393 ("Hughes") as the Respondent/Petitioner's agreement to a stay on the basis of the agreed submission to arbitration was a unilateral act on his part.
Respondent/Petitioner's submission
18. By contrast the Respondent/Petitioner argued that she was entitled to her costs. She said that the original application was doomed as the Applicant submitted their first statement on the substance of the dispute before seeking arbitration and therefore was not entitled to seek a referral pursuant to Article 8 of the Model Law. Furthermore, the arbitration clause and the original arbitration referral could never have encompassed the Companies Act issues which arose in these winding up proceedings. What was ultimately agreed was fundamentally different to what was proposed in the original referral to arbitration which grounded the motion.
The Law
19. The following provisions of the 2010 Act are relevant:
(a) Section 6 states that:
"Subject to this Act, the Model Law shall have the force of law in the State and shall apply to arbitrations under arbitration agreements concerning—
(a) international commercial arbitrations, or
(b) arbitrations which are not international commercial arbitrations."
(b) Article 8(1) of the Model Law, incorporated by s.6 the 2010 Act provides as follows:
"Article 8. Arbitration agreement and substantive claim before court
(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed." (emphasis added)
20. As Dowling-Hussey et al notes at [7-55] of Arbitration Law (3rd ed., 2018), that
"Case law from the jurisdictions that apply the Model Law shows that the wording 'statement on the substance of the dispute' in art.8 of the Model Law has been, and will be, interpreted narrowly. It is clear from the text of art.8 that a party will not necessarily be barred from seeking a referral of the action to arbitration if it takes a step in the court proceedings without invoking the arbitration agreement. It is only where that step amounts to a submission of a statement on the substance of the dispute that that party will lose its right to referral of the dispute to arbitration under art.8 of the Model Law."
21. Under the Arbitration Act 1980 the right to seek a stay pending an arbitration was required to be exercised by the party seeking the stay "after an appearance has been entered, and before delivering any pleadings or taking any other steps in the proceedings". However, since the 2010 Act, the statutory test for whether the (automatic) right to a stay is lost is whether the Applicant has submitted a statement on the substance of the dispute. It is not necessary for present purposes for me to consider the extent to which the Court retains a power to stay proceedings pursuant to its inherent jurisdiction.
22. Both parties agreed that the Court of Appeal decision in Hughes, sets out the principles applicable to the costs of proceedings which have become moot. In brief, Mr Hughes had sought judicial review to require the respondent to make certain appointments pursuant to a collective agreement. In the course of, and arguably in response to, those proceedings but also following the recommendation of an industrial relations adjudicator, the respondent proposed (and the Applicant and other parties ultimately agreed) a new collective agreement, superseding the original proceedings and rendering them moot. Murray J noted in his judgment's opening paragraph, the issue as to how costs should be awarded where mootness arises:
"not as a result of either the 'external events' or 'unilateral action' identified in the relevant judgments, but instead where the parties effectively compromise the case as between themselves but do not make provision for costs ...".
23. In Hughes, shortly before the judicial review came on for hearing, the respondent:
"determined to take steps the effect of which was to both grant the applicant part of the relief he sought in the proceedings and at the same time to dissolve the legal basis on which he had sought that relief. For reasons more fully explained later, it was necessary for the applicant to agree to this course of action before it could be implemented. The applicant did so agree. In that way, the specific concern that motivated him to bring this case was addressed to his satisfaction and the parties have each adopted the position that the proceedings have thus been rendered moot. However, the parties could not agree how the costs would be borne".
24. The High Court made no order for costs. As Murray J noted at paras. 24 - 25, the High Court concluded that:
"...The cause of the mootness was not, strictly speaking, either the unilateral act of one of the parties or an underlying change of circumstance. The catalyst which gave rise to the result, however, was a factor outside the control of the parties.'
[25] The 'catalyst' to which the Court was referring here was the decision of the Adjudicator. Essentially, according to the first named respondent's submissions (but not its evidence) the Adjudicator's finding presented a model as to how a compromise might be fashioned in such matters which prompted the first respondent and Forsa to find a new modus vivendi ..."
25. Murray J noted at para. 28 the very particular issues presented by issues around the allocation of the costs of moot proceedings:
"A determination or concession of mootness may render the investment the parties have made in the commencement, preparation of or (depending on the point in time at which the action becomes moot) participation in the trial and prosecution of the appeal of legal proceedings, futile. At first glance, it might be thought that the most reliable way of deciding where that cost should lie would be to determine who would have prevailed in the proceedings had they run to conclusion. However, this would represent both an inefficient use of court resources and of the resources of the parties themselves. It would also undermine one of the purposes underlying the mootness doctrine – which is not merely directed to ensuring the most productive use of court time, but also reflects a broader constitutional principle that the Courts should not generally involve themselves in determining proceedings which do not present a live lis inter partes ..."
26. Murray J noted that the Courts had adopted a more structured approach as reflected in the Supreme Court decisions in Cunningham v. President of the Circuit Court [2012] IESC 39, [2012] 3 IR 222 ("Cunningham"), Godsil v. Ireland and the Attorney General [2015] IESC ("Godsil"), 103 [2015] 4 IR 53, and Matta v. Minister for Justice, Equality and Law Reform [2016] IESC 45. He also noted at para. 29 the helpful summary by Humphreys J in MKIA (Palestine) v. IPAT [2018] IEHC 134 at para. 6. Crucially, the new approach:
"focuses not on the merits of the underlying action but instead on the cause of the mootness".
27. Murray J noted at paras. 31-33 that the essential structure can be reduced to three broad propositions:
"First, where the mootness arises as a result of an event that is entirely independent of the actions of the parties to the proceedings, the fairest outcome will generally be that the parties should bear the costs themselves. Neither is responsible for the mootness, and neither should have to pay for costs rendered unnecessary by an event for which they bear no responsibility.
Second, however, where the mootness arises because of the actions of one of the parties alone and where those actions (a) can be said to follow from the fact of the proceedings so that but for the proceedings they would not have been undertaken, or (b) are properly characterised as 'unilateral' or - perhaps - (c) are such that they could reasonably have been taken before the proceedings, or before all of the costs ultimately incurred were suffered, the costs should often be borne by the party whose actions have resulted in the case becoming moot. In the first of these situations, it can be fairly said that there was an event which costs can and should follow in accordance with conventional principle. In the second, it will frequently be proper that the party who is responsible for the unilateral action which results in the mootness should bear the costs. In the third, it might be said that where a party who could reasonably have acted so as to prevent the other party from incurring costs failed to do so, it is proper that they should have to discharge those costs".
28. Murray J also emphasised, at para. 34 that;
"Each of these three propositions – it must be stressed – present a general approach rather than a set of fixed, rigid rules. The starting point is that the Court has an over-riding discretion in relation to the awarding of costs, and the decisions to which I have referred are intended to guide the exercise of that discretion. They are thus properly viewed as presenting a framework for the application of the Court's discretion in the allocation of costs in a particular context and should not be applied inflexibly or in an excessively prescriptive manner (PT v. Wicklow County Council [2019] IECA 346 at paras. 18 and 19)".
29. The parties in Hughes (as in this case) debated whether the event which rendered the action moot was a unilateral action. Murray J observed at para. 39 that the Court needed to answer four questions:
"(i) What was the specific event that resulted in the action becoming moot?
(ii) Was that event the result of an occurrence outside the control of either party?
(iii)Was that event caused by the unilateral actions of one of the parties?
(iv) If the answer to (iii) is in the affirmative, has the person responsible for the mootness established that their actions were not undertaken in response to the proceedings?
40. Subject to the general intervention of the Court's discretion to which I have referred earlier, if the answer to (ii) is in the affirmative, the default position is that no order for costs should be made. If the answer to (iii) is in the affirmative and to (iv) is in the negative, the default position is that costs should be awarded against the party whose action caused the mootness. But all of this depends on characterising the event that gives rise to the action becoming moot in the first place.
41. An action will become moot where a legal dispute has ceased to exist, where the issue has materially lost its character as a lis, or where the essential foundation of the action has disappeared (see Lofinmakin v. Minister for Justice, Equality and Law Reform at para. 82)...
44. What actually rendered the action moot was the fact that the LTA was superseded by a new collective agreement... the critical part was the stipulation that the parties to the original LTA had now agreed that thereafter positions would be filled on the basis of a business need. Once this happened, the legal basis of the applicant's claim dissolved.
45. This was not an event that occurred independently of any of the parties, but neither can it be properly characterised as 'unilateral'. It was undertaken with the agreement of the applicant. Had it been the case that the first named respondent and Forsa could have and did enter into this agreement without reference to the applicant or above his objection, he would have enjoyed a strong case ... that the action giving rise to the mootness occurred in response to the proceedings. He might in that circumstance have thus been entitled to at least some of his costs. This, however, is not what happened. He agreed to the changes. Because he agreed to it, as he seemingly had to for the new post to be created, it was not unilateral..."
30. Murray J rejected the Applicant's submission that in Godsil and Cunningham, mootness was due to the respondent's unilateral acts notwithstanding that the Applicant acquiesced in those acts:
"47. The suggestion that an action which is undertaken with the agreement of the applicant is actually a unilateral act of the respondent seems curious. That said, within the argument lies an important point: in both of these cases the actions of the respondents did not require the applicant's consent and in neither case was it sought. Here, the first respondent was proceeding on the basis that the consent of all the HLEO's was required. Once that was the case, the applicant had it in his power to block the proposal if the action was not resolved on terms that were satisfactory to him. He could have prevented the action from becoming moot but he chose not to do so. This makes his position quite different from that of the applicants in the cases upon which he relies. None of them had that facility. Thus, Cunningham and the cases that follow it are concerned only with mootness which arises in one of two ways - because of an event outside the control of either party, or because of an action of just one of them. This is clear from the comments of Clarke J. in Cunningham when he observed (at para. 24): 'a court ... should ... ordinarily lean in favour of making no order as to costs in cases which have become moot as a result of a factor or occurrence outside the control of the parties but should lean in favour of awarding costs against a party through whose unilateral action the proceedings have become moot'."
31. At para. 48 Murray J noted that in Cunningham the Supreme Court was
"concerned exclusively with situations in which the mootness arises from either unilateral acts or changes in circumstances outside the control of the parties"
32. At paras. 50 - 54 he noted the need to distinguish between two scenarios to determine how Cunningham may be applied when
"50. ... proceedings are resolved as a consequence of an event to which the parties have agreed, and putting to one side the distinct issues that may arise where the agreement involves terms that have nothing whatsoever to do with the reliefs sought in the underlying claim...
51. One is where the respondent offers to the applicant all of the relief claimed in the action but makes no offer as to the costs incurred by the applicant. In that situation, it would represent a significant constraint on the jurisdiction of the Court to conclude that if placed in that position the applicant was not entitled to say, if necessary, that he will accept the offer and allow the court to decide the issue of costs. In that situation, the Cunningham principles can be applied with only limited modification. Provided the respondent has either been requested to grant the claimed relief before the action is started or has at the very least been given sufficient time to consider its position before substantial costs are incurred, by eventually agreeing to that relief the respondent will, prima facie, have changed its position and given the applicant what he instituted the proceedings to obtain. Once the applicant accepts the offer the proceedings have become moot. Even though that mootness occurs through a bilateral agreement by which the applicant agrees not to seek relief, absent particular circumstances and/or evidence from the respondent establishing that the relief was offered for reasons that are not connected to the proceedings, the applicant should obtain at least some of his costs.
52. The second situation is where the applicant is only offered part of the relief he seeks.In that case the applicant has a choice. Because the respondent has offered only part of what he seeks, the action will not be rendered moot by that offer unless he both accepts it and agrees not to press for more (in which event it is perhaps easier to refer to the proceedings are being compromised rather than rendered moot). In that situation, Cunningham does not resolve how costs should be addressed. While the respondent may have changed its position by offering something, the reason the action is not proceeding is that the applicant has agreed to accept what is proffered. That is not a unilateral action, and there are various considerations relevant to whether it is fair that the costs should be awarded in favour of the applicant which take the situation outside the structure put in place by that case.
53. This case falls within the second of the situations with the difference that here there were other parties whose agreement was also required and the additional feature that the applicant's acquiescence in the terms operated to dissolve the LTA and render his original action without legal foundation. In this second scenario, the Court is concerned not with the consequence for costs of an act over which at least one of the parties has no control, but is instead looking at whether it is just that one party should have to bear costs, or another party should have to forgo them when the proceedings are not being heard as a result of agreement over which both had control.
54. It would be open to the Court to refuse to make any order for costs on the basis that it was a matter for the parties to resolve the question of costs when they entered into their agreement, and that it was not correct for them to leave the Court in the position of an arbitrator on an aspect of the settlement which could not be agreed between them. However, I think this would both unnecessarily constrain the jurisdiction of the court, and (at least in the context of proceedings such as this action which involve third party interests) would ignore the legitimate public interest in encouraging parties where possible to seek to resolve litigation. Such a jurisdiction was accepted in judicial review actions, and its limits explained, in M v. Croydon LBC [2012] EWCA Civ 595, [2012] 3 All ER 1237 as follows (at para. 47):
'It is open to parties in almost any civil proceedings to compromise all their differences save costs, and to invite the court to determine how the costs should be dealt with. The court has jurisdiction in such a case to determine who is to pay costs, but it is not obliged to resolve such a free-standing dispute about costs. Accordingly, by settling all issues save costs, the parties take the risk that the court will not be prepared to make any determination other than that there be no order for costs not only because that is the right result after analysing all the arguments, but also on the ground that such an exercise would be disproportionate'."
33. Murray J endorsed those comments in Croydon as representing the law in this jurisdiction, but subject to an important reservation:
"55. While these comments also describe the law in this jurisdiction, they have to be applied with caution. In that case, the English Court of Appeal adopted the position that one of the factors it would take into account in resolving such an issue is whether it can be said with confidence which party would have won had the action run to trial (see para. 51). Such an approach - at least as the law presently stands - seems to be emphatically out-ruled as an option by the decision in Cunningham (see para. 21 of the judgment). I note that a similar view was adopted by Noonan J. in SF v. Secretary General of the Department of Education and Skills [2016] IEHC 577 at para. 10. I will proceed here, accordingly, to address costs independently of the strengths of the case, while noting that I think that at least where it can be said with confidence that a case was noticeably weak or self-evidently strong, account should be taken of that in deciding how costs should be fairly distributed in a situation such as that in issue here".
34. Murray J summarised the principles:
"56. Needless to say each case will depend on its facts. However, the discretion of the Court (which at the time this matter was heard in the High Court was governed by O.99 Rule 1(1) and Rule 1(3) and (4)) has to take account of the application to an individual case of four over- riding considerations: (i) the general public interest in obtaining a resolution of proceedings. (ii) the need to ensure that respondents/defendants are not inhibited in proposing reasonable measures to address proceedings by the concern that they will end up having to discharge the costs of an action they believe to be unmeritorious. (iii) the related consideration that where there are third party interests in play it would be undesirable that a respondent/defendant should have to choose between making a decision which will benefit third parties and paying the costs of an action which it believes unmeritorious, or not providing that benefit and fighting the case. (iv) that the Court should exercise its discretion in the award or refusal of costs in a manner which both encourages applicants/plaintiffs to clearly identify what they want from respondents/defendants before they initiate proceedings, and to prompt those respondents/defendants to address in a timely manner the relief which is claimed.
57. Overhanging these factors is the position of the court itself. While parties are to be encouraged to settle their disputes, the interests of the court and the public are not significantly advanced if a lengthy dispute around the underlying contest between the parties is replaced with a time-consuming dispute about the costs following settlement. Whatever rule is applied in seeking a just outcome to the type of situation that presents itself here, it must be heavily influenced by the need to encourage litigants to settle all of their disputes, not to enter into agreements that substitute one form of litigation for another. Thus, the starting point is that where the parties take the risk of compromising between themselves on the basis that the Court will decide the issue of costs, they entrust their fate to the Court's discretion, and they must expect that the consequence of adopting this course of action may well be that the Court cannot fairly resolve the issue other than by making no order.
58. That said, and adapting the approach adopted in Cunningham, the following questions seem to me to be potentially relevant in deciding how costs in a case such as this should be addressed:
(i) Did the agreement entered into between the parties result in the applicant obtaining a substantial part of the relief he sought in the action?
(ii) Could the necessity for the proceedings or their continuation have been avoided by the agreement being offered to the applicant by the public body at an earlier stage in the process?
(iii) Would the applicant have obtained the benefit of the resolution ultimately put in place without instituting proceedings?
(iv) Is there any aspect of the conduct of the parties that militates against or in favour of their obtaining costs or having costs awarded against them?
59. Taking all of these considerations into account, it seems to me that there are three factors which point to the conclusion that the applicant in this case should obtain some order for costs in his favour. First, the Court must approach the question of costs on the basis that the course of action adopted by the first named respondent and ultimately resulting in the filling of one new APLEO position, was a response to the proceedings. While fully noting the entitlement of the trial Judge to view sceptically the suggestion of the applicant that this was the sole factor motivating the actions of the first named respondent, the fact of the matter is that the Court had before it an uncontradicted averment that the applicant was advised by the Revenue Solicitor that the suggested filling of one post was 'being undertaken in response to the proceedings'. The timing of the Revenue proposal strongly suggests that there was a connection between the two".
In Hughes, the Applicant's unchallenged affidavit suggested that the respondent's actions were in response to the proceedings and gave the Applicant some of what he sought. There was no concrete evidence that the offer could not have been made earlier; to the contrary, costs (and Court time) could have been saved by an earlier offer. However, the Applicant did not obtain all, or even most, of the relief claimed and at para. 62, balancing those factors, the Court of Appeal awarded the Applicant 50% of his costs.
35. Murray J also warned of the risk that parties took if they compromised an action leaving the Court to determine the costs order:
"66. ... apart from those cases where the respondent can establish that this proposal was not made in response to the proceedings, where a public body determines to offer to an applicant in judicial review proceedings the substance of all the relief claimed, that unless that offer has been made promptly, provided the respondent was afforded the opportunity to accede to that relief before substantial costs were incurred and absent persuasive reasons why on the particular facts costs should not follow, the applicant will obtain his costs not merely of the action, but of fighting for his costs. Similarly, I emphasise that where an applicant decides to compromise his case on a basis that involves the grant of significantly less than he seeks, he will not usually obtain all of his costs and may obtain no costs at all if the Court cannot in the circumstances justly adjudicate on how costs should be borne. By not agreeing costs as part of a settlement, each party takes a risk that both should avoid."
Discussion
36. The outcome ultimately reflected in the revised submission was in all parties' interests. It should reduce the overall costs, saving time and money for all involved, but particularly the losing party. The parties and their lawyers are to be commended for an eminently sensible and practical arrangement. Without it, they faced an (even greater) exposure to expensive and time-consuming proceedings, with the potential for additional wrangling as to what issues could be resolved by arbitration, whether these or the dissolution proceedings should proceed in the meantime and what issues could properly be resolved in what proceedings. Progressing the core issues simultaneously is a pragmatic outcome. If the parties find it necessary to take the arbitration to hearing, it is to be hoped that the outcome (whatever that might be) will clear the way for the resolution of the winding up and dissolution proceedings.
37. That said, neither party can be described as having been "substantially successful" on the application. The ultimate submission to a broadly based arbitration encompassing all issues could not have been achieved on the original notice of motion or the original referral to arbitration. I disagree with the suggestion that questions of jurisdiction could be determined by the points of claim and defence and resolved by the arbitrator. While the arbitrator does determine his jurisdiction under the arbitration clause, the jurisdiction does not arise from the points of claim or defence but from the underlying arbitration agreement (or any agreed variation). There was scope for major, expensive and time consuming wrangling as to which issues and which parties could be encompassed in the arbitration originally proposed by the Applicant, particularly to the extent that they related to the derivative claims. The subsequent submission to arbitration obviated those challenges. The parties accepted that the application was rendered moot as a result of the revised submission. I do not consider that that agreement (to a substantially revised submission to arbitration) was a unilateral act by either party. Without it, the parties could have been litigating on at least three fronts, these Companies Acts winding up proceedings, the partnership dissolution proceedings and the original arbitration. The parties, at the Respondent/Petitioners initiative, cut the Gordian knot by negotiating a sophisticated complex submission to arbitration which went beyond the original clause, encompassing more parties (the principals, including the estate of the deceased partner and his successor in title, the two companies and the partnership) and all claims between them. It was scarcely a unilateral act.
38. Murray J observed that the principles outlined in Hughes and other cases represent a general approach not rigid rules - the Court retains its over-riding discretion. The decisions guide the exercise of that discretion but should not be applied inflexibly or prescriptively. Accordingly, I have the following conclusions on this application, set against those principles:
a. By failing to agree the costs arrangements, the parties run the risk that I will make no order or an order against them. Although, as Murray J noted, there is a public interest in encouraging parties to resolve litigation, I am not obliged to make any costs order if I consider that that is the right result in the circumstances.
b. the ultimate outcome cannot fairly be characterised as the Respondent Petitioner's unilateral action, nor was it resolved on the basis proposed in the motion. The parties have agreed that the proceedings should be stayed pending arbitration but for an arbitration on a different basis, and involving different parties, to the arrangements envisaged in the notice of arbitration which grounded the application.
c. If the Applicant had rejected the Respondent/Petitioner's proposal, the latter would likely have opposed the application and - although it is not my function to determine the likely costs award following a hypothetical determination - there were clearly substantial grounds on both sides. However, and helpfully, the issue was resolved by agreement on significantly broader terms to those envisaged by the application.
d. The parties differed as to the answers to the questions posed by Murray J at para. 39. I would answer them as follows: (i) the event that resulted in the action becoming moot was the parties' agreeing a submission to arbitration on terms significantly different to those proposed by the Applicant. (ii) & (iii) As in Hughes, the event did not occur independently of the parties, but neither could it be fairly characterised as 'unilateral'. It was undertaken with both parties' agreement. (Question (iv) is inapplicable).
e. Paragraphs 51 - 52 of Hughes considered the cost consequences when the event rendering proceedings moot arose with both parties' agreement. It focussed on two scenarios - where the Applicant substantially secured the relief sought and where he failed to do so. An Applicant is generally on strong ground to claim costs in the first scenario but not the second. This case, however, is a variant - the Applicant secured the relief sought - the inclusion of the substantive issues in these proceedings in the arbitration and the stay of the winding up proceedings - but only in return for a concession which would not necessarily have followed from the terms of the original arbitration notice. The revised submission guaranteed the inclusion of the issues which the Respondent/Petitioner wished to ventilate and the addition of further parties to the arbitration. It seems to me that the outcome went beyond what the motion could have achieved.
f. In the current scenario, as in the second scenario identified by Murray J, I must consider whether it is just that one party should bear costs, or that another party should forgo them when the proceedings are not being heard as a result of agreement over which both had control.
g. It is not appropriate to speculate to any great extent on the hypothetical outcome if the motion had been adjudicated, although Murray J did say at para. 55 that
"... at least where it can be said with confidence that a case was noticeably weak or self-evidently strong, account should be taken of that in deciding how costs should be fairly distributed in a situation such as that in issue here".
h. It suffices to say that the Respondent/Petitioner seems to have had solid grounds to resist the application and the outcome of the application (including the possible exercise of the inherent jurisdiction) could not have been regarded as assured. Accordingly, the ultimate outcome appeared to reflect both side's concerns and vulnerabilities as opposed to being a clearcut victory for either side.
i. Taking into consideration the public interest principles identified by Murray J (and emerging from the Legal Services Regulation Act 2015 and the current Order 99) it seems to me that the answers to the questions posed by Murray J at para. 58 of his judgment are as follows:
(i) the agreement resulted in the Applicant obtaining a substantial part of the relief he sought, but only in return for his extending to the Respondent Petitioner the reliefs which she was seeking both in this action. The stay application could have been avoided by the agreement having been offered by either side at an earlier stage. It is unlike the situation in which a respondent has capitulated after commencement of proceedings, making a concession that could usefully have been made earlier (or where a plaintiff has prematurely issued proceedings without making any attempt to engage in circumstances where the need for litigation might well have been avoided by a more measured approach). In this case, before the Applicant's motion was issued (and, indeed, before these proceedings or the partnership proceedings were issued) it was open to either side to propose the compromise ultimately arrived at;
(ii) the question as to whether the Applicant would have obtained the benefit of the ultimate outcome without the application is less relevant than in Hughes, but in any event, I consider that the result could have been achieved without litigation had both parties engaged earlier along the lines achieved after the 8 January 2025 letter;
(iii) I would not single out any particular aspect of the parties' as militating against or in favour of their obtaining costs or having costs awarded against them. Both deserve credit for engaging in the ultimate compromise - the Respondent/Petitioner for proposing its parameters and the Applicant for responding to that proposal. It would have been even better if the accord had been reached earlier, but responsibility must be shared in that regard.
j. Taking these considerations into account, neither side has satisfied me that it should obtain an order for costs at this point. The course adopted by the Respondent/Petitioner was not simply a response to these proceedings, extending beyond it to a holistic approach to the litigation which could not be assured by the original arbitration notice. This litigation was only one of the factors motivating the parties' actions and the Respondent Petitioner was arguably in a strong bargaining position on the basis of its grounds to oppose a stay as of right in circumstances in which the Applicant was alleged to have submitted his first statement on the substance of the dispute before seeking arbitration and therefore was not entitled to seek a referral pursuant to Article 8 of the Model Law, even leaving aside the Respondent/Petitioner's objection based on the fact that Courts have exclusive winding up jurisdiction (but its position was not unassailable as the question of a discretionary stay may still have arisen).
k. The Respondent/Petitioner's actions did have the effect of giving the Applicant what he sought on the motion but only in return for concessions which went beyond the motion and, indeed, the winding up proceedings.
40. The costs of the winding up proceedings as a whole will need to be determined at some point (unless the parties their differences generally). The outcome of the arbitration may either render these (and the dissolution proceedings) moot or encourage agreement of any outstanding issues, failing which the litigation may need to continue. Depending on the outcome, there may well be an order for costs in respect of these proceedings generally. For the reasons outlined above as to the mutuality of the process ultimately agreed upon and because that outcome went far beyond the terms of the Applicant's motion, I consider that the fairest result would be to provide that the costs of the current application would be costs in the cause in these Companies Act proceedings. This will hopefully mean that, if either party is ultimately vindicated in those proceedings and awarded their costs, they also recover the costs of this application which resulted in the parties' reaching agreement as to how and in what sequence the various claims should be litigated.
41. Finally, I note that there appears to be some uncertainty whether the winding up petition has been stayed. The parties apparently understood that Quinn J had granted such an order on consent. However, the Court file does not reflect that understanding. For the avoidance of doubt, I will, if necessary, make such an order along with my costs ruling. The terms of the stay will presumably need to refer to the revised submission to arbitration. I invite the parties to agree appropriate wording for such a stay and providing for the costs of the application to be costs in the cause in these (to be stayed) proceedings. In the absence of such agreement, each party can submit alternative wordings for my consideration within 14 days. Unless I deem a further short hearing necessary (and it seems undesirable to put the parties to more costs) I will then finalise the order without further recourse to the parties.
APPEARANCES
Mr. Garret Byrne BL, instructed by Kennedys Solicitors LLP, for the Applicant.
Mr. Garvan Corkery SC, instructed by RDJ LLP, for the Respondent/Petitioner.