The High Court has granted McMahon O’Brien Solicitors a charging order over costs recovered in a settlement for Mount Kennett Investment Company and Greenband Investments, but limited the charge to a proportionate amount determined by a formula.
Mr Justice Clarke delivered the judgment on 29 March 2012. The application arose after receivers appointed for the plaintiffs settled their appeal with three defendants for €1.5 million inclusive of costs. The settlement resolved proceedings in which the defendants had previously been ordered, jointly and severally, to pay €2,447,893 plus interest and costs. By the time of settlement, the total liability was estimated at about €3.25 million, including costs.
The solicitors had acted for the plaintiffs in the underlying proceedings and sought a charge under section 3 of the Legal Practitioners (Ireland) Act 1876. The receivers opposed the application, arguing that the court should refuse a charge or make a reduced order. They relied on the compromise, delay, the plaintiffs’ receivership and possible liquidation, and the statutory position of receivers under the National Asset Management Agency Act 2009.
The judge found that the statutory requirements for a charging order were met: the €1.5 million settlement was property recovered through the solicitors’ work, even though it was paid to receivers. He found no culpable delay that would defeat the claim. The original damages order had been stayed pending appeal, and the receivers had notice of the solicitors’ asserted claim. He also concluded that the 2009 Act provision relied on did not displace the priority of a section 3 charge.
However, the court took account of the close connection between the solicitors and their clients. Paul O’Brien, one of the firm’s two equity partners, was the beneficial owner of Greenband. The judge also considered that the settlement was for less than half the estimated value of the award including costs, and that an “all-in” compromise would ordinarily require the lawyers to share the reduction. He found that allowing the firm to claim full costs against the reduced settlement would be inequitable in these circumstances.
The court ordered that the amount of the charge be calculated by a formula using costs taxed on a party-and-party basis and interest under the earlier court order to 31 January 2012, with costs reduced proportionately to the settlement recovery. The costs are to be taxed and the resulting figure applied under the formula. The judge did not determine any later priority dispute between NAMA and the firm’s partners, and reserved the costs of the charging-order application for submissions.