High Court Cuts Tenant Costs Award Over Failed Rent Set-Off

A commercial tenant that successfully defended its statutory tenancy rights against a landlord's purported forfeiture has had its lower court legal costs significantly curtailed by the High Court. In a supplemental judgment clarifying the financial fallout of commercial leasing disputes, Mr Justice Garrett Simons held that while the tenant prevailed in securing its tenancy, its pursuit of an unmeritorious equitable set-off claim justified a sharp reduction in its cost recovery for the initial Circuit Court proceedings.

The dispute in Verbenagrove Ltd v Simon Evans and Maureen Griffin centred on the Landlord and Tenant (Amendment) Act 1980. The landlords had attempted to resist the tenant's claim for a new statutory tenancy by asserting that they had lawfully forfeited the lease and re-entered the demised premises due to alleged rent arrears. While the High Court previously ruled in favour of the tenant in its principal judgment, this latest decision tackled the contentious question of legal expenses spanning two court tiers under the Legal Services Regulation Act 2015.

Contested Re-Entry and Forfeiture Claims

To justify the lease termination, the landlords maintained that they had executed a lawful and peaceable re-entry onto the property on 17 August 2023. This purported repossession involved physical actions surrounding a garden gate, the manipulation of a sliding bolt, and the attendance of a locksmith alongside one of the co-landlords, Maureen Griffin. The tenant robustly resisted this narrative during the substantive appeal, requiring the High Court to examine detailed witness evidence and complex case law concerning the precise degree of physical intervention permitted before a re-entry ceases to be peaceable.

Following their substantive defeat, the landlords argued that the tenant had wasted substantial court time litigating the peaceable re-entry issue. They submitted that extensive legal submissions and witness examinations were devoted to points immaterial to the eventual outcome, urging the court to disallow the tenant's costs on that basis. However, Mr Justice Simons firmly rejected this argument, ruling that the tenant was entirely entitled to challenge the landlords' assertion of lawful repossession, as the legitimacy of the alleged forfeiture remained a core pillar of the landlords' defence.

Equitable Set-Off Triggered Cost Reduction

The tenant faced a far less favourable outcome regarding its secondary defence against the rent arrears. In the Circuit Court, the tenant had sought an equitable set-off against outstanding rent, arguing it had paid for structural and maintenance repairs that should have been discharged by the landlords. The Circuit Court had declined to admit this set-off, reiterating the established Irish legal principle that an equitable set-off against commercial rent cannot be sustained unless the underlying liability is clearly ascertained and established.

Mr Justice Simons determined that the tenant's continued reliance on the unliquidated set-off claim had needlessly expanded the scope and duration of the Circuit Court hearing. Consequently, under sections 168 and 169 of the Legal Services Regulation Act 2015, the High Court exercised its statutory discretion to depart from the standard rule that costs automatically follow the event. The judge ordered that the tenant recover only 40 per cent of its legal costs and outlay associated with the first module before the Circuit Court.

Modern Cost Rules in Irish Commercial Litigation

By contrast, the High Court held that the tenant was entitled to recover its full costs for the High Court appeal stage. Mr Justice Simons observed that the tenant was wholly successful in overturning the landlords' resistance to the new tenancy on appeal, and no conduct at the appellate level justified displacing the presumptive entitlement to full cost recovery under the 2015 Act.

The ruling delivers a sharp reminder to commercial litigants across Ireland that the courts will rigorously inspect how individual arguments are run. While commercial tenants retain strong statutory protections under the Landlord and Tenant (Amendment) Act 1980, the Courts Service will not shield successful parties from adverse cost penalties if they advance flawed equitable arguments that prolong litigation. Litigants attempting to withhold commercial rent to offset unquantified repair costs run a distinct risk of being penalised in costs, even if they ultimately prevail on the primary dispute.