Breach of contract - Can it be a self fulfilling act?

BenEadir

Hi all,

I was debating over the weekend with a family member about the prohibitive cost of taking a breach of contract action in the High Court.

We had been watching the Man U Vs Liverpool game earlier (this is our year!! ) and developed the following scenario which we felt there must be a remedy for but for the life of us couldn't think what it might be so we left it but it's bugging me so maybe someone here can put me out of my misery?

Scenario: Big City FC Ltd (BCFC) enters into a 3 year fixed term contract at a fixed rate of €X per month with a sports psychiatrist called Mr. B for Mr. B to be available to the BCFC management team (headed by Glen Hofddle!!) and players as they require up to a maximum of 5 days per month. BCFC use Mr. B's service intermittently and pay MR. B's invoice on time each month for the first 6 months. After 6 months BCFC are in the relegation places and fire Mr. Hoddle. They appoint a new manager who sees no benefit in using a sports psychiatrist and thereafter BCFC cease paying Mr. B. They don't issue a termination notice as the contract is for a fixed term, they simply stop paying him. Mr. B continues to make his service available to BCFC and continues to issue his monthly invoice per the fixed term agreement but BCFC don't respond to his attempted correspondence and don't pay any of his invoices.

Mr. B's solicitor advises Mr. B that if he wants to pursue BCFC he will have to go to the High Court and he will have to shell out an expected €30,000 in costs prior to the case being heard. Since BCFC stopped paying Mr B's invoices and Mr B hasn't been able to secure an alternative source of income Mr. B doesn't have the ability to fund a high court case and therefore has to drop the matter and forego the remaining income he should have earned from the contract.

My argument was that unfair as it may sound that is how the court system works and there isn't much Mr B can do about it but my brother in law is of the opinion that a breach of contract like this cannot be self fulfilling i.e. by not paying Mr. B's invoices BCFC are guaranteeing he won't have the financial ability to take a court action against them.

BTW, our original scenario (and what kicked off the conversation) used a player rather than a sports psychiatrist but given players always seem to have their fixed term contracts paid up if the club no longer want them in the squad we ended up with the sports psychiatrist scenario.

I hope the above tickles someones interest enough to get an explanation of whether my cynical view of the world is correct or whether a party who have suffered a financial loss and therefore don't have much in the way of available resources can in fact get access to High Court justice. That might restore some of my faith in humanity, only some mind

Cheers,

Ben

Pat Mustard

I wouldn't necessarily agree with this. I'd say that if a punter has a good case, solicitors may be willing to work with less money on account or they may not ask for payment of fees until the conclusion of the matter.

However, I wonder if you may be thinking about the issue of an order for security for costs, which could be got against a plaintiff company, which could hinder its progress, insofar as if the plaintiff cannot provide security for costs in the event of losing the case, it cannot proceed. However, I remember reading that where it can be shown that if the defendant is the cause of the plaintiff's insolvency and therefore its inability to provide such security, that such an order should not be granted by the court, in those circumstances.

BenEadir

Thanks for the reply Mustard,

The Mustard wrote: »

I wouldn't necessarily agree with this. I'd say that if a punter has a good case, solicitors may be willing to work with less money on account or they may not ask for payment of fees until the conclusion of the matter.

That may be an option where there is a preexisting relationship between a solicitor and client and/or was common in the Celtic Bubble but do solicitors these days really take a punt on a successful outcome like that which could take months/years to come to court?

Assuming some solicitors would take such a punt and risk either no payment or delayed/reduced payment if Mr. B was unsuccessful in his case against BCFC does that mean that the only solution to Mr. B's dilemma is to keep knocking on enough doors until he finds a solicitor willing to defer his fees until the conclusion of the case? What about the barristers fees? I guess he'd also have to select a barrister willing to work on the same deferred fee basis?

If I was Mr. B I'd be thinking "What sort of solicitor is prepared to wait until after the case for his fee?" and the cynic in me would be thinking that it would only be solicitors and barristers who aren't very busy (i.e. not much in demand) who would agree to such terms with a total stranger. That wouldn't fill me with confidence as I assume the best solicitors and barristers are in a position to demand payment as they work i.e. for every 10/20 hours they do they issue an invoice and if it's not paid in a reasonable time-frame they simply stop working on the case. No pay no play so to speak.

The Mustard wrote: »

However, I wonder if you may be thinking about the issue of an order for security for costs, which could be got against a plaintiff company, which could hinder its progress, insofar as if the plaintiff cannot provide security for costs in the event of losing the case, it cannot proceed. However, I remember reading that where it can be shown that if the defendant is the cause of the plaintiff's insolvency and therefore its inability to provide such security, that such an order should not be granted by the court, in those circumstances.

Yes, I believe that is indeed the type of thing my bro in law was thinking about and perhaps getting confused with but it's interesting to know that there is indeed a provision which allows the plaintiff to avoid providing security for costs if the defendant is the cause of the plaintiffs inability to provide such security.

Ben

Pat Mustard

It is often the case in relation to many debt collection cases, that there is a lot of red tape and rigmarole until the money comes in, and nobody gets paid until then.

Similarly with personal injury cases, although the plaintiff may have incurred significant fees in respect of medical reports in the interim.

People are less likely to have money these days. Most ordinary people wouldn't find it easy to pay €30k up front. It would be bad for business to send away punters with good cases.

BenEadir

The Mustard wrote: »

People are less likely to have money these days. Most ordinary people wouldn't find it easy to pay €30k up front. It would be bad for business to send away punters with good cases.

I understand that point Mustard but where would a regular small solicitors firm with one managing partner and a couple of associates typically draw the line? Even if they felt the case had an 80% probability of success could they afford to sponsor €30,000 in working capital for 18 months or two years plus take the risk that at the end of it the client could lose the case and be unable to pay their costs.

Also, the €30,000 fee was hypothetical. What if BCFC decided to defend the action and bury Mr. B in requests for discovery etc? Couldn't the cost of mounting a High Court case rise inexorably? Does €30,000 even scratch the surface of preparing for a High Court case? If I was a solicitor I wouldn't want to find myself in a situation where I'd put €20,000 worth of time into the case only to find out it looks like it could take another €40,000 worth of time before the case is heard. It would be hard to walk away from the €20,000 already invested but would I have the appetite for a €60,000 punt???

Risky business!!!

Ben

Fred Swanson

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Pat Mustard

BenThere wrote: »

I understand that point Mustard but where would a regular small solicitors firm with one managing partner and a couple of associates typically draw the line? Even if they felt the case had an 80% probability of success could they afford to sponsor €30,000 in working capital for 18 months or two years plus take the risk that at the end of it the client could lose the case and be unable to pay their costs.

I wouldn't think that there would be much of a problem, although it is entirely possible that money would be requested on account.

BenThere wrote: »

Also, the €30,000 fee was hypothetical. What if BCFC decided to defend the action and bury Mr. B in requests for discovery etc? Couldn't the cost of mounting a High Court case rise inexorably? Does €30,000 even scratch the surface of preparing for a High Court case? If I was a solicitor I wouldn't want to find myself in a situation where I'd put €20,000 worth of time into the case only to find out it looks like it could take another €40,000 worth of time before the case is heard. It would be hard to walk away from the €20,000 already invested but would I have the appetite for a €60,000 punt???

At the outset, the paperwork is examined and the risks are assessed. The decision to take or refuse the work is made then. The plaintiff's solicitor has to deal with whatever paperwork comes his way and drive the matter into court. If the defence has caused needless additional work, then they can be fixed with an order for the costs.

BenEadir

That's very interesting guys.

So what does it typically take for a plaintiff to bring a (not overly complicated) breach of contract or request for specific performance type case (if my 3rd level law studies from 20 years ago are still relevant!) to the High court these days?

What sort of a bill could a plaintiff expect to have run up by the time he/she gets into court?

I've been told by solicitor friends of mine at social events that if you don't win your case in the high court you're looking at a bill of several hundred thousand Euro. That implies each side racks up at least €100,000 in costs and the loser has to pick up a bill of at least €200,000 if they lose and have costs awarded against them. That's quite a prohibitive thought for most people. It would certainly make me think twice i.e. if I was owed for example €75,000 with a 70% chance of success would I really risk a potential bill of €200,000 in costs to pursue the €75,000? Probably not!!

Ben

Fred Swanson

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BenEadir

Fred Swanson wrote: »

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Was it a High Court case? I can imagine a District or Circuit Court case having those type of fees but I've always been told (perhaps urban myth) that if your case has to be heard in the High Court (i.e. any civil matter where the claim for damages is in excess of €70,000) the costs rise exponentially and you are literally looking at €100,000 or more of costs on each side for a "typical" contract dispute type case. Obviously the costs involved in major/landmark cases can go through the roof and reach millions of Euro.

Ben

Fred Swanson

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BenEadir

Fred Swanson wrote: »

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I guess it depends how close to a trial it got i.e. in terms of motions, discovery etc and if it goes all the way and is heard for for example three days I guess you'd be looking at €5,000 a day to cover your barrister, a junior barrister and your solicitors time? That would add another €15,000??

I wonder where the scaremongering ref High Court costs comes from then if "typically" you're looking at €20,000 to prepare a breach of contract type case and €15,000 to run it?

€35,000 isn't peanuts but it's not "hundreds of thousands" either is it?

Ben

hullaballoo

BenThere wrote: »

Was it a High Court case? I can imagine a District or Circuit Court case having those type of fees but I've always been told (perhaps urban myth) that if your case has to be heard in the High Court (i.e. any civil matter where the claim for damages is in excess of €70,000) the costs rise exponentially and you are literally looking at €100,000 or more of costs on each side for a "typical" contract dispute type case. Obviously the costs involved in major/landmark cases can go through the roof and reach millions of Euro.

Ben

Your understanding of the scale of legal fees does not reflect reality.

I'm not about to launch into a diatribe about lawyers being underpaid but they are paid no where near the amounts you have posted here.

The maximum I would expect to pay for a case that runs in the District Court (Civil) would be €1,000 but there would want to be some serious reasons for it to be so high. In the High Court, the fees are based on the fact that generally, a lot more work is required and there many more steps in appropriately preparing a matter for hearing. Even still, €100,000 for one party's legal fees is astronomical and totally disproportionate - especially in a case such as your example, where the award is at the lower end of the court's jurisdiction.

Most High Court cases would give rise to legal fees of €10-15k per party. Only in certain circumstances will they ever be substantially higher than this.

As for the point about funding litigation, most lawyers work on the basis that they probably won't get paid for quite some time. This includes solicitors and barristers both. Occasionally, a client will want to keep up-to-date on the fees being raised and will seek to discharge them regularly but this is rare.

For the most part, lawyers will have to wait until the losing party has paid the full amount before the funds are available to discharge fees. In many cases, it is unfortunately the case that suing someone is not worthwhile for anyone because neither party has any money or assets to discharge the award and the sum. It is part of a lawyer's job to consider the financial realities and advise accordingly.

In some cases, the lawyers will agree to run the case despite there being little/no prospect of being paid because there may be further work in the future that might make it worthwhile.

Going back to the situation in the OP, the psychiatrist has a very good chance of success. There appears to be a clear breach of the contract, which is for a specified sum, being the total of the payments to be made. It may even be a case that is appropriate to use the summary jurisdiction of the High Court as a liquidated sum. That being the case, the scale of the costs would be even lower. There are very few lawyers who wouldn't be prepared to gamble on a sitter like that.

That's the reason why big football clubs tend to pay the severance money when they sack managers/players etc. It always seems like a large payout but the reality is they are paying to get out of their obligations and this usually will not be much more than the sum total of payments to be made together with whatever other applicable benefits might be.

BenEadir

hullaballoo wrote: »

Your understanding of the scale of legal fees does not reflect reality.

I'm not about to launch into a diatribe about lawyers being underpaid but they are paid no where near the amounts you have posted here..

I don't disagree with you at all Hullaballoo, I have a couple of friends in the profession one of whom has his own small firm and I know he works his ass off and whilst he earns a decent wedge (maybe €120,000 a year) it comes with a lot of long hours and a lot of stress and worry. I also know senior equity partners in the very largest firms can earn up to €1m a year (http://www.independent.co.uk/student/magazines/city-law-firms-sixfigure-salaries-and-job-satisfaction-419965.html) but they are perhaps 0.10% or less of the profession?

hullaballoo wrote: »

Most High Court cases would give rise to legal fees of €10-15k per party. Only in certain circumstances will they ever be substantially higher than this.

I thought it was much higher. In fact only yesterday, by complete co-incidence, I spoke to someone I had met some months ago who was involved on the periphery of a breach of contract case being taken in the High Court by a business friend of his to do with being terminated by the defendant as the distributor of the defendants range of products. The case was settled last week in favour of the plaintiff and according to my contact the plaintiff's costs were €250,000 which sounds off the chart to me but I do know the case had been in the pipeline for a couple of years with both senior and junior counsel and he had to invest in obtaining an expert witness report on the value of his business and lost earnings etc. Could that even be possible especially when the award of damages were less than the (alleged) costs incurred???

Ben

hullaballoo

BenThere wrote: »

The case was settled last week in favour of the plaintiff and according to my contact the plaintiff's costs were €250,000 which sounds off the chart to me but I do know the case had been in the pipeline for a couple of years with both senior and junior counsel and he had to invest in obtaining an expert witness report on the value of his business and lost earnings etc. Could that even be possible especially when the award of damages were less than the (alleged) costs incurred???

Ben

It depends very much on the facts of the case - its complexities, the clarity of the law in the area etc. That level of fees (€250k) suggests to me that it may have been a commercial case? That is one which is specially listed upon application to have the matter heard in the Commercial Division of the High Court.

Other than that, there are cases that can become procedurally complex, usually where there is a lot of acrimony between the parties and little cooperation.

Latterly, the courts do not suffer this lack of cooperation gladly and it is, thankfully, being more seriously admonished. However, effectively the only tool available to the Court to prevent this behaviour is the application of costs penalties against one side or another.