Insurance & Risk Update, Q1 2024

Insurance & Risk Update

A snapshot of our Review of 2023 Q1 2024

Welcome

Welcome to the latest edition of our Insurance & Risk Update. In this interactive magazine, we provide a snapshot of some of the most popular articles in our Review of 2023 and insights into what can be expected this year for those of you who missed it. We hope you find it informative. You can find the full Review here

First up, Deirdre Munnelly chats with Senior Associate, Laura Keane in the above vlog about developments in the insurance litigation arena during the past year and looks ahead to what we can expect in 2024.

Other popular insights featured in this edition include:

• Supreme Court to Reconsider Current Delay Test

• Modified Cost Orders and Cost-efficient Litigation

• Data Protection Litigation in Ireland

Please feel free to contact me or another member of our team if you wish to discuss these topics or any other issues impacting your organisation.

Supreme Court to Reconsider Current Delay Test

Deirdre Munnelly Partner, Insurance & Risk dmunnelly@mhc.ie

The Rules of the Superior Courts state that a defendant can seek to have proceedings brought against it dismissed on the grounds of delay. Specifically, an application for dismissing the proceedings can be made where a plaintiff fails to progress matters for a period of two years. This includes failing to exchange pleadings or taking any other steps to progress their claim. The courts also have an inherent authority to dismiss a claim for delay at its own discretion.

The Primor test

The Primor test was laid down by the Supreme Court in the 1996 decision Primor Plc v Stokes Kennedy Crowley.1

The Supreme Court ruled that delay, in itself, is not sufficient justification to dismiss proceedings. The court must consider:

1. Is the delay inordinate?

2. Is the delay inexcusable?

3. If the answer to 1) and 2) is yes, the court must consider if the balance of justice favours the dismissal of the proceedings

1. Primor Plc v Stokes Kennedy Crowley [1996] 2 IR 459, 11, February 1994

2. O’Neill v Lorcan Birthistle [2023] IEHC 515, 28, July 2023

3. Sheehan v Cork County Council [2023] IEHC 46

Jill Valentine Associate, Insurance & Risk jvalentine@mhc.ie

Recent developments

In recent years, courts have become less tolerant of plaintiffs who delay in progressing their claims. Where plaintiffs do not progress their claims for two years or more, the courts have become more amenable to dismissing their proceedings on the grounds of delay.

Aine O’Neill v Lorcan Birthistle

The High Court applied the three limb Primor test in Aine O’Neill v Lorcan Birthistle 2 Ms O’Neill’s claim arose from repeated infections following surgery. The proceedings issued in 2015. Ms O’Neill instructed new solicitors in 2022 and as a result of a number of factors, including delays in obtaining an expert report, the claim was dismissed by Mr Justice Heslin in July 2023.

He said that there had been an inordinate delay, that the delay was inexcusable and that on the balance of justice the case should be dismissed. He noted that no valid explanation had been given for the delays.

Sheehan v Cork County Council

In the High Court case of Sheehan v Cork County Council, 3 Ms Sheehan as plaintiff alleged that she endured “significant emotional suffering” as a result of a “flawed” disciplinary investigation carried out by her employer, Cork County Council, in October 2015.

Interestingly, Ms Sheehan swore an affidavit agreeing that the delay was “inordinate and inexcusable”.

In June 2023, Mr Justice Simmons dismissed the plaintiffs claim on the grounds of inordinate and inexcusable delay. He noted the balance of justice lay in favour of the dismissal of the proceedings. He also referred to the diminished recollection of witnesses and the prejudice to the defendant which resulted.

Kirwan v Connors

The case of Kirwan v Connors4 was dismissed for delay by both the High Court and the Court of Appeal.

The claim arose from a property dispute for breach of contract. Proceedings were issued in 2013.

With no action having been taken by Mr Kirwan, in 2018 the defendant made an application to dismiss the case for want of prosecution. The High Court deemed the delay of 5 years inordinate, inexcusable, and on the balance of justice the case was dismissed. This was due to the prejudice and reputational damage caused to the defendants by the delay. This decision was upheld by the Court of Appeal.

The Court of Appeal held that Mr Kirwan failed to demonstrate, objectively, that there was a fundamental issue concerning denial of justice in the matter being dismissed. He did not establish anything of an exceptional or unusual nature that would justify a hearing of the substantive action on the merits of his application.

In March 2023, the Supreme Court granted the plaintiff leave to appeal.

Conclusion

Significantly, the Supreme Court has confirmed that it will re-examine the principles of the Primor test, which have been applied in Ireland for nearly 20 years. It remains to be seen if the current trend leaning towards dismissals for delay will continue or if the Supreme Court decision will change the current landscape.

4. Brendan Kirwan v Marguerite Connors Trading Under The Style of MJ O’Connor Solicitors [2023] IESCDET 34

Modified Cost Orders and Cost-efficient Litigation

Deirdre Munnelly Partner, Insurance & Risk

The long-established principle that ‘costs follow the event’ was thrown into turmoil following the High Court decision in Word Perfect Translation Services Limited v The Minister for Public Expenditure and Reform1 (the Word Perfect case). The Court of Appeal decision has now clarified the position.

A court has discretion in deciding which party should pay the costs of litigation. The starting point is generally, that costs follow the event. A successful party is generally entitled to their costs. However, the Legal Services Regulation Act 2015 provides that a court needs to afford consideration “to the conduct of all parties before and during the proceedings”

Following the costs order made by the High Court in the Word Perfect case, a new starting point for assessing costs appeared to be on the horizon – did the successful party conduct the litigation in the most cost-efficient manner possible?

The High Court decision on costs

Word Perfect brought proceedings challenging the legality of a Request for Tenders on a number of grounds. At the trial, the Minister for Public Expenditure and Reform was successful in arguing that Word Perfect was not eligible to bring the proceedings.

Richard Hogan Senior Associate, Insurance

As the Minister was entirely successful in its defence of the proceedings, it sought all its costs from Word Perfect.

In its decision on costs, the High Court observed that it needs to ensure that “scarce court resources are only used when necessary” and “only to the extent necessary”. The Minister did not issue a preliminary application challenging Word Perfect as an eligible person earlier in the proceedings. As a result of this, the court found that it had failed to conduct the litigation in the most cost-efficient manner. The court held that this had financial implications for the other party and an adverse impact on the court’s resources. The costs award to the Minister was therefore reduced by 50%. In making this modified cost order, the High Court held that it was not criticising the conduct or manner in which the Minister ran the litigation.

The High Court decision created a level of uncertainty about what costs a successful party might be entitled to and how this would be assessed. The test seemed to be moving towards whether the successful party conducted the litigation in the most cost-effective way possible. The courts would be assessing the costeffectiveness of a litigation strategy with all the benefit of hindsight.

The Court of Appeal decision

Earlier this year the Court of Appeal overturned the High Court decision and awarded the Minister full costs. In so doing it reiterated that the starting point for a court is that a successful party is entitled to its costs. In departing from this starting point, the court needs to consider the Legal Services Regulation Act 2015 and whether the parties conducted litigation fairly, reasonably and proportionately to the issues at stake.

Conclusion

The Court of Appeal decision provides a useful review of the essential principles to be applied in awarding costs. Costs are awarded at the discretion of the court, the starting point remains that costs follow the event. However, where a modified costs order is sought, the test is whether the successful party behaved unreasonably in conducting the litigation. There is no requirement on the successful party to show that it conducted the litigation in the most cost-efficient manner possible.

Our Insurance & Risk team possesses considerable experience of defending complex proceedings effectively and efficiently. For more information on how we can assist your organisation, contact a member of our team.

Data Protection Litigation in Ireland

A recap of 2022 and 2023 developments

Rachel Kavanagh Partner, Head of Insurance & Risk rkavanagh@mhc.ie

The General Data Protection Regulation (GDPR) has been in force since 2018. It brought with it the concept of non-material, or non-financial, damage to Ireland. After a sluggish start, we now have some insight from the European courts on the interpretation of this concept and crucially, some Irish decisions.

2022 caselaw of note

The first insight into what a claimant needs to prove for ‘non-material damage’ was the Advocate General’s opinion in UI v Österreichische Post AG1 delivered on 6 October 2022. The AG noted that any infringement of GDPR is likely to lead to a negative reaction by the data subject and allowing compensation for ‘mere upset’ would be akin to not requiring proof of harm. He was of the opinion that there must be some threshold of harm above a de minimus (minimum) level.2

This opinion undoubtedly influenced Judge O’Donohue’s consideration of “the SIPTU claims” in the Irish Circuit Court 26 October 2022.3 SIPTU had accidentally sent its 4,000 members a document with the names and addresses of 212 employee members. Judge O’Donohue was satisfied to dismiss the claims on the basis that none of the plaintiffs had suffered any loss or damage over a de minimus upset.

The Circuit Court decision in the case of Cunniam v Fastway Couriers Ireland & Others4 shed further light on the concept of non-material damage in the Irish context. At the time of this decision, there were six preliminary references pending before the Court of Justice of the European Union (CJEU), Europe’s highest court. All of these references related to questions from Member State courts seeking clarification on how to apply Article 82 – the compensation provision, and the appropriate test for non-material damage.

The defendants argued that the proceedings should be stayed until the outcome of these preliminary references was determined. The defendants argued that there was not enough clarity on how to apply non-material damage. They contended that this was causing prejudice to defendants and unnecessarily increasing costs of litigation.

Judge O’Connor acceded to the application based on the duty of sincere co-operation placed on national courts. In ordering the stay, Judge O’Connor referenced the need to prevent multiple conflicting judgments on the interpretation of the GDPR in the absence of a sufficient level of clarity from the CJEU.

1. Case C‑300/21

2. https://www.mhc.ie/latest/insights/damages for breach of gdpr 2

3. https://www.irishtimes.com/business/2022/10/26/court throws out data protection breach claims by members against siptu/

4. https://www.mhc.ie/latest/insights/defending data breach claims in ireland 2

2023 caselaw of note

On 2 June 2023 the CJEU weighed in with its decision in UI v Österreichische Post AG5 which crucially departed from the AG’s opinion. The CJEU found that the GDPR prevented a national court from imposing a threshold of “seriousness” for non-material damage. The CJEU confirmed that the concept of non-material damage should be broadly interpreted and that was a decision for each Member State on a case-by-case basis.

Judge O’Connor judgment in Kaminski6 was the first Irish decision following this CJEU ruling. This case related to footage shown at a work meeting which clearly identified the employee plaintiff and which, he claimed, painted him in a poor light professionally. Judge O’Connor set out the factors that a court must consider when assessing compensation for non-material damage as follows:

• A mere violation of the GDPR is not sufficient to warrant an award of compensation

• There is not a minimum threshold of seriousness required for a claim for non-material damage to exist, however compensation for non-material damage does not cover “mere upset”

• There must be a link between the data infringement and the damage claimed

• Non-material damage must be genuine and not speculative

• Damage must be proved and supporting evidence is strongly desirable

• An apology where appropriate may be considered in mitigation of damages

• Delay in dealing with a “data breach” by either party is a relevant factor in assessing damages

• A claim for legal costs may be affected by these factors, and

• Even where non-material damage can be proved and is also not trivial, damages in many cases will probably be modest

Having considered the facts of the case, Judge O’Connor accepted that the plaintiff’s reaction to the incident went beyond mere upset and awarded him €2,000.

2024 – what might be in store?

The Courts and Civil Law (Miscellaneous Provisions) Act 2023 was signed into law on 5 July 2023. The Act provides that data protection claims can be issued in the District Court as well as the Circuit and High Courts. This section has not yet been commenced but when it is, it will have a significant impact on costs. The cost of issuing many of these claims in the Circuit Court and High Court often outweighs their value.

The GDPR allows for representative actions. Representative actions are not common in Ireland. One such case came before the High Court in October 2023 – Digital Rights Ireland Company

Limited by Guarantee v Discord INC 7 This case involved an application for documents which was ultimately granted, rather than a full hearing. We expect that this the first of many representative actions we will see arising from the GDPR.

Whether a PIAB authorisation is required for personal injury claims made in data breach litigation remains to be seen following the Circuit Court decision in Keane v Central Statistics Office 8

Key takeaways

Data breach litigation is still at a nascent stage in Ireland. No hard conclusions can be drawn on what is needed to be successful in a non-material damage claim and if so, how much that is worth. We await further rulings from the courts to clarify the position.

What is clear, however, is that a data controller must get their house in order once notified of a breach. It must comply with the relevant notification provisions of the GDPR. This is something that heavily featured in the Kaminski ruling and it is expected that negative conduct may upwardly influence the value of claims and potentially affect costs.

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Chambers & Partners, 2024

Rachel Kavanagh Partner, Insurance & Risk

+353 86 021 2376 rkavanagh@mhc.ie

Richard Hogan

Senior Associate, Insurance & Risk

+353 86 078 7733 richardhogan@mhc.ie

Sarah Burns Associate, Insurance & Risk

+353 86 609 1454 sburns@mhc.ie

We deal with a wide range of complex insurance claims from personal injury and employers liability to public & product liability and defamation. Our highly regarded team provides a solution driven approach to the defence of these claims. We provide commercially focused advice on issues surrounding insurance policies and their interpretation and effect. We also advise on the establishment and operation of insurance, re-insurance and captive insurance businesses in Ireland and have a depth of experience in advising in insurance merger, acquisition and restructuring transactions.

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Deirdre Munnelly Partner, Insurance & Risk

+353 86 828 9546 dmunnelly@mhc.ie

Jill Valentine Associate, Insurance & Risk

+353 6 103 7016 jvalentine@mhc.ie

Laura Keane

Senior Associate, Insurance & Risk

+353 86 010 6638 lkeane@mhc.ie

Laura Prendiville Associate, Insurance & Risk

+353 86 032 2188 lprendiville@mhc.ie