Tread carefully with fraud allegations

In the linked cases of Howley v McClean and Howley v Howard¹ , the Defendant taxpayers sought to resist proceedings by Revenue by alleging that the arrangement between Revenue and its solicitors for the provision of legal services was champertous. The taxpayers also alleged fraud against the Revenue, claiming that Revenue would misrepresent its legal costs by presenting a bill of costs higher than what was actually owed. Revenue denied the claims. 

The Court of Appeal did not accept that the arrangement between Revenue and its solicitors was champertous. It concluded that the taxpayers were fully aware of the arrangements between Revenue and its solicitors, and that the taxpayers could not demonstrate any fraud or fraudulent misrepresentation. 
In the context of the fraud allegation, the court emphasised the seriousness of alleging fraud and the need for careful consideration by litigants and legal professionals before doing so. It noted that even if such a claim is struck out at an early stage, the allegation of fraud can result in "lingering but palpable damage" to the reputation of the person or institution accused of fraud.

The court also highlighted the professional obligations of lawyers in making a claim of fraud. It concluded that the claim of fraud in this instance was unstateable and should never have been made. It criticised the taxpayers' persistence in alleging fraud despite the lack of evidence.

The court identified several potential sanctions or consequences for a party or lawyer who fails to substantiate a claim of fraud, including:

1.    Professional Consequences: The court may refer the matter to the lawyer's relevant professional body if it feels there has been a breach of the rules of that body. This could lead to disciplinary action against the legal professionals involved.

2.    Costs on a Full Indemnity Basis: The court may award costs on a full indemnity basis (or some higher basis than the norm) against parties making groundless allegations of fraud. This means the party making the unsubstantiated claim would have to cover all legal costs incurred by the other party

3.    Personal Liability for Lawyers: In certain circumstances, the court may consider whether the lawyers who pursue such groundless claims could be responsible for "holding harmless" the persons against whom such allegations are made. This means that the lawyers themselves could be held liable for an adverse costs order. 

This decision underscores the importance of careful and responsible conduct by legal professionals when alleging fraud. 

Tread carefully

¹  [2025]  IECA 77

Written by:  Killian O'Reilly