The Critical Importance of Bringing Your Case in the Correct Court-the Differential Costs Order

differential costs order

Choosing which Court to pursue your legal proceedings in is an important decision with a potentially costly outcome if you pursue your cause of action in the wrong Court. Two recent cases illustrate this:

  1. Moin -v- Sicika and
  2. O’Malley -v- McEvoy

Two personal injuries cases were brought in the High Court but the awards were within the Circuit Court scale. The plaintiff was awarded costs on the Circuit Court scale but the Judge refused the defendant’s request for a differential costs order.

The defendant appealed this decision to the Court of Appeal and succeeded in getting a differential costs order.

This order allows the Judge who makes the award of damages to the plaintiff on the lower court scale to order that the plaintiff pay the difference between the costs actually incurred by the defendant and those that would have been incurred if the case was brought in the correct court.

The Judge can measure these costs or order that they be taxed and the differential costs provision also provides for a set-off against the plaintiff’s costs.

The Courts Act 1981, as amended by the Courts Act, 1991, sets out the differential costs order power as follows:

“Limitation on amount of plaintiff’s costs in certain proceedings.

17.—(1) Where an order is made by a court in favour of the plaintiff or applicant in any proceedings (other than an action specified in subsections (2) and (3) of this section) and the court is not the lowest court having jurisdiction to make an order granting the relief the subject of the order, the plaintiff shall not be entitled to recover more costs than he would have been entitled to recover if the proceedings had been commenced and determined in the said lowest court.

(2) In any action commenced and determined in the High Court, being an action where the amount of damages recovered by the plaintiff exceeds £25,000 but does not exceed £30,000, the plaintiff shall not be entitled to recover more costs than he would have been entitled to recover if the proceedings had been commenced and determined in the Circuit Court, unless the judge hearing the action grants a special certificate, for reasons stated in the order, that, in the opinion of such judge, it was reasonable in the interests of justice generally, owing to the exceptional nature of the proceedings or any question of law contained therein, that the proceedings should have been commenced and determined in the High Court.

(3) In any action commenced and determined in the High Court, being an action where the amount of the damages recovered by the plaintiff exceeds £5,000 but does not exceed £15,000, the plaintiff shall not be entitled to recover more costs than whichever of the following amounts is the lesser, that is to say, the amount of such damages or the amount of costs which he would have been entitled to recover if the action had been commenced and determined in the Circuit Court.

(4) It shall not be lawful for rules of court to contain or impose any restriction on the amount of costs recoverable by any party from any other party in any action or other proceeding, but nothing in this subsection shall prevent the insertion in rules of court of a restriction on the amount of the costs recoverable which is identical with a restriction imposed by this section nor the fixing by rules of court of the amount recoverable by any person as and for the costs and expenses incurred by him in the doing of any specified thing in any particular form of action or other proceeding.

(5) (a) Where an order is made by a court in favour of the plaintiff or applicant in any proceedings (not being an appeal) and the court is not the lowest court having jurisdiction to make an order granting the relief the subject of the order, the judge concerned may, if in all the circumstances he thinks it appropriate to do so, make an order for the payment to the defendant or respondent in the proceedings by the plaintiff or applicant of an amount not exceeding whichever of the following the judge considers appropriate:

(i) the amount, measured by the judge, of the additional costs as between party and party incurred in the proceedings by the defendant or respondent by reason of the fact that the proceedings were not commenced and determined in the said lowest court, or

(ii) an amount equal to the difference between—

(I) the amount of the costs as between party and party incurred in the proceedings by the defendant or respondent as taxed by a Taxing Master of the High Court or, if the proceedings were heard and determined in the Circuit Court, the appropriate county registrar, and

(II) the amount of the costs as between party and party incurred in the proceedings by the defendant or respondent as taxed by a Taxing Master of the High Court or, if the proceedings were heard and determined in the Circuit Court, the appropriate county registrar on a scale that he considers would have been appropriate if the proceedings had been heard and determined in the said lowest court.

(b) A person who has been awarded costs under paragraph (a) of this subsection may, without prejudice to his right to recover the costs from the person against whom they were awarded, set off the whole or part thereof against any costs in the proceedings concerned awarded to the latter person against the first-mentioned person.

(6) In this section ‘relief’ includes damages.”.

The Court of Appeal held that it was incumbent upon a Judge where an award is made on the lower court scale to make a differential costs order unless there is a good reason for not doing so.

The Court of Appeal also noted it is necessary for the Plaintiff to pursue his case in the lowest court that can award what is reasonable in the circumstances of the case and if he does not do so then there is a serious costs risk.

In these cases the defendant had written to the Plaintiffs telling them that they believed the correct Court for the case was the Circuit Court and they would seek a differential costs order under under s. 17(5) of the Act of 1981 if the Plaintiff succeeded with his claim.

Read the full decision of the Court of Appeal here.

The takeaway is you need to exercise caution in which case you choose to pursue your case.

Open Offers to Settle Legal Proceedings and Legal Costs-a Warning

open settlement offers

Most people are aware that the cost of legal proceedings, particularly litigation proceedings in the High Court, are incredibly expensive.

I have previously written about certain tools you can use to compromise or settle legal proceedings: Calderbank letter and lodgments. I have also written about the use of ‘without prejudice’ communications to attempt to settle a claim and avoid the attendant legal costs.

A recent High Court decision in O’Reilly & anor -v- Neville & ors [2018] IEHC 228 by J. Binchy shows the danger of ignoring reasonable open offers-that is, offers made in open correspondence.

The facts of the case- O’Reilly & anor -v- Neville & ors

The case involved Mr. and Mrs. O’Reilly suing the defendants for breach of contract arising from defects in a dwellinghouse purchased by the O’Reillys from the defendants. J. Binchy, in relation to the substantive action, held as follows:

In summary, I made an order for specific performance, in favour of the plaintiffs of a building agreement entered into between the parties on 30th March, 2005 (the “building agreement”), and I also ordered that the defendants pay the plaintiffs the cost of renting alternative accommodation since they vacated, in August, 2010, the dwellinghouse constructed for them by the defendants pursuant to the building agreement.

However, he held over the questions of costs until a later date, and delivered his judgment on 18/01/2018.

Winner takes all and costs follow the event

The normal rule is that the winner usually has his costs paid by the losing party. This is set out in the Rules of the Superior Courts, Order 99 rule1(3):

(3) The costs of every action, question, or issue tried by a jury shall follow the event unless the Court, for special cause, to be mentioned in the order, shall otherwise direct.

The O’Reillys naturally argued that they were entitled to have their costs awarded to them against the defendants. However, the Judge can consider offers made by the defendant to try to settle the case early as Order 99 rule 1A.(1)(b) states:

(b) The High Court, in considering the awarding of the costs of any action (other than an action in respect of a claim or counterclaim concerning which a lodgment or tender offer in lieu of lodgment may be made in accordance with Order 22) or any application in such an action, may, where it considers it just, have regard to the terms of any offer in writing sent by any party to any other party or parties offering to satisfy the whole or part of that other party’s (or those other parties’) claim, counterclaim or application.

Open offers

In this case the defendants made 6 open offers in an attempt to settle the case and avoid the costs of a hearing which ultimately went on for 11 days. The Defendants argued that these offers should be taken into account by J. Binchy when deciding costs. Mr. Justice Binchy agreed.

He decided, It follows from this that the defendants should be awarded all costs incurred by them in these proceedings from 18th February 2016 onwards, save only those costs that were incurred in connection with the claim of the plaintiffs for reimbursement of the cost of renting alternative accommodation. The plaintiffs are entitled to an order for all other costs incurred by them in the proceedings i.e. all costs incurred by them up to 18th February, 2016, together with such costs as may be deemed to relate only to recovering the cost of renting alternative accommodation.

He also held: Parties to proceedings are to be encouraged and not discouraged from putting forward proposals which will lead to an early resolution of litigation with all attendant benefits, including significant savings of costs and court time. All of this is recognised by O 99, r 1 A (1) of the Rules of the Superior Courts.

Conclusion

The successful party in legal proceedings cannot always assume he will be awarded his costs as against the other party, particularly if he refuses reasonable efforts to compromise the case.

The Rules of the Superior Courts make provision for this and the High Court judges must have regard for these rules and the conduct of the parties to the proceedings.

You can read the full decision of Mr. Justice Binchy in O’Reilly & anor -v- Neville & ors [2018] IEHC 228 by clicking on the link.

Litigation Costs in Ireland-What You Should Know

litigation costs ireland

Firstly, what is litigation?

Litigation is “contentious work”, with the definition of contentious work being set out in the
Solicitors (Amendment) Act, 1994, sections 2 as follows:

“contentious business” means business done by a solicitor in or for the purposes of or in contemplation of proceedings before a court or tribunal or before an arbitrator appointed under the Arbitration Acts, 1954 and 1980

Solicitors’ fees are subject to statutory regulation in relation to both contentious and non-contentious work. Legal costs are regulated in the High Court, Circuit Court, and District Court through the Rules of the Superior Courts, Circuit Court rules and District Court rules.

Categories of Legal Costs

There are 3 main categories:

  1. Party and party (costs payable by one party to another)
  2. Solicitor and client (costs payable by one party to another on a more generous scale)
  3. Solicitor and own client (payable as a matter of contract by the client to his own solicitor).

Taxation of Costs

Taxation of costs refers to the procedure by which legal costs are measured or “taxed”. Legal costs may be taxed if a Court orders it of if a client requests that the bill be taxed, or if an arbitrator directs it.

Party and Party Costs

The Rules of the various courts set out the parameters within which the costs will be ordered to be paid. Only reasonable costs are recoverable.

Costs incurred due to overcaution or mistake or negligence are not allowable. Expenses relation to witnesses and the giving of evidence are recoverable.

Each Court has a large degree of discretion as to awarding costs in any particular circumstance, but normally costs will follow the event-this means, essentially, that the winner takes all.

The Superior Courts must also have regard for any offer made in writing in an attempt to settle a case. This gives statutory effect to the Calderbank Offer.

If a party brings an action in a higher court than was justified, that party will only be allowed costs that would have been allowable if it had been brought in the appropriate lower court.

Appendix W to the Rules of the Superior Courts contains the relevant scales for contentious work.

Types of Awards of Costs

A Court can direct the following:

  • Reserved costs (reserved until the hearing of the action)
  • Costs thrown away (due to some act or omission)
  • Costs of this hearing
  • Costs of “this day’s hearing”
  • No order as to costs
  • Costs of the day

Security for Costs

A request for an order for security for costs can be made; the Court has discretion in relation to such an order. This may occur in a case involving an application to the High Court or appeal to the Supreme Court. It can also be made against plaintiff companies or where there is a personal plaintiff who resides outside the jurisdiction.

 

The fees of counsel and expert witnesses are deemed to constitute disbursements in the taxation of a bill of costs, and details of these expenditures will need to be shown at the taxation hearing.

However, some experts’ fees, for example accountancy fees, may be more properly claimed as special damages and may not be recoverable as between party and party.

Also, the costs incurred in producing documentary evidence for the purpose of proving the case may not be allowed as between party and party.

Taxation of Party and Party Bill of Costs

In the High Court it will be necessary to lodge the following with the taxing master’s office:

  1. The bill of costs
  2. A copy of the Court order granting costs to one party
  3. A notice to tax.

The relevant rules are Order 99, rules 14-29, Rules of the Superior Courts.

In the Circuit Court the procedure is set out in order 66, rule 8.

Section 27, Courts and Court Officers Act 1995 has brought about a huge change in relation to the powers of a County Registrar and taxing masters. Up to this they could not make any value judgment as to the work carried out by solicitors and other professionals, and could just grant the “going rate”.

Now, it is part of their job to assess the work carried out vis a vis disbursements claimed and make a judgment on that and assess a fair and reasonable amount. Prior to section 27 this was not possible.

Solicitors’ Instructions Fees

This is the solicitor’s professional fee.

The taxing master, when measuring this fee, must consider the complexity of the case, the importance of the matter at issue, the value of the case, how much documentation was involved, and the time spent on the case.

Calderbank Offers and Lodgments in Court

A Calderbank offer allows a defendant to make an offer for settlement on a without prejudice basis, save as to costs. If a lodgement or Calderbank offer is refused by the Plaintiff, and he subsequently fails to be awarded a greater sum at the hearing, that Plaintiff is only entitled to his costs up unto the time of the lodgment.

Learn more about Calderbank offers and lodgments here.

Solicitor and Own Client and Solicitor and Client Costs

Solicitor and own client costs are payable as a matter of contract between solicitor and client.

There is a statutory presumption of reasonableness in assessing costs as between solicitor and client. This is set out in Order 99, rule 11(1)-(3).

This means that the person opposing the solicitor’s bill must show that the costs incurred are unreasonable or are an unreasonable amount.

Section 68(6) of the Solicitors (Amendment) Act, 1994 states:

6) Notwithstanding any other legal provision to that effect a solicitor shall show on a bill of costs to be furnished to the client, as soon as practicable after the conclusion of any contentious business carried out by him on behalf of that client—
(a) a summary of the legal services provided to the client in connection with such contentious business,
(b) the total amount of damages or other moneys recovered by the client arising out of such contentious business, and
(c) details of all or any part of the charges which have been recovered by that solicitor on behalf of that client from any other party or parties (or any insurers of such party or parties),
and that bill of costs shall show separately the amounts in respect of fees, outlays, disbursements and expenses incurred or arising in connection with the provision of such legal services.

 

68(6)(a) clearly allows a solicitor to provide a bill containing a summary of the work carried out, not necessarily a detailed bill.

Summary Bill of Costs

A summary bill of costs should contain

  1. A statement setting forth the salient features of the work carried out and professional services rendered
  2. Details of counsel’s fees
  3. All other outlays/expenses incurred

Solicitor and client costs are costs payable by one party to an action to another on a more generous scale than the normal party and party costs.

Section 68, Solicitors (Amendment) Act, 1994

Section 68 (1) of the Solicitors (Amendment) Act, 1994 provides:

68.—(1) On the taking of instructions to provide legal services to a client, or as soon as is practicable thereafter, a solicitor shall provide the client with particulars in writing of—
(a) the actual charges, or
(b) where the provision of particulars of the actual charges is not in the circumstances possible or practicable, an estimate (as near as may be) of the charges, or
(c) where the provision of particulars of the actual charges or an estimate of such charges is not in the circumstances possible or practicable, the basis on which the charges are to be made,
by that solicitor or his firm for the provision of such legal services and, where those legal services involve contentious business, with particulars in writing of the circumstances in which the client may be required to pay costs to any other party or parties and the circumstances, if any, in which the client’s liability to meet the charges which will be made by the solicitor of that client for those services will not be fully discharged by the amount, if any, of the costs recovered in the contentious business from any other party or parties (or any insurers of such party or parties).

 

The only time, in contentious matters, where a solicitor can charge a percentage of the damages which the client recovers is in debt collection matters.

If a client disputes the amount of a bill the solicitor must

  1. a) try to resolve the dispute;
  2. b) advise the client of his right to submit the bill for taxation and of his right to make a complaint to the Law Society of Ireland.

Failure by a solicitor to comply with section 68 of the Solicitors (Amendment) Act, 1994 constitutes misconduct.

However, the absence of a section 68 letter at the outset does not disallow the solicitor from pursuing his legal costs as a matter of contract. It can be taken into account, though, by a taxing master in assessing the appropriateness of the fees.

Requisition to Tax

Order 99, Rules of the Superior Courts, provides that the client may requisition a solicitor to submit the bill of costs for taxation.

A solicitor should give a requisition to tax at the same time as the bill of costs if the client wishes to have the costs taxed.

If a solicitor fails to set down a bill of costs for taxation at the request of the client, then the client can do so.

Conclusion

Legal costs, particularly in contentious matters, can quickly mount up. You should ask your solicitor for a section 68 letter at the outset which will at least give you an indication of the basis on which fees will be charged, even if an exact amount or an estimate is not possible.

For further information take a look at this page from legal cost accountants, Connolly Lowe, which appears to be very useful.