settlement | Terry Gorry & Co. Solicitors

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.

Going to Court over a dispute or to uphold a legal right or entitlement is all fine and dandy.

You have the opportunity to weigh up your chances of success, obtain professional advice, look at the potential outcomes, estimate the likely legal costs, and decide whether to proceed or walk away.

The decision is yours.

But, what if you are dragged into a potentially costly legal case, one not of your making?

What if somebody, encouraged by friends, family or advisors, or a combination of all three, decides to sue you in the High Court, for example?

This is not a fight of your choosing, and you are told that when it comes to legal costs in litigation in Ireland it is a case of “winner takes all”.

What if the other party is being assisted by his legal team in bringing the case on a “no win, no fee” basis, though, and may not, therefore, be as mindful of costs as you are?

And, finally, the person who is suing you is not a “mark”. In other words, if you successfully defend the case and have your costs awarded you are unlikely to be able to give this practical effect because the person suing you is a “man of straw”.

In plain English, you are not going to be paid, even though you are legally entitled to recover your costs.

What can you do?

There are two devices you can use to try to protect your position and keep your legal costs down:

A Calderbank letter
A Lodgment.

The purpose of these devices is to attempt to force a plaintiff to seriously consider settling the case, rather than going ahead to the high risk, high cost venue of the High Court, or any Court for that matter.

The Lodgment

The Rules of the Superior Courts allow a defendant to pay into Court a sum of money to satisfy a claim. The money is lodged into the Courts office in cases other than personal injuries cases. (In personal injuries cases an insurer can make a similar offer called a tender which has a similar effect, but the money does not have to be actually paid into the Court office.)

If the plaintiff does not accept the lodgment the case goes ahead to trial.

However, if the plaintiff does not win an award greater than the lodgment penal costs provision are applied.

This means that the plaintiff will have to pay the defendant’s costs from the time of the lodgment. These costs will include the cost of the trial, barristers’ fees, solicitors’ fees, experts’ fees etc.

They can be eye watering, quite frankly.

For this reason, the plaintiff would be strongly advised to consider the lodgment sum to settle the case.

The rules of the superior Courts state that the lodgment must be made at specific times in the proceedings; this can make it difficult to gauge the lodgment amount accurately because you may not have all the necessary information to make an accurate, informed decision.

Also, the Courts are reluctant to allow a lodgment outside the times laid down in eh rules.

So, is there anything else that can be done to overcome this limitation?

This is where the Calderbank letter is useful.

The Calderbank Letter

The Calderbank letter derives from an English family law case, Calderbank v Calderbank. In this case, an offer was made “without prejudice except as to costs”.

The purpose of this wording was that reference could be made to the letter in respect of costs if the offer was not accepted. Otherwise, the contents of the letter would enjoy the normal “without prejudice” status, that is, they would not be disclosed to the Court.

The Calderbank letter does not need to follow any particular structure or layout; the Courts can consider any offer in writing in deciding the reasonableness of the parties in their willingness to settle and general approach.

(a) The Supreme Court, in considering the awarding of the costs of any appeal or any application in respect of an appeal, 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 or counterclaim the subject of the appeal, or application.

(c) The High Court, in considering the awarding of the costs of any appeal from the Circuit Court, may, where it considers it just, have regard to the terms of any offer in writing sent by any party to any other party to the appeal offering to satisfy the whole or part of that other party’s (or those other parties’) claim or counterclaim the subject of the appeal. (S.I. No. 12/2008 – Rules of the Superior Courts (Costs) 2008)

Unlike with a lodgment the time allowed to serve a Calderbank letter is open, and can be done so right up to trial.

The differences between Calderbank letters and lodgments

So, the significant differences between a Calderbank letter and a lodgment revolve around

Timing-when they can be used, and
The degree of discretion the Courts have in relation to penalising a party, as to costs, who will not settle or is unreasonable-wide in relation to Calderbank letters, none in relation to lodgements which are not exceeded by the plaintiff’s subsequent award, if any.

The Calderbank letter and the lodgment are useful tools to help settle a case, and ensure costs are kept on a tight rein.