In a recent case, defendants issued a costs differential letter to the plaintiff’s solicitors putting them on notice that if the plaintiff failed to achieve an award of damages within the High Court jurisdiction, the defendants would apply to have any award of costs made in favour of the plaintiff reduced to Circuit Court costs and would seek an award of costs against the plaintiff in respect of that proportion of the defendants’ costs incurred in excess of Circuit Court costs.
Ultimately, the Court of Appeal held that there were no valid grounds on which it could justify exercising its discretion to decline to make a costs differential order in the circumstances. The plaintiff was awarded Circuit Court costs on the basis of the reduced amount of damages of €41,000 which fell comfortably within the Circuit Court’s jurisdiction. The defendants were awarded not only the costs of the appeal but also the excess costs incurred by them in defending the case in the High Court.
McKeown v Crosby & Anor
The Court of Appeal has delivered a significant ruling in the case of McKeown v Crosby & Anor [2021] IECA 139 on 11th May 2021. The principal judgment in the case was delivered by the Court of Appeal on 11th August 2020, in which the appellants were successful in having the award of damages of €76,000 made by the High Court reduced to €41,000.
At the commencement of the High Court proceedings, the defendants issued a costs differential letter to the plaintiff’s solicitors putting them on notice that if the plaintiff failed to achieve an award of damages within the High Court jurisdiction, the defendants would apply to have any award of costs made in favour of the plaintiff reduced to Circuit Court costs and would seek an award of costs against the plaintiff in respect of that proportion of the defendants’ costs incurred in excess of Circuit Court costs.
The case proceeded to trial before the High Court and following the trial, the defendants’ solicitors issued a Calderbank letter offering the sum of €47,156 plus Circuit Court costs without a certificate for Senior Counsel in settlement, subject to certain other conditions. The defendants issued a notice of appeal the day after issuing the Calderbank letter appealing against ‘so much of the judgment of O’Hanlon J (for the High Court) as concerns the award of general damages’. The plaintiff subsequently made a counter-offer or ‘reverse Calderbank’ proposing that they would settle for the sum of €61,000 plus High Court costs. This offer expired and was later repeated, however, it was not accepted by the defendants and the appeal proceeded.
The statutory framework for the resolution of costs issues is to be found in Sections 168 and 169 of the Legal Services Regulation Act, 2015 together with a recast Order 99 RSC. Judge Noonan, in giving consideration to these provisions, referred to another recent case before the Court of Appeal on the issue of quantum but in defamation proceedings, in Higgins v. The Irish Aviation Authority [2020] IECA 277. In that case, Judge Murray emphasised that:
In particular s. 169(1)(f) requires the court to have regard to whether a party made an offer to settle the matter the subject of the proceedings and if so, the date, terms and circumstances of that offer …..In the particular circumstances in which an appeal is brought to this Court only against the assessment of the quantum of damages by the High Court, the facility for the making of offers of the kind referred to in these provisions can assume decisive importance in determining what order for costs is just.
The decision
Ultimately, the Court of Appeal held that there were no valid grounds on which it could justify exercising its discretion to decline to make a costs differential order in the circumstances. The plaintiff was awarded Circuit Court costs on the basis of the reduced amount of damages of €41,000 which fell comfortably within the Circuit Court’s jurisdiction. The defendants were awarded not only the costs of the appeal but also the excess costs incurred by them in defending the case in the High Court.
It is noteworthy that Judge Noonan held that the plaintiff’s submission, that it would be unduly harsh to penalise her for costs on the double in suffering the costs of the appeal and a costs differential order in respect of the High Court proceedings, could not be regarded as a relevant consideration as to do so ‘would entirely defeat the purpose of the section as explained in the authorities to which I have referred’. Judge Noonan further commented ‘Indeed, one might reasonably ask, if this is not an appropriate case for the making of a costs differential order, what is?’
Effectiveness of the use of Calderbank offers and costs differential letters
This case should come as a warning to plaintiffs and, in particular, to their legal representatives who will need to fully consider all matters prior to making the decision as to which jurisdiction to issue proceedings in. The judgment highlights the effectiveness of the use of Calderbank offers and costs differential letters in appropriate cases, both of which can have significant costs implications for plaintiffs.
