As most recently demonstrated in O’Reilly & Anor v Neville & Ors, we are seeing a trend towards a more nuanced approach to the awarding of legal costs in litigation.1

Introduction

“Justice is open to all, like the Ritz Hotel."2

Liability for legal costs can often present a significant obstacle to parties wishing to exercise rights or assert entitlements by way of litigation. It can also serve as an effective tool to deter parties from pursuing frivolous or unmeritorious claims. The courts are entrusted with the unenviable task of striking a balance between these two objectives when applying costs rules.

Order 99 of the Rules of the Superior Courts

The general rule governing litigation costs in the Superior Courts is set out in Order 99 Rule 1(3) RSC and provides that, unless otherwise ordered, costs follow the event. In essence, the losing party in litigation must pay the winning party’s legal costs.

The general rule must be read in conjunction with Order 99 Rule 1(1) RSC, which states that the costs of proceedings shall be in the relevant court’s discretion. This rule has been interpreted to mean that the courts may depart from the general rule, but only where the justice of the case so requires, and where the case in question involves special circumstances warranting such departure.3

Public interest cases

Public interest litigation is one of the areas in which the courts have tended to depart from the usual costs rule. The relevant proceedings must have a considerable element of public importance and the plaintiff must not be seeking a private personal advantage in litigating the matter, although the courts have been sure to stress that these are only two factors to be taken into account when considering whether to depart from the general costs rule. All other circumstances of the case must also be considered.4

Dardis v Poplovka

Mr Justice Barr’s decision in Dardis v Poplovka5 is a useful reminder of the perils of pursing inflated heads of loss.

In this case, the Plaintiff had been awarded the sum of €84,688.52 in respect of injuries he suffered in a road traffic accident. This amount included an award of €20,000 for loss of opportunity in the jobs market.

In the costs application that followed the substantive decision, the Plaintiff claimed that he was entitled to his costs on the basis that he had succeeded in his claim and costs should therefore follow the event in the usual way. The Defendant, on the other hand, argued that the Court should depart from the general rule in circumstances where the Plaintiff’s substantial claim for past and future loss of earnings in the sum of €620,042, which the Plaintiff claimed lengthened the trial by six days, had been described by the Court as “totally unrealistic” and had been effectively dismissed.

Mr Justice Barr found that the hearing was unnecessarily prolonged by the loss of earnings claim by approximately two days and so the Plaintiff was not entitled to his costs in respect of those days, or in respect of the costs of the two experts retained to advise upon that claim. Furthermore, the Defendant was awarded his costs in respect of two days at hearing together with the fees he had paid to his expert accountant.

O’Reilly & Anor v Neville & Ors

Order 99 Rule 1A(b) RSC allows the courts to have regard to any written settlement offer when considering the awarding of legal costs. In O’Reilly & Anor v Neville & Ors, the Plaintiffs had claimed various defects in building works carried out on their dwelling house by the Defendants, and sought damages for breach of contract. Mr Justice Binchy made an order for specific performance of the relevant agreement and ordered the Defendants to pay the Plaintiffs the cost of renting alternative accommodation.

The Defendants had made no less than five open written offers to resolve the dispute between July 2010 and February 2016.

Mr Justice Binchy described the open offers as “exemplary”, but found that only the most recent offer made on 18 February 2016 would have been likely to resolve the proceedings because earlier offers did not address all issues in dispute. By failing to accept that offer made on 18 February 2016, Mr Justice Binchy found that the Plaintiffs caused almost all of the costs that were incurred thereafter, with the exception of the costs that exclusively related to the recovery of rent paid by them for alternative accommodation. He made a costs order in favour of the Defendants in respect of all costs incurred by them from 18 February 2016 onwards, save the costs that were incurred in connection with the Plaintiffs’ claim for reimbursement of the cost of renting alternative accommodation. The Plaintiffs were entitled to an order for all other costs incurred by them in the proceedings.

Conclusion

Costs orders have the potential to impact upon parties just as much, and sometimes even more, than the substantive outcome of proceedings. It is therefore important when formulating and executing litigation strategy to give due consideration to how this will be viewed by the court when determining liability for costs.