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Differential Cost Orders

10 October 2018
We consider the cost consequences of issuing proceedings in a higher court where the value of a claim comes within the monetary jurisdiction of a lower court.  

The monetary jurisdiction of the District Court and Circuit Court in the Republic of Ireland has been increased in recent years. A plaintiff in a personal injury action in the Circuit Court can now obtain damages of up to €60,000. If a plaintiff pursues their claim above the appropriate court jurisdiction they could be penalised in terms of costs.

The Circuit Court and High Court has discretion to make an award of costs on the lower court scale where the level of damages awarded at trial is within the monetary jurisdiction of the lower court. A court will more likely award costs on the lower scale if the level of damages awarded is comfortably within the jurisdiction of the lower court. 

The recent decision of the Court of Appeal in Moin –v- Sicika and O'Malley –v- McEvoy  [2018] IECA 240 looked at the circumstances where a court ought to make a differential costs order as provided for in Section 17(5) of the Courts Act 1981 (as amended by Section 14 of the Courts Act 1991).

This decision arises from an appeal of two High Court personal injuries actions in which the trial judge in each case awarded damages of less than €42,000 and €35,000 respectively. Counsel for the defendants advised the Court that the defendants had made the plaintiffs aware of their intention to seek differential costs orders on the basis that the proceedings in each case ought to be brought in the Circuit Court. The Plaintiff in each case continued their action in the High Court.

The High Court was asked by the defendants to make differential costs orders pursuant to Section 17(5) of the Courts Act 1981 (as amended). This provision empowers a court to measure a sum the court considers to be the difference between the costs actually incurred by the defendant in the proceedings and the cost that would have been incurred by that defendant had the action been issued in the appropriate court jurisdiction and to direct the plaintiff to pay that sum to the defendant, or alternatively, to direct that the measurement of costs be dealt with by taxation. 

The trial judge made an order for costs to the plaintiffs on the Circuit Court scale and gave a certificate for senior counsel. The court directed that the cost be taxed. The court refused to make differential costs orders. 

Decision of Court of Appeal 

The defendants appealed the order for costs in each case. 

In the decision of the Court of Appeal, Peart J. noted that, "… In my view it is incumbent upon a trial judge in circumstances where an award is significantly within the jurisdiction of a lower court to make a differential costs order unless there are good reasons for not doing so. The trial judge must have regard to the clear legislative purpose, and have regard to all the circumstances of the case at hand which are relevant to the exercise of his/her discretion".

Peart J. noted that neither trial judge gave sufficient consideration to the legislative purpose of Section 17(5) nor did they give consideration to the warning given by the defendants that they would seek differential costs orders as the proceedings were in the wrong jurisdiction. He noted that the damages awarded to the plaintiffs in the High Court actions were not border line in terms of monetary jurisdiction. 

The court held that it was appropriate that the appeals should be allowed and that differential costs orders should be made in the terms of s. 17(5)(a). The orders permitted the parties to off set the costs awarded to each pursuant to Section 17(5)(a) and 17(5)(b). 

Comments 

This is an important and interesting judgement for Insurers and litigants. It highlights the cost implications for plaintiffs who pursue litigation in the wrong jurisdiction. The decision also looks at the  legislative intention behind section 17(5) of the 1981 Act and the circumstances where a trial judge should make differential costs orders.

It is worth noting that while is not a requirement of section 17(5) for a defendant to notify a plaintiff of their intention to seek a differential costs order, this would be something that a court would take into account when deciding whether to exercise discretion to make such an order. This decision from the Court of Appeal serves as a cautious reminder to litigants that pursuing a claim in the wrong court jurisdiction could result in significant cost penalties for plaintiffs. A differential costs order could significantly diminish the overall value of damages awarded as the cost of defending a High Court action will invariably be greater than the cost of bringing a Circuit Court claim. 

Authors: Liam Mills and Damien Browne

Further Reading