Litigation Costs will not always follow the event - DAC Beachcroft

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Litigation Costs will not always follow the event

Published 31 July 2018

O'Reilly & Anor v Neville & Ors (2018)

On the 21 July 2017 Mr Justice Binchy in the High Court took the position that where an open offer to settle has been made but refused by the other side, the Court may depart from the normal rule that the costs of the litigation follow the event.

The Dispute

In O'Reilly & Anor v Neville & Ors [2018] IEHC 228, the Plaintiffs and Defendants were parties to a building agreement for a dwelling house. The Plaintiffs claimed various defects in the building works and ultimately sought damages for breach of contract. Following the hearing of the eleven day trial, Mr Justice Binchy delivered a judgment on the substantive issues on 31 July 2017. The judge made an order for specific performance of the building agreement followed by an order that the Defendants pay the costs of the Plaintiffs' alternative rented accommodation.

The only decision that remained related to the costs award. The Plaintiffs argued that as they had succeeded in the "event" in the proceedings they were entitled to an order for the costs incurred by them explaining that this was not a case which the Court should depart from the general rule.

Order 99, Rule 1(3) of the Rules of the Superior Courts sets out the normal procedure that costs follow the event unless the Court, for special reasons, directs otherwise.

The Defendants argued that Order 99, Rule 1.A(1)(c) (consideration of open offers) requires the Court, in considering the awarding of the costs of any action or application, and where it considers it just, to have regard to the terms of the offer in writing sent by any party to any other party offering to satisfy the whole or part of that other party's claim, counterclaim or application. (This rule does not apply to lodgements into Court or tender offers in lieu of lodgement which are dealt with in Order 22). The Defendants relied on various open offers made to settle the dispute (6 in total), to argue that throughout the litigation, the Defendants tried, but failed, to engage with the Plaintiffs to resolve the matters in dispute.

Decision – Parties should be encouraged towards early resolution of litigation

In deciding this matter, the High Court looked to an offer letter sent on 18 February 2016 which, the High Court held, should have been accepted. The High Court decided that the Plaintiffs failure to accept this offer caused almost all of the costs that followed. In awarding the Defendants' their costs from 18 February 2016 onwards, Binchy J. was clear when stating that Plaintiffs should not be free to refuse offers such as these "with impunity". He 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".

Litigants should not presume that if they are successful at trial they will automatically obtain their party-party costs from the losing party. Parties should be mindful to properly engage with and consider any open offers made as evidenced in this case, the Court will assess the parties' open efforts to settle when making an award of costs.

Authors

Laurence Mulligan

Laurence Mulligan

Dublin

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