In both cases, the High Court had awarded the plaintiffs damages for personal injury that were comfortably within the jurisdiction of the Circuit Court.
In Moin v Sicika, the plaintiff had been a passenger in a car when she sustained soft-tissue, lower-back injuries following a collision.
She was awarded damages, to include special damages, of €41,305. In O’Malley v McEvoy, the plaintiff was awarded €34,808, to include special damages.
Both awards were on a full-liability basis, with no deductions for contributory negligence. Both proceedings had issued subsequent to January 2014, and the Circuit Court jurisdiction applicable to each claim was €60,000.
It should be noted that – in each case – the defendant wrote to the plaintiff, well in advance of the hearing, stating that they were of the view that the proceedings had been brought in the wrong jurisdiction and stating their intention to seek a differential costs order.
At the conclusion of each trial, the judge awarded costs of the proceedings to the plaintiff on the Circuit Court scale, to include a certificate for senior counsel.
In each case, counsel for the defendant made an application for a ‘differential costs order’, which was refused. The defendants appealed the refusal of those applications, and the Court of Appeal allowed those appeals.
This decision may have significant consequences in both existing and future litigation in most areas of civil litigation, but especially personal injuries.
Order in the court
The term ‘differential costs order’ is a colloquial one. It describes an order that can be made pursuant to section 17(5) of the Courts Act 1981 (as amended by section 14 of the Courts Act 1991). The section provides that, where an order is made by a court in favour of a plaintiff, and that court is not the lowest court that could have made the order, the judge may make an order, if appropriate in all the circumstances, for the payment to the defendant of an amount equal to the difference between the costs of the proceedings and what the costs would have been had the proceedings been held in the lower court.
While Peart J gave some consideration to when a trial judge may measure the difference in costs and how the difference should be calculated at taxation, most of the judgment is concerned with an analysis of the discretion of the trial judge in refusing such applications, and the factors to be taken into account when exercising that discretion.
The court considered O’Connor v Bus Atha Cliath (2003) and Savickis v Governor of Castlerea Prison (2016) in arriving at its judgment.
It was submitted on behalf of the appellants that the default position should be that a differential costs order should be made unless the plaintiff could identify good reason otherwise.
Peart J accepted this reasoning and stated, at paragraph 21: “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 order unless there are good reasons for not doing so.”
He identified the starting point for a trial judge in deciding such applications as the legislative intent of the section to discourage litigation in a higher court than is necessary, and quoted Hardiman J in O’Connor: “Looking at section 17 as a whole, it seems clear that the legislative purpose is to provide a strong incentive to the institution of proceedings, generally, in the lowest court having jurisdiction to make the award appropriate to them.
In this case, it is now beyond argument that the plaintiff’s claim could have been dealt with quite adequately in the Circuit Court. This did not occur.”
Peart J also quoted Irvine J in Savickis: “Why should a defendant have to face the expense of defending an action in the High Court when the relief to which the plaintiff was entitled fell comfortably within the jurisdictional limit of a lower court?
Worse still, without the type of statutory disincentive provided for in section 17 of the 1981 act, a defendant who successfully defended such a claim might end up with an order for costs which they are unable to execute against the plaintiff and remain obliged to discharge the costs of having to meet the claim in the High Court.”
In Peart’s view, neither trial judge had sufficient regard for the legislative purpose of the section.
Having given due regard to the legislative purpose of the section, the trial judge must then have regard to the circumstances of the case in exercising his/her discretion. Peart J found that, in each case, this was inadequate, with the relevant extracts from the transcripts in each set out in the judgment.
In the first case, the trial judge expressed the opinion that, given that the plaintiff suffered a back injury, it would have been negligent not to issue proceedings in the High Court. Peart J respectfully disagreed, particularly given that the jurisdiction of the Circuit Court is €60,000.
In the second case, the trial judge expressed his conclusions briefly, stating that “where the case was one from the outset that could merit a High Court award, on one view of the case, it would be very difficult to expect a solicitor and junior counsel not to opt for the High Court jurisdiction”.
Similarly, Peart J disagreed, pointing out that, in each case, the plaintiff failed to achieve an award within the €60,000 jurisdiction by a considerable margin.
No consideration was given to the letters sent by both defendants warning of their view on jurisdiction and their intention to seek an order under section 17(5), as he held they were obliged to do so.
In that regard, he commented that, on foot of receiving such a letter, a plaintiff would need to consider the possibility of having the case remitted to a lower court.
Interestingly, at this juncture, he points out that, as provided for in section 20 of the Courts of Justice Act 1936 (as substituted by section 16 of the Courts and Civil Law (Miscellaneous Provisions) Act 2013), where a case is remitted to the Circuit Court from the High Court, the Circuit Court has jurisdiction to award damages in excess of its monetary jurisdiction.
However, he makes clear that the onus should always rest on the plaintiff to ensure that the proceedings are conducted in the appropriate court. While the warning letters sent in both cases were an important factor in the decision of the Court of Appeal, it is not clear whether such letters will be regarded as a prerequisite to applications under section 17(5).
In allowing the appeals, the Court of Appeal made an order in terms of section 17(5)(a) of the 1981 act, with the difference in costs incurred by the defendants to be assessed by the taxing master.
The order further allows those costs to be set-off against the plaintiff’s Circuit Court costs awarded in each case.
What to do?
There is no doubt that this is a watershed judgment for a lot of practitioners, and will have a major impact on a large volume of litigation that has already commenced.
There can be no doubt that the area of practice that is most effected is personal injuries; however, the principles apply to all litigation where proceedings could have been brought in a lower court.
Practitioners who act for plaintiffs should be prepared to meet applications for differential cost orders if they fail to meet the jurisdiction of the lower court.
Many will have received warning letters in this regard already, and many more such letters will issue on foot of this judgment. It is also an issue that is not confined to High Court litigation.
Many plaintiffs have received letters advising that their Circuit Court claims are more appropriate to the District Court, and there are recent cases where defendants have been successful in applying for differential costs orders in the Circuit Court in Dublin.
Similarly, defence practitioners should be advising clients that, where they believe they are defending litigation in a higher court than necessary, that a differential costs order is now a more realistic prospect and that any application will be bolstered by an early warning letter.
This judgment should be of interest to all lawyers, but especially so for personal injuries practitioners.
It is important to note that the two cases appealed were ‘straightforward’ soft-tissue personal injury claims, where special damages were not a significant feature, and without other complicating factors such as further psychological sequelae, unresolved symptoms, or risk of future complications.
If there is a likelihood that a plaintiff will fail to meet the jurisdiction, and such other factors are not present, it should be asked whether an application for a differential costs order can be credibly opposed, and on what basis.
In cases of pending High Court proceedings, if the answer is ‘no’, consideration should be given to writing to the defendant and asking them to consent to remitting the matter back to the Circuit Court with unlimited jurisdiction.
It will be interesting to see whether some defendants – insurers especially – will consent to this approach, having been historically reluctant to accept unlimited jurisdiction in the Circuit Court.
In any event, if warning letters are sent in relation to this issue, they should not be ignored.
Likewise, for proceedings that have yet to be commenced, the issue of jurisdiction needs increased scrutiny. It may be prudent to issue proceedings in a lower court and make a further application to transfer if the case merits it.
It remains to be seen whether a successful application to transfer, for example, from the Circuit Court to the High Court (where a county registrar or Circuit Court judge has assessed the case and deemed it appropriate for the higher court) would be a sufficient reason for a judge to refuse a differential costs order.
Practitioners must also be aware, and plaintiffs must be advised, that the financial consequences can be immediate, with the provisions of section 17(5)(b) allowing for the differential costs to be set off against the costs due to the plaintiff.