Slings and arrows

20 Dec 2018 / conveyancing Print

Slings and arrows

Mr and Mrs O’Reilly (the plaintiffs) purchased a property built in 2005 by the defendants. The house was a three-bedroom duplex at Hillrace Crescent, Saggart, Co Dublin, which cost €280,000.

The O’Reillys alleged that the property was defective.

They claimed the property had many defects that were not rectified, including condensation, mould, and fungus growth caused by poor ventilation in the attic and bedrooms. They claimed that this resulted in their sons developing respiratory infections.

After many visits to the GP and the emergency department in Tallaght Hospital, the plaintiffs – who got test results in June 2010 that showed one of their children had a mass on one of his lungs – were given medical advice to leave the property, which they did in August 2010. The plaintiffs remained out of the house and were living in rented accommodation up to the time of the trial.

Negligence

They sued the builders and developers of the property in 2017, alleging negligence and breach of duty (including that the defendants had failed to ensure that the property was free from defects that would endanger the O’Reilly family’s health).

They issued proceedings in the High Court, seeking damages for breach of contract, comprising special damages of €97,000 (which was the estimated cost of the repairs to be undertaken), special damages in respect of the cost of renting alternative accommodation, and general damages in respect of the adverse impact upon the lives of the plaintiffs.

Mr Justice Donald Binchy delivered judgment on 31 July 2017 in O’Reilly v Neville & ors and made the costs ruling in January 2018 (O’Reilly & anor v Neville & ors).

Judgment

In the July 2017 judgment, Binchy J made an order of specific performance, requiring the defendants to carry out the repairs to the property. He also awarded damages in respect of the cost of alternative accommodation. He left the issue of costs to be determined, pending submissions from the parties.

The default rule in court proceedings under order 99 of the Rules of the Superior Courts is that ‘costs follow the event’. In other words, the winning party in litigation is entitled to an order that it be paid its litigation costs by the losing party.

The plaintiffs submitted that, in obtaining an order for specific performance of the building agreement, they succeeded in the ‘event’ in the proceedings, and that they were entitled to an order for the legal costs incurred by them in obtaining the order, in accordance with the general principle that costs follow the event.

Event

The defendants submitted that it was necessary for the court to analyse the ‘event’ and to take into account the various opportunities afforded to the plaintiffs, by the defendants, to resolve the dispute pre-hearing.

The defendants, in open correspondence, had made a number of offers to resolve the dispute, all of which were rejected by the plaintiffs.

Some nine months before the matter came to trial, the defendants, in an open letter dated 18 February 2016, had set out a comprehensive mechanism for the identification of defects in the dwellinghouse, as well as the measures that would be required to rectify those defects.

In particular, the offer included the involvement of the plaintiffs’ engineer and provided for the intervention of an independent expert to resolve any dispute between the parties.

Offer

The plaintiffs had rejected the offer. Mr Justice Binchy considered the offer that had been made and then held that “the defendants cannot be criticised for the manner in which they addressed the plaintiffs’ complaints before the issue of proceedings, or for the manner in which they addressed the proceedings once issued.

On the contrary, the open offers made by the defendants to the plaintiffs with a view to resolving these proceedings were exemplary.”

The defendants sought to rely on order 99, rule 1a(1)(c) of the Rules of the Superior Courts, which provides that the High Court in considering costs may, where it considers it just, have regard to the terms of any offer in writing sent by any party to another party offering to satisfy the whole or part of that other party’s claim.

The defendants argued that the order for specific performance, which the plaintiffs obtained, was no more than they would have achieved had they accepted the offers that had been made.

Contended

The defendants further contended that the only matter that would then have had to proceed to trial would have been the claim for the cost of renting alternative accommodation, which would, it was submitted, have involved a shorter hearing.

The trial lasted for 11 days in total. In his January 2018 judgment, Mr Justice Binchy held that “the offer made in February 2016 should have been accepted and, by their failure to do so, the O’Reillys caused almost all of the costs that followed, with the sole exception of those costs that were exclusively related to the recovery of rent paid by them for alternative accommodation”.

Awarded

The defendants were awarded all costs incurred by them from the date of the final offer, except for those costs incurred in connection with the plaintiffs’ claim for the cost of alternative accommodation.

Mr Justice Binchy awarded the plaintiffs just one day of costs out of the 11-day hearing.

The decision predated the commencement of the Mediation Act 2017, which contains radical provisions that will now allow a judge to deny a party their costs – even if successful – on the basis that, if they had explored the possibility for settlement or mediation, they might have achieved settlement on the same terms as the ultimate award, without all the expenses of trial.

Exceptional

In exceptional cases, a successful party may even be ordered to pay the legal costs of the unsuccessful party.

Consequently, a well-pitched offer of settlement is now strategically very important, regardless of whether you are a plaintiff or a defendant, and a court is entitled to have regard to (and take into account) pre-trial correspondence, including without prejudice correspondence, when considering the question of costs.

A carefully crafted and drafted settlement offer, open or without prejudice, may result in settlement of the proceedings on terms that are acceptable to all sides – or, if the offer is not accepted, the offer can nonetheless be a very useful measure in contesting an application for an award of costs.

Bill Holohan
Bill Holohan
Bill Holohan is a Cork-based solicitor and mediator