Court: High Court of Justice in Northern Ireland
Judge: McAlinden J
Date: 8 November 2023

Overview of County Court Costs and Contentious Business Agreements

On 8 November 2023, the High Court handed down a game-changing judgment in the case of Christina Falls v LIDL Northern Ireland Limited. The decision provides critical clarification on the recovery of legal costs in County Court proceedings in Northern Ireland where a party has agreed to remunerate their solicitor under a contentious business agreement (CBA) for less than the prescribed scale costs under the County Court Rules (NI) 1981.

This ruling is of particular importance to both claimant and defendant practitioners, as it resolves longstanding uncertainty about whether a successful party can recover costs below scale where a CBA is in place.

Background

The case originated as a personal injury claim brought by the plaintiff, Christina Falls, against LIDL Northern Ireland Limited. The matter was heard in the County Court on 14 February 2022 and was dismissed on the merits. The plaintiff did not appeal the dismissal.

LIDL, had entered into a CBA with its solicitors, governed by the Solicitors (Northern Ireland) Order 1976. Under this agreement, the solicitors agreed to charge a percentage of the scale costs rather than the full amount. The defendant also incurred costs for counsel and an expert engineer.

Following the dismissal, the defendant’s solicitors initially submitted a bill of costs based on full scale fees. Upon realising the error, they amended the bill to reflect the reduced fees under the CBA. The plaintiff’s solicitors disputed the revised bill, arguing:

1. The indemnity principle prohibited recovery of scale costs exceeding what the client was liable to pay.
2. The County Court lacked jurisdiction to certify non-scale costs.
3. The fees for counsel and the expert were excessive.

The defendant applied to the County Court to certify the costs. On 13 March 2023, the District Judge granted the application. The plaintiff appealed that decision to the High Court.

The Appeal

The appeal was heard by Mr Justice McAlinden on 19 October 2023. The central issue was whether the County Court has the power to certify a lesser amount than the scale fee where a CBA exists.

Judgment

McAlinden J dismissed the appeal, affirming the District Judge’s decision in all respects except one minor point (relating to Article 71F, which was deemed inapplicable). The matter was remitted for certification and taxation under Order 55 Rule 5A and Rule 6 of the County Court Rules.

The Judge held that:

• Order 55 Rule 2, which mandates scale costs, must be read in conjunction with Rule 5A, which allows for taxation where a CBA exists.
• Article 66 of the 1976 Order permits third parties (such as an unsuccessful litigant) to challenge the costs arising from a CBA.
• The County Court has jurisdiction to certify or tax costs below scale where a CBA is in place.
• The disclosure of the CBA is required to enable proper scrutiny and fairness in cost assessment.

McAlinden J rejected the plaintiff’s argument that solicitors can only recover scale costs or nothing. He clarified that the Rules provide a mechanism for taxation in such cases, ensuring that the indemnity principle is upheld while allowing successful parties to recover appropriate costs.

Key Excerpt from the Judgment

“… ordinarily solicitor’s costs are as set out in the scales in Appendix 2 to the Rules. However, in county court proceedings where a contentious business agreement under Part V of the Solicitors (Northern Ireland) Order 1976 exists and an unsuccessful party in the proceedings is liable to pay the costs of a successful party in the proceedings who is also a party to a contentious business agreement, then the unsuccessful party can dispute the costs claimed and can seek taxation of the said costs and the taxation of the said costs will be carried out under the provisions of Order 55 rule 5A…”

 County Court Costs and Contentious Business Agreements

This decision is immensely helpful for Northern Ireland litigatators and those dealing with County Court Costs and Contentious Business Agreements.  It:

• Clarifies the scope of cost recovery in County Court proceedings involving CBAs.
• Reinforces the indemnity principle, ensuring parties cannot recover more than they are liable to pay.
• Empowers unsuccessful parties to challenge costs through taxation.
• Prevents windfalls for unsuccessful litigants and ensures that successful parties are not unfairly penalised.

The ruling provides a balanced and practical framework for resolving cost disputes and will help avoid procedural deadlocks where costs are contested. It also affirms the County Court’s ability to perfect its own orders in a manner consistent with fairness and statutory authority.

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Background: Sherry v Murphy & Ors

In Sherry v Murphy & Ors, the Court of Appeal considered an appeal from a High Court judgment and order that refused to fix a date for the hearing of a motion brought by a defendant. The motion challenged the adequacy of a Personal Injury Summons, with the defendant seeking several orders based on alleged failures to comply with High Court procedure and the requirements of Part 2 of the Civil Liability and Courts Act, 2004.

High Court Decision

When the motion was called, counsel for the defendant requested that a date be fixed for its hearing. This request was opposed by counsel for the plaintiff, who argued that the case’s progress was impeded because the first defendant had not yet delivered a defence and was seeking to have his motion assessed in advance.

The High Court judge ruled that the defendant should first deliver his defence and then bring his motion, which could be considered alongside the main hearing. The judge declined to strike out the motion but adjourned it generally and reserved the costs.

Substance of the Appeal

The appeal argued that the High Court judge’s discretion to adjourn the motion irredeemably prejudiced the defendant. It was contended that the order defeated the objectives of Part 2 of the Civil Liability and Courts Act, 2004 and failed to properly balance justice between the parties.

The Court of Appeal noted that while the claim that the order irredeemably defeated the Act’s objectives may have been overstated, the defendant had a valid argument that the requirements of the Act had not been met in the way the claim was pleaded.

Court of Appeal Findings

The Court of Appeal considered the correct High Court procedure and allowed the appeal, remitting the motion to the High Court for hearing. The Court acknowledged the challenges judges face in managing busy lists and limited resources, stating:

“I acknowledge that in the management of busy lists and scarce resources a significant margin of appreciation must be afforded to the list judge but in my view, he was led into error by the summary of the issues. In my view, the refusal of the High Court judge to fix a date for the hearing of the motion created a substantial risk of significant procedural unfairness coupled with a likelihood that no effective remedial action could be put in place later to address the very significant additional costs to which the first defendant was exposed in the event that his application proved to be successful.”

In the case of McHugh v Ferol, the Court examined an important issue in personal injury law: whether the uplift for less dominant injuries can exceed the value of the dominant injury award. The Court referenced the approach taken by Coffey J in The Lipinski Judgement, noting that current guidelines for general damages do not provide a clear process for calculating uplifts to ensure that a claimant receives fair and just compensation for all injuries suffered.

Understanding Uplift in Personal Injury Cases

In legal terms, “uplift” simply means to increase. The Court emphasised that damages awarded for non-dominant injuries can, in some circumstances, exceed the amount awarded for the main or dominant injury. There is nothing in the guidelines to suggest that the uplift must be limited to a proportion of the dominant injury award.

This principle recognises that claimants suffering multiple serious injuries may not be adequately compensated if the uplift is artificially restricted. By allowing the uplift to exceed the dominant injury, the Court ensures that all additional pain, suffering, and functional limitations are considered fairly.

How the Court Assessed Uplift in McHugh v Ferol

In this case, while the Court confirmed that an uplift could exceed the dominant injury award, it did not apply this principle for the specific circumstances of the claimant.

• The dominant injury was assessed at €60,000.
• The cumulative value of less dominant injuries was €65,000.
• The Judge, Murphy J, applied a practical approach, setting the uplift at half of the cumulative value, resulting in €32,500.

“Taking into account the roll-up factor and the overlap of injuries, the court considers that an uplift of €32,500 represents fair and just compensation for all the additional pain, discomfort and limitations arising from the plaintiff’s lesser injuries.”

This methodology ensures that all injuries are recognised and valued, while avoiding overcompensation for overlapping or related harms when dealing with an uplift in Personal Injury Compensation in Ireland

Lessons for Insurers in Calculating Uplift in Personal Injury Compensation in Ireland

The McHugh v Ferol judgment provides important guidance for solicitors and claimants in personal injury litigation:

• Uplifts for less dominant injuries are not automatically capped by the dominant injury award.
• Courts have discretion to determine a proportionate and fair uplift based on the cumulative impact of multiple injuries.
• Proper assessment of pain, suffering, and functional limitations is critical to ensure just compensation.
• The case highlights the importance of presenting detailed evidence of all injuries and their impact when seeking damages.

This decision reinforces the principle that personal injury awards must reflect the full scope of a claimant’s suffering, particularly where multiple injuries are involved.

Introduction on the Vehicle Trade Insurance Dispute

The High Court in London recently resolved a dispute involving an Equity Red Star (ERS) Trade Policy issued to a vehicle transport company. The case highlights how conflicting wording between a policy schedule and its certificate can affect the application of insurance coverage, particularly in the context of trade plate vehicles and personal use.

Policy Schedule vs Certificate: Conflicting Wording

The policy schedule limited coverage to a specific number of vehicles being driven on Trade Plates, with the class of use defined as “Business use of the Insured.”

In contrast, the certificate included broader coverage. It referred to “any private car or commercial vehicle the property of the policyholder or in their custody or control, including any motor vehicle bearing a trade plate number owned by the policyholder”, with the class of use described as “Use for social, domestic and pleasure purposes and for the business of the policyholder.”

Incident Leading to the Vehicle Trade Insurance Dispute

In September 2017, an employee of the insured collected a vehicle scheduled for delivery to a client. On the second day, while driving without trade plates and apparently for social or domestic purposes, the employee was involved in a collision, resulting in serious injury to a third-party driver.

This incident triggered a dispute between Allianz, the usual insurers of the transported car, and ERS, over whether the ERS policy applied in these circumstances.

High Court Judgment

Beltrami J examined the apparent conflict between the schedule and the certificate. The court concluded that the ERS policy did not apply in this case:

“I find that the conflict should be resolved in ERS’s favour. Taking the ERS Policy as a whole, the operative document which defined the insured vehicles and the cover which applied was the Schedule. That Schedule was unambiguous as to those matters. The Certificate served a different purpose and should, in the event of inconsistency, yield to the Schedule on such matters.”

Legal Principle: Schedule Prevails

This judgement reinforces the principle that, where a policy schedule conflicts with a certificate, the schedule governs the scope of coverage. Insurers and policyholders should rely primarily on the schedule when determining rights and obligations under a trade insurance policy.

Conclusion on Vehicle Trade Insurance Disputes

The ERS Trade Policy case serves as a reminder for both insurers and policyholders to carefully review policy schedules and certificates. Clear documentation is crucial to avoid disputes over coverage, particularly when vehicles are used for both business and personal purposes.