Recovery of costs in the County Court of Northern Ireland: a moment of clarity?

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 case centred around the issue of costs recoverable under the ‘scale costs’ provided for under the County Court Rules (NI) 1981 (the Rules) and subsequent amendments, where a party has agreed to renumerate their solicitor a sum lower than the amount prescribed under the Rules.

Kennedys represented the defendant, LIDL Northern Ireland Limited.

Background

The case began life as a County Court personal injury action which was heard before the District Judge on 14 February 2022. The Judge dismissed the plaintiff’s action on the merits, with costs following the event. The plaintiff did not appeal the decision.

The defendant and their solicitors had a contentious business agreement (CBA) between them concerning actions in the County Court. The CBA was governed by the terms of the Solicitors (NI) Order 1976 (the 1976 Order). Under the CBA, the defendant had agreed to pay their solicitors a percentage of the scale costs applicable. In defending this case, the defendant had incurred costs for their solicitor, and for instructing counsel and an expert witness engineer.

The scale costs provided in the County Court are set figures for the amount that solicitors and counsel are entitled to charge for accepting instructions on a case. The County Court has jurisdiction to hear cases of up to £30,000. Unlike the High Court in Northern Ireland, the County Court does not have a general power to have inter-partes costs taxed. The basis for this is that, with scale costs, there is a degree of certainty with what parties to a County Court action can recover.

On successfully defending the case, the defendant’s solicitor sent a bill of costs in error to the plaintiff. When this was amended and re-sent to the plaintiff, her solicitors disputed the defendant solicitors' professional fee for two main reasons. First, the defendant’s solicitor could not recover scale costs as this would be a breach of the indemnity principle (i.e. that a solicitor cannot recover a higher amount for costs than it would otherwise be entitled to recover from a client). Second, the defendant was unable to recover ‘non-scale fees’ (i.e. those which were not provided by the Rules). Counsel’s fee and the engineer’s fees were also claimed to be excessive.

The defendant applied to the County Court asking it to certify the costs sought from the plaintiff. That application went before a District Judge on 13 March 2023, who granted the application.

On 21 March 2023, the plaintiff appealed the District Judge’s decision on costs to the High Court. The Honourable Mr Justice McAlinden heard the appeal on 19 October 2023.

Judgment

McAlinden J dismissed the appeal. He upheld the District Judge’s decision in all aspects bar one (which had been abandoned by the defendant). The Judge directed that the case be remitted back to the District Judge for certification and taxation of the appropriate elements under Order 55 Rule 5A and Rule 6.

McAlinden J set out the heart of the matter, namely; if a plaintiff’s claim is dismissed, whether the County Court has the power to certify a lesser amount than the scale fee set out in the Rules in respect of the defendant solicitor’s costs where there exists a CBA agreeing a fee less than County Court scale. He identified that Order 55 of the Rules, which deals with costs, sets out that: “A decree granted in the county court shall, except as otherwise provided by any statute or rule, carry such costs as are provided by this Order”.

In unpacking the various provisions for costs in the Rules, McAlinden J identified a specific power for the County Court under Order 55 Rule 5A which related to the taxation of costs under Part V of the 1976 Order in respect of contentious and non-contentious business. This governs the rules concerning renumeration between a solicitor and client. By operation of Article 66 of the 1976 Order, any disputes concerning renumeration to a solicitor also extends to a person who: “is or is alleged to be liable to pay, or is or claims to be entitled to be paid, the costs due or alleged to be due in respect of the business to which the agreement relates”. He commented that there was a common misconception that these provisions are limited to disputes between parties to a CBA. He said that Order 55 Rule 5A was inserted into the Rules after the introduction of the Solicitors (Amendment) (Northern Ireland) Order 1989 to bring effect to the provisions of Part V of the 1976 Order. The Judge further stated that Order 55 Rule 5A cannot be limited to disputes between solicitors and their clients.

The Judge rejected the plaintiff’s argument that solicitors can only recover scale costs or nothing in the County Court. He stated that Order 55 Rule 2 mandates the use of the scales set out for solicitor and counsel in Appendix 2: “subject to the provisions hereinafter in this Order specified”. He stressed that this qualifying provision was very important in that this rule must be read in conjunction with Order 55 Rule 5A.

McAlinden J then summed up the position under the Rules:

“… 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. This process involves the disclosure of the contentious business agreement to the court and any other party entitled to be heard on the taxation”.

Comment

This decision will be of great importance to both defendant and plaintiff practitioners in Northern Ireland, as well as their clients. The uncertainty created by the misconception about whether a party could recover an amount less than scale costs has now been clarified.

In essence, a successful defendant in the County Court is entitled to have the Court certify the amounts sought from an unsuccessful plaintiff in respect of costs. A plaintiff is entitled to dispute the amount sought. In the Court determining whether costs should be allowed, disclosure of a CBA will be required. This procedure balances the rights of both parties in allowing a Court to certify and perfect its own order in regards to costs, and also ensures that a plaintiff has a right to challenge the position.

This procedure will enable practitioners to progress disputes in a proper manner, rather than creating an impasse of cases where parties are not paid at all and unsuccessful parties are giving an unmerited windfall for having their case dismissed.

A copy of the judgment can be found here.