Case highlights the risk of ignoring reasonable open offers

Risks of ignoring reasonable open offers

The recent High Court case of O’Reilly & anor v Neville & ors [2018] has highlighted the need for Plaintiffs to consider reasonable offers and attempts by the Defendants to settle matters or risk not recovering their party-party costs even when successful in the action.

The case arose from an alleged defective dwellinghouse, which the Plaintiffs purchased from the Defendants. The Plaintiffs claimed various defects in the building works and sought damages for breach of contract and compensation for the inconvenience, distress and upset they had suffered. Binchy J ultimately made an order for specific performance of the building agreement and ordered the Defendants to pay the costs of the Plaintiffs alternative renting accommodation. The issue of costs was dealt with at a later date (January 2018) and has raised a red flag for Plaintiffs and their solicitors in considering open offers made by the Defendants to settle a matter before the Courts.

The Plaintiffs sought their costs on the basis that they had been successful in their action. Ordinarily, under Order 99.r.1(3) of the Rules of the Superior Courts, costs follow the event unless the Court, for special reasons, otherwise directs. The case in question lasted 11 days in the High Court and consequently costs would have been quite substantial.

The Defendants in opposing the Plaintiffs claim for costs relied on the fact that they had made 6 open offers to settle the dispute, the final open offer having been made in February 2016. They argued that throughout the litigation, they had tried but failed to engage with the Plaintiffs to resolve the matters in dispute. They argued that Order 99 rule 1 A(1)(c) requires the Court , where it considers 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.

Binchy J held that the final offer made by the Defendants in February 2016 should have been accepted by the Plaintiffs. He stated that this letter of offer “provided a comprehensive mechanism for the objective identification of defects in the dwellinghouse as well as the measures required to address those defects”. The failure of the Plaintiffs to accept this offer had caused almost all of the costs that followed. Binchy J accordingly awarded the Defendants their costs from February 2016 onwards and stressed that Plaintiffs should not be free to refuse offers such as these “with impunity”. Binchy J held that:-

“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”

The ruling of Binchy J is a stark warning that success in court proceedings does not automatically mean that the successful party is entitled to its costs. All parties to litigation should properly consider any open offers made to resolve the matter.