The importance of sending costs differential warning letters recently highlighted by the Court of Appeal

The Court of Appeal recently delivered a clarifying decision in Milmoe v Chatzis and Sheldon Investments Limited t/a River Medical Group[1] in respect of costs differential orders.  The Court upheld the High Court trial judge’s decision not to make a costs differential order in favour of the Defendants, in circumstances where a costs differential letter had not been served by the Defendant during the proceedings.  The decision serves as a warning to litigants to heed the discretionary nature of such relief.

In this article, Niamh Gallagher, Senior Associate and Rachel Gleeson, Trainee Solicitor, explore the judgment and its practical implications for litigants and practitioners.

What is a costs differential order?

A costs differential order can be sought by a Defendant where a Plaintiff is granted an award of damages which falls below the monetary jurisdiction of the Court in which proceedings issued. Pursuant to section 17 of the Courts Act, 1981 (as amended) (the “1981 Act”), a Defendant can seek to recover the difference between costs actually incurred in defending the proceedings and the costs they would have incurred had the proceedings been initiated in the appropriate lower Court.

In Milmoe, the Plaintiff claimed there was a breach of duty on the part of the Defendants in her post-operative care following a breast uplift procedure.  Proceedings issued in the High Court and the Plaintiff was ultimately awarded damages in the amount of €44,460.  Brett J granted the Plaintiff an order for costs on the Circuit Court scale but declined to make a costs differential order.

What did the Court of Appeal consider?

There were two issues for consideration in the appeal; one being whether the calculation of damages had been correct and the second, whether the trial judge had erred in her refusal to grant a costs differential order given that the award fell within the jurisdiction of the Circuit Court (up to €60,000).

On the issue of damages, the Court found that the trial Judge had been entitled to use her discretion in considering her award.

In relation to the costs differential order, the Court focused on the reasonableness of the Plaintiff’s decision to commence proceedings in the High Court given the complexity of the matter and the difficulty in assessing the true value of the claim.  The Court agreed with the trial judge that in this particular case, initiation of the proceedings in the High Court was justified due to the prevailing factors at play.

The Court of Appeal considered caselaw pertaining to costs differential warning letters, which operate as formal notifications to Plaintiffs that a costs differential order may be sought.  The Court considered the trial Judge’s rationale in placing significant weight on the fact that the Defendants in this this matter had not issued a costs differential warning letter.  Brett J had highlighted that that in relevant cases such as Moin v Sicika and O’Malley v McEvoy[2], advance interaction between the Defendant and the Plaintiff had taken place about the jurisdictional issues and a warning letter had been sent in each case.

Owing to the lack of pre-trial engagement on the issue as to costs, the Court dismissed the appeal.

What should parties to litigation consider in light of the judgment?

Even if the criteria set out in section 17 of the 1981 Act is satisfied, it cannot be assumed that a costs differential order will be granted.  The discretionary nature of these orders has been highlighted by Milmoe.

Defendants should be alert to issuing a costs differential warming letter as soon as a question mark arises over the jurisdiction of a particular claim and seek to engage the Plaintiff on the issue of costs.  When issuing proceedings, parties need to carefully consider where to issue proceedings and keep this under review as investigations progress where any uncertainty exists.

[1] [2025] IECA 149

[2] [2018] IECA 240