Alistair Wilson

The Court of Appeal in Milmoe v Chatzis & Anor [2025] IECA 149 clarifies that differential costs orders under section 17 of the Courts Act 1981 are discretionary, not automatic.

Even where an award falls within the Circuit Court’s jurisdiction, a costs differential order may be refused depending on the procedural and evidential context, and the specific circumstances of a case.

Background

The plaintiff initiated legal proceedings against the defendants, a consultant surgeon (first defendant) and private clinic (second defendant/appellant), alleging negligent post-operative care following breast augmentation surgery.

The plaintiff alleged that the failure to provide antibiotics following the surgery resulted in an infection, causing additional pain, a prolonged recovery and led to more significant scarring than would ordinarily have occurred following the procedure in the absence of infection.

The High Court

The High Court accepted that a degree of scarring was inevitable as a consequence of the procedure. However, it found that additional, “over and beyond” scarring resulted from the post-operative infection.

In its assessment of damages, the court cited Reilly v Moir [2009] IEHC 169 as a reference for full value breast scarring cases. The court determined that 35 per cent of the scarring was attributable to the post-operative infection and accordingly, awarded the plaintiff 35 per cent of the full value established in Reilly.

Further, the court awarded 50 per cent of the original procedure costs and additional damages in respect of time and the impact associated with the prolonged infection, arriving at a total award of €44,460.

Notably, the High Court declined to make a differential costs order, despite the award falling within the Circuit Court’s jurisdiction, which covers personal injury claims up to €60,000.

Court of Appeal

Two issues arose on appeal:

1. Quantum – whether the calculation of damages was correct; and

2. Differential Costs Order – whether the court’s refusal to make a section 17 differential costs order was an error in principle given the award fell within the jurisdiction of the Circuit Court.

Quantum

The Court of Appeal upheld the award.

It found that in the absence of expert evidence pertaining to the infection’s contribution to the scarring, the trial judge was correct to rely on judicial precedents, including Reilly, to establish a full value figure, then apply a percentage to reflect the circumstances of the plaintiff.

The Court of Appeal also upheld the assessment that 50 per cent of the original procedure costs should be reimbursed to the plaintiff, reflecting the impact of the negligent post-operative care.

Differential Costs Order

Section 17(5) provides that a trial judge who has awarded damages to a plaintiff which fall within the jurisdiction of a lower court may order the plaintiff to pay the difference between the costs actually incurred by the defendant and those that would have been incurred had the proceedings been commenced and determined in the appropriate court.

This is referred to as a differential costs order.

The legislative intention of section 17 is to limit the amount of costs which can be awarded in a case litigated in a higher court than was appropriate. While the default position is that such an order may be made, the power is discretionary.

The Court of Appeal upheld the decision of the trial judge and found that their refusal to make a cost differential order was well within their discretion.

They emphasised two points: the reasonableness of litigating in a higher court, and the absence of a Costs Differential Warning Letter.

Reasoning

The reasonableness of litigating in a higher court

This case was initiated before the Personal Injury Guidelines came into effect. Consequently, damages were assessed under the Book of Quantum which offered no guidance on scarring.

Given the complexity of the case and the uncertainty as to valuation, the court considered that it was reasonable to commence proceedings in the High Court.

The absence of a Costs Differential Warning Letter

A costs differential warning letter is a formal notification alerting the opposing party (typically the plaintiff) that, due to certain developments, a differential cost order may be sought.

As articulated by the court in Quinlan v Quinlan (Approved) ([2025] IEHC 170), “a differential costs order will be significantly more difficult to resist where the defendant had warned the plaintiff in advance that an order would be sought if necessary”.

The applicant’s failure to send a costs differential warning letter was a significant factor in the Court of Appeal’s finding that refusing to make a section 17 order was within the trial judge’s discretion.

Conclusion

The refusal to grant a differential costs order in this case serves as a reminder that parties must be proactive in assessing jurisdiction and choosing the appropriate forum from the outset of proceedings.

Despite the damages awarded (€44,460) in this case falling squarely within the Circuit Court’s jurisdiction, the decision of both the High Court and Court of Appeal emphasises the discretionary nature of differential costs orders.

This case also emphasises the importance of procedural strategy. Defendants should be mindful of the consequences of a lack of engagement and failure to send a costs differential warning letter while plaintiffs issuing in the High Court should document the uncertainty that justifies commencing proceedings in a higher court.

• Alistair Wilson is a partner at Northern Ireland firm Tughans. He is dual-qualified and practises north and south of the border.