Third-Party Costs: s.17 Courts Act 1981 Inapplicable, but Circuit-Scale and “Differential” Costs Orders May Be Made by Analogy under s.168 Legal Services Regulation Act 2015

1. Introduction

Ashdrum Lodge Ltd T/A Kiernan Homes v Barbouti [No. 2] is a post-trial costs judgment delivered by Ms Justice Siobhán Stack following a 28-day High Court trial and a principal merits judgment ([2025] IEHC 522). The applications in this “No. 2” judgment concerned how costs should be allocated between:

  • Plaintiff: Ashdrum Lodge Limited t/a Kiernan Homes (the contractor in the principal proceedings);
  • Defendant: Ms Aysar Barbouti (homeowner/defendant who pursued claims over construction defects and contract administration);
  • Third Parties: David Gilligan and Gilligan Architects Limited (architects brought in by third party notice).

The costs dispute arose because, although the Defendant obtained a modest award (notably relating to defective haunching to garden walls and underpinning to the Warehouse foundations), she failed on the overwhelming majority of the contested issues that occupied the trial. The Third Parties had conceded liability in respect of the limited heads that ultimately generated the award, and they had also made a substantial Calderbank settlement offer shortly before trial.

The key legal issues were:

  • whether the mandatory costs-limiting regime in s. 17(1) of the Courts Act, 1981 applies to third party proceedings;
  • how the High Court should exercise its modern statutory discretion on costs under s. 168 of the Legal Services Regulation Act, 2015 where a party is only partially successful;
  • the weight to be given to a Calderbank offer made shortly before trial in a complex case;
  • whether a “differential costs” approach could be adopted where s. 17 is not formally applicable.

2. Summary of the Judgment

The Court rejected the Defendant’s claim to 50% of her trial costs and found that, in substance, the Third Parties had been successful in defending the issues that were actually litigated at trial. While accepting that the Defendant was entitled to some costs (reflecting the conceded defects for which she recovered damages), the Court made a calibrated order designed to (i) reflect the modest and largely conceded success, and (ii) impose the consequences of pursuing an over-extended claim to a 28-day hearing.

Orders made (under s. 168 LSRA 2015):

  1. The Defendant recovered costs on the Circuit Court scale (with a certificate for Senior Counsel) up to and including Day 1 of the trial.
  2. The Third Parties recovered their costs from Day 2 onwards.
  3. The Third Parties were granted a “differential costs order” by analogy, being the difference between (a) the High Court costs incurred up to and including Day 1 and (b) the Circuit Court scale costs that should have been incurred for that period (again including a certificate for Senior Counsel).

3. Analysis

3.1 Precedents Cited

(a) O'Connor v. Bus Átha Cliath, [2003] IESC 66, [2003] 4 I.R. 459

This was the central authority on the policy of s. 17 of the Courts Act 1981. The Court relied on Hardiman J.’s explanation that s. 17 is intended to create a “strong incentive” to litigate in the lowest court with jurisdiction, thereby reducing unnecessary expense and the social cost of “overblown” litigation.

Two distinct policy strands in O'Connor were deployed:

  • s. 17(1): A largely ex ante discipline—guiding choice of forum at institution of proceedings.
  • s. 17(5): A discretionary ex post control—allowing the court at the end of the case to impose a “price” for litigation that was more elaborate and expensive than it should have been.

Ms Justice Stack used O'Connor both to interpret s. 17 and to justify, in principle, a costs outcome that penalises disproportionate litigation—even though she ultimately held s. 17 did not technically govern third party proceedings.

(b) Murnaghan v. Markland Holdings Ltd, [2004] IEHC 406, [2004] 4 I.R. 537

This authority was cited by the Defendant to argue that the Court should give little or no weight to a late Calderbank offer. The Court distinguished it: in Murnaghan the offer came on the hearing date, remained open only for a very short time, and did not fairly allow the recipient to evaluate it. Additionally, the plaintiff in Murnaghan recovered approximately 80% of the offer (excluding costs), unlike the Defendant here who recovered roughly one third of the sum offered (and that comparison excluded potentially significant issues concerning fees).

(c) Gravity Construction Limited v. Total Highway Maintenance Limited [2021] IEHC 19

Also relied on by the Defendant on timing of offers. The Court distinguished Gravity Construction Limited v. Total Highway Maintenance Limited [2021] IEHC 19 on multiple grounds:

  • the statutory and procedural context in Gravity (a scheme aimed at interim payment pending adjudication) was materially different;
  • in Gravity the offer structure and attempt to limit opening-day costs did not reflect that most costs are incurred before Day 1;
  • in the present case, the Third Parties’ approach explicitly recognised that reality by conceding some costs up to Day 1;
  • the present case involved significant late evolution/clarification of issues (including the escalation of the walls claim shortly before trial), making the timing of the offer less blameworthy.

(d) [2025] IEHC 522 (principal judgment)

Although not a “precedent” in the usual sense, the principal judgment provided the factual and evaluative foundation for the costs decision: it recorded that the Defendant failed on virtually all contested issues, that some alleged incidents did not occur, and that the trial was prolonged by issues on which the Defendant was unsuccessful.

3.2 Legal Reasoning

(a) Statutory framework: s. 168 and s. 169 Legal Services Regulation Act 2015

The Court treated s. 168 as the principal operative power enabling nuanced and segmented costs orders, emphasising the express statutory ability to award:

  • a portion of costs (s. 168(2)(a));
  • costs from or until a specified date (s. 168(2)(b));
  • costs related to particular steps (s. 168(2)(c));
  • where a party is partially successful, costs linked to the successful elements (s. 168(2)(d)).

While s. 169 (entitlement of an entirely successful party) formed part of the legal context, the case turned on partial success and the court’s discretion to “slice” the proceedings temporally and substantively under s. 168.

(b) Does s. 17 Courts Act 1981 apply to third party proceedings?

The Third Parties argued that Order 16, rule 8 of the Rules of the Superior Courts effectively treats a defendant as “plaintiff” and a third party as “defendant” for third party procedure, bringing the case within s. 17’s text. The Court rejected that approach:

  • Textual point: s. 17 speaks in mandatory terms of “plaintiff” and “defendant”; the Court held that procedural rules cannot “alter the plain meaning” of the statute.
  • Policy point: the mischief in s. 17(1) is about encouraging the correct choice of court at the time of institution. Here, the main proceedings were properly in the High Court given the scale of the plaintiff’s claim and the Defendant’s own pleaded quantum at the time (both exceeding lower-court jurisdiction). Requiring parallel Circuit Court litigation would undermine the cost-reduction policy by creating duplication.

The Court therefore held that s. 17(1) was not applicable. Although s. 17(5) is discretionary and ex post in character, the Court indicated it too was not comfortably applicable in third party proceedings because of the statutory language (“plaintiff”) and the structural reality that the High Court forum was driven by the principal action.

(c) Using s. 168 LSRA 2015 to reach an outcome analogous to s. 17

The crucial move in the judgment is that, having found s. 17 inapplicable, the Court nonetheless used s. 168 to craft a result “analogous” to the s. 17 regime:

  • Because the Defendant’s ultimate recovery was modest (well within Circuit Court jurisdiction) and her success was limited to issues conceded in advance, the Court restricted her recoverable costs to Circuit Court scale costs up to Day 1.
  • Because the trial from Day 2 onwards was driven by issues on which the Defendant failed (and which necessitated a long trial), the Court awarded the Third Parties their costs for that period.
  • To address the additional expense of High Court litigation even up to Day 1, the Court granted a “differential” adjustment by analogy, compelling the Defendant to bear the “extra” that would not have been incurred on the proper scale.

(d) Treatment of partial success: “not an exhaustive mathematical exercise”

The Court reaffirmed that costs assessment for partial success is not a purely arithmetical exercise. Nevertheless, it considered the Third Parties’ analysis highly indicative:

  • the Defendant recovered roughly 4% of the sum claimed;
  • she succeeded on only two out of 24 issues identified from the principal judgment;
  • those successful elements had been conceded prior to trial.

This combination supported the finding that, after rejection of the settlement offer, the Defendant was “essentially, wholly unsuccessful.”

(e) Calderbank offer: relevance and timing

The Court treated the Calderbank offer as “highly material” to the s. 168 discretion. Key points:

  • Timing: although sent five days before trial, the Court found the offer not unfairly late given the lack of clarity and late-evolving scope of the Defendant’s case (including late-updated particulars and an important causation agreement only months before trial).
  • Substance: the offer (€170,250 plus costs and waiver of professional fees) was “substantially greater” than the award and, importantly, included an element that would have addressed costs exposure.
  • Litigation choices: the Court rejected the argument that the offer was defective for not specifying proportions of liability as concurrent wrongdoers; it was for the Defendant to evaluate the offer in light of risks under contribution principles.

The judgment thus signals that lateness is not a standalone disqualifier: courts will look at litigation dynamics, clarity of issues, and practical ability to evaluate the offer.

3.3 Impact

The decision is likely to matter in three practical ways:

  • Third party costs and s. 17: It provides clear High Court support for the view that the mandatory limitation in s. 17(1) Courts Act 1981 does not straightforwardly apply to third party actions, notwithstanding procedural deeming provisions in the Rules of Court.
  • s. 168 as a “toolbox” for proportionality: Even where s. 17 is inapplicable, courts can use s. 168 LSRA 2015 to replicate the proportionality effects of s. 17 through date-delimited, issue-sensitive, and scale-sensitive orders—including “differential” adjustments by analogy.
  • Settlement incentives in complex litigation: The decision strengthens the costs consequences of rejecting a realistic offer, even when made shortly before trial, especially where the rejecting party proceeds to litigate (for many days) issues on which it ultimately fails.

More broadly, the judgment exemplifies a modern Irish costs approach: proportionality is achieved not only by “who won,” but by what was reasonably pursued, what consumed hearing time, and what could and should have been avoided.

4. Complex Concepts Simplified

  • Third party proceedings: A mechanism allowing a defendant to bring another party into the case, claiming that the third party should contribute to or indemnify the defendant for any liability to the plaintiff.
  • Circuit Court scale vs High Court costs: “Scale” refers to the level of recoverable costs. If a case could have been brought in a lower court, recoverable costs may be limited to the lower-court scale to prevent disproportionate expense.
  • Differential costs order: An order requiring one party to pay the other the “difference” between the costs actually incurred in a higher court and what would have been incurred if the case had been litigated at the appropriate (lower) level. Here, that concept was applied by analogy under s. 168.
  • Calderbank offer: A “without prejudice save as to costs” offer. If rejected, it can later be used to argue that the rejecting party acted unreasonably and should bear adverse costs consequences.
  • Certificate for Senior Counsel: A court certification that it was reasonable to retain Senior Counsel, allowing those fees (if otherwise recoverable) to be included in costs.
  • Defects liability period / Final Account / certificates: Standard construction-contract administration steps intended to detect and remedy defects and finalise payment. The Court considered that derailing these processes can unnecessarily generate disputes and litigation.

5. Conclusion

This judgment’s central significance lies in how it reconciles (i) the apparent inapplicability of s. 17 Courts Act 1981 to third party proceedings with (ii) the strong legislative and judicial policy against disproportionate, over-extended litigation. Ms Justice Stack held that while s. 17 did not govern, the Court could and should use s. 168 Legal Services Regulation Act 2015 to achieve a proportionate outcome—restricting recoverable costs to an appropriate scale and period, awarding the opposing party costs for the balance of an unsuccessful trial, and imposing a “differential” adjustment by analogy.

The case stands as a clear warning that a party who presses on with a lengthy High Court trial after receiving concessions and a substantial offer—yet fails on the contested core—may recover only tightly limited costs and may face significant adverse costs consequences thereafter.