COSTS

Question 1

LOSER PAYS THE WINNER’S COSTS

Answer 1

The general rule in litigation is that the loser pays the win-ner’s costs. Costs are the fees incurred in the case. To this must be added disbursements—expenses incurred by the solicitor on behalf of their client.

Question 2

6

Costs are always at the discretion of the court. The court may depart from the usual costs rules where there has been:

Answer 2

*A failure to comply with a pre-action protocol;
*A failure to negotiate;
*A refusal to engage in ADR;
*Rejection of a Part 36 offer
*Exaggeration; or
*A failure to succeed on the whole of the claim.

Question 3

THE INDEMNITY PRINCIPLE

Answer 3

The indemnity principle states that a party cannot recover
more from an opponent than they are liable to pay their own legal representative. The limit is actual costs.

Question 4

The Standard Basis

Answer 4

The standard cost basis is where the court allows on**ly proportionate costs and exercises any doubt in favour of the paying party.

EXAMPLES
1) A District Judge is conducting a detailed assessment of a claimant’s costs in a routine road trafffic accident case. The case settled quickly after exchange of witness statements
and medical evidence. The claimant’s solicitors seek to recover the cost of spending three hours reviewing medi-
cal records. The defendant objects and contends that two hours is sufficient. The judge reviews the files. They are
short and straightforward. The judge will likely apply the standard basis and allow costs only for two hours for review

Question 5

The Indemnity Basis

Answer 5

1. The indemnity basis is used when the court has doubts in the receiving party’s favour.
2. The court **does not consider propor-tionality. **
3. The effect is that it is difficult for the paying party to object to costs unless it is able to say that it was** unreasonable for the solicitor to do the work at all**.

EXAMPLE
The District Judge then hears another assessment where the defendant is seeking costs against a claimant who not only lost the case, but also failed to follow protocol. The or-der in this case is for indemnity costs. The defendant claims eight hours for travelling to and attending two conferences with the barrister. The claimant contends that this is unreasonable, only one conference should be necessary. Noting that the order is for indemnity costs, the District Judge disregards proportionality and allows the defendant to recover the cost of attending two conferences with counsel.

Exam Tip
Be clear that you know the difference between costs
awarded on the standard and the indemnity basis and that costs will generally only be awarded on the indem-nity basis as a sanction against a party for incurring unnecessary costs by their conduct.

Question 6

ASSESSING COSTS

Answer 6

In the first instance parties should seek to agree the costs. If this is not possible, the court will have a hearing to determine the costs, which is known formally as an assessment.

Question 7

3

Types of Costs Order

Answer 7

*A stated amount for costs;
*Payment of costs up to a certain date or up to certain steps in the case; and
*An order to pay only a proportion of the other party’s costs.

Question 8

5

COSTS MANAGEMENT AND BUDGETING

Answer 8

1. The aim of costs budgeting is to limit costs.
2. In a multi-track case both parties file and exchange costs budgets.
3. The parties must file their budget with the Directions Questionnaire if the case is worth less than £50,000, or
4. 21 days before the first Case Management Conference, if the value is £50,000 or more.
5. The aim is to give the court control over costs and ensure that the parties are on an equal footing.

Question 9

Costs and Case Management Conference

Answer 9

The budgets are often considered by the judge at the Case Management Conference. When the court proposes to deal with costs at this hearing, the order will be for the parties to attend a Costs and Case Management Conference (‘CCMC’)

Question 10

3

Costs Management Order

Answer 10

1. At the hearing, the judge may make a costs management or-der (‘CMO’).
2. Once a CMO has been made, the costs budget **should not be departed from **(though there is a small percentage leeway (typically 20% at most)).
3. During the proceed-ings, if a party sees they will exceed the CMO, they must apply to the court for a new order.

Question 11

No Budget, No Costs

Answer 11

The parties need to budget for the entire action. If no budget is filed, the risk is that no costs will be awarded, only the applicable court fees.

Question 12

INTER-PARTES COSTS

Answer 12

1. Inter-partes simply means a party in the claim is awarded costs against another party; the term is used to distinguish these from a party’s own costs, which is the amount they have agreed to pay their own solicitor.
2. Such costs are usually assessed on the standard basis. The successful party may not be awarded the entirety of their legal costs, as the costs incurred will be assessed by an officer of the court. This can be done in one of two ways.
   (1) summary assessment
   (2) detailed asessment

Question 13

2

Summary Assessment

Answer 13

1. In interim applications \9excluding those on the fact track for summary judgment, interim payments, and interim injunctions where the costs are fixed), a statement of costs must be filed by the parties 24 hours before a hearing or 2 days before a trial, and the judge will make a summary assessment of the costs payable at conclusion of the hear-
   ing.
2. The court normally orders the costs to be paid within 14 days, and the receiving party is entitled to interest from the time of judgment until costs are paid.

Question 14

Detailed Assessment

Answer 14

In Multi track cases , the court is likely to order ‘detailed assessment’

Question 15

Exceptions—No Order for Costs and Fixed
Costs

Answer 15

1. On small claims track, a successful party cannot rever its legal cost, but fixed amounts can be claimed for issue fee, and for witness’s expenses and expert fee, subject to a maximum 750
2. On the fast and intermediate tracks, a successful party may, in principle, recover, legal costs, but the amount awarded is not determined by actual costs. In stead, it is determined in accordance with fixed amount set out in CPR PD45.

Question 16

PROCESS FOR DETAILED ASSESSMENT OF COSTS

Answer 16

1. The starting point is for the receiving party to prepare a
   detailed** ‘bill of costs’, which must be served on the opponent within three months of the judgment or order**.
2. The paying party files their ‘points of dispute’ within 21 days thereafter.and ask for the matter to be listed for a detailed assessment hearing. If they fail to do so, the receiving party can apply for a default costs certifcate.

Question 17

Provisional Assessment
Detailed Assessment

Answer 17

Often the bill will be ‘provisionally assessed’ by the District
Judge, which means that the District Judge will consider the
reasonableness of the bill as a paper exercise and indicate
an amount of costs that they would be prepared to sanction. There will be no provisional assessment where the costs
claimed exceed £75,000.

Question 18

Final Costs Certifcate

Answer 18

A final costs certifcate will be issued once the parties agree or following assessment. However, it is possible for the court to issue an interim costs certifcate

Question 19

Fluctuations from Budget
Detailed Assessment

Answer 19

If the bill is over 20% more than the fIgures in the costs budget, the claimant must file a statement with reasons. The court will not depart from the figures in the costs manage-
ment order without good reason.

Question 20

Time for Payment

Answer 20

Costs awarded should be paid within 14 days of the final costs certifcate.

Question 21

2

SECURITY FOR COSTS

Answer 21

1. In certain situations, a defendant may apply for a security for costs order if they are concerned that the claimant will not be able to pay the defendant’s costs if the defendant wins the
   case.
2. This is another type of interim application. If the application is granted, the claimant may be required to pay money into court or provide a bond.

Question 22

6

A security for costs order is available only for specifc situ-
ations set out in statute and court rules

Answer 22

1. The claimant is resident** outside** the jurisdiction;
2. The claimant is a company or other body and there is reason to believe that it will be unable to pay the defen-
   dant’s costs if ordered to do so;
3. The claimant has changed address since the claim was started with a view to evading the consequences of
   litigation;
4. The claimant failed to provide an address or gave an incorrect address on the claim form;
5. The claimant is acting as a nominal claimant (that is, someone suing for the benefit of another person); or
6. The claimant has taken steps in relation to assets that would make it difficult to enforce an order for costs
   against them (for example, moving them out of the juris-diction of the courts of England and Wales).

Question 23

2

Non-Party Costs Orders

Answer 23

1. The court has jurisdiction to award costs in cases involving a non-party.
2. Costs orders against non-parties are exceptional but, as costs are at the court’s discretion, it is possible in situations where the non-party funds the proceedings and controls or benefits from them. **

EXAMPLE
A non-party promotes and funds proceedings by an insolvent company solely or substantially for the non-party’s own financial beneft. In this situation, the non-party will be liable
for the costs if their claim, defence, or appeal fail

Question 24

3

WASTED COSTS ORDERS

Answer 24

1. The court can make a ‘wasted’ costs order if a solicitor’s con-duct has been improper, unreasonable, or negligent.
2. To make a wasted costs order, the court must be satisfed that:
   *The legal representative acted improperly, unreasonably, or negligently;
   *The conduct caused unnecessary cost; and
   *It is **‘just’ **to make the order.