11. Costs

Question 1

Starting point for costs orders

Answer 1

The losing party pays the winning party’s costs

Question 2

When is a costs budget filed

Answer 2

Before the CMC

Question 3

What is on a costs budget

Answer 3

1. Costs incurred to date
2. Costs anticipated in the future

Question 4

What is the effect of imposing a CMO on the multi-track

Answer 4

1. If party awarded costs on standard basis they will normally recover amount of its last approved budgetted cost
   - can only depart if very good reason (costs of a phase not incurred at all or much less than budgetted)
2. Costs awarded on indemnity basis and incurred costs assessed in the normal way

Question 5

What costs are recoverable on the small claims track?

Answer 5

legal costs are not recoverable, only costs payable will relate to disbursements

Question 6

On fast and intermediate tracks when might fixed costs be varied on judgement

Answer 6

A party’s fixed costs may be increased as the paying party or decreased as a receiving party by 50% for ‘unreasonable conduct’

Question 7

What are costs assessed summarily?

Answer 7

This applies when costs are not fixed and involves the court determining the amount payable immediately, at the end of the hearing

Question 8

When should a court make a summary assessment of costs

Answer 8

Any hearing which has not lasted for more than a day
- Parties must file and serve a statement of costs atleast 24 hours prior to this interim hearing

Question 9

Detailed Assessment of Costs: when will this be made?

Answer 9

Generally the case for multi-track cases or cases where a summary assessment cannot be made (ie. not enough time)

Question 10

Process of a detailed assessment

Answer 10

within three months of the date of the judgement or order, the receiving party must serve on the paying party a notice of Commencement of detailed assessment proceedings together with their bill of costs and evidence in support (ie. receipts)

Question 11

What if a party wants to challenge a bill of costs presented to them on a detailed assessment?

Answer 11

1. They have 21 days to serve points of dispute
2. The receiving party has 21 days to file a reply
3. the receiving party must file request for assessment hearing within 3 months of the expiry of the period for commencing detailed assessment proceedings
4. if the costs claimed are less than 75 000 the court undertakes a provisional assessment where the judge decides what costs are allowable in the absence of the parties
5. If either is unhappy with this they may request an oral hearing within 21 days, but if the party fails to achieve an adjustment in their favour by at least 20% they will be ordered to pay the costs of the hearing

Question 12

When is the question of costs addressed for interim hearings?

Answer 12

At the end of each interim hearing
- will be considered summarily unless fixed costs apply

Question 13

Factors relevant when assessing the amount of final costs

Answer 13

General Rule: CPR r 4.44 sets out factors to be considered in multi-track claims

1. conduct of parties and efforts made to try to resolve dispute
2. value of money or property involved
3. importance of the matter to the parties
4. the complexity of the matter
5. the skill, effort, specialised knowledge and responsibility involved
6. the time spent on the case
7. the place and circumstances in which the work was done; and
8. the receiving party’s last approved or agreed budget

Question 14

The standard basis of assessing costs

Answer 14

costs awarded on this basis must be proportionate to the matters in issue
- must be reasonably incurred
- must be reasonable in amount (or will be deducted)
- total costs are proportionate if they bear a reasonable relationship to the sums in issue, the value of non-monetary relief in issue, the complexity of the litigation, any additional work generated by the conduct of the paying party etc…
- Any doubt will be resolved in favour of the paying party

Question 15

Stage 1 of assessing costs on the standard basis

Answer 15

The first stage requires the judge to go through the bill on a line by line basis, scrutinising each point in turn. Any items deemed to be unreasonably incurred or unreasonable in amount will be disallowed.

Question 16

Stage 2 of assessing costs on the standard basis

Answer 16

The proportionality of the overall figure must then be assessed by reference to the factors listed in Part 44 (above)

• If deemed to be proportionate, no further assessment is required.
• If not, the judge will then scrutinise various categories of cost, such as disclosure or factual evidence, to decide whether they should be further reduced. Once any such reductions have been made, the resulting figure is the final amount of the costs assessment.

Question 17

The indemnity basis of costs

Answer 17

Costs awarded on the indemnity basis are awarded as a penalty, usually to reflect the court’s displeasure with conduct. Costs must be

1. Reasonably incurred and
2. reasonable in amount
   - Any benefit of the doubt is given to the receiving party

Question 18

When can the court make a NON-Party cost order

Answer 18

This would only be the case if this non-party was the ‘real party’ interested / responsible for bringing proceedings.

Question 19

Procedure for making a non-party costs order

Answer 19

Before an order can be made, the third party must be added as a party to the proceedings and may attend the hearing when the court determines the issue of costs.

• No need for them to have acted improperly to have a costs order imposed against them

Question 20

Security for costs order: who can apply for it and when

Answer 20

Security for costs can be applied for by a defendant, or a claimant defending a counterclaim or a defendant to a Part 20 additional claim - only whilst court proceedings are ongoing

Question 21

When will the court make an order for security of costs

Answer 21

The court has the discretionary power to make an order for security for costs if:

1. it is satisfied, having regard to circumstances in the case that it is just to make such an order and
2. one or more of the conditions in Part 25 applies
   - claimant resident outside a 2005 Hague Convention State (company: where its central control is)
   - claimant is an impecunious company (unable to pay costs)
   - claimant has taken steps to make enforcement difficult

Question 22

Procedure for security for costs

Answer 22

Defendant should write to claimant and ask for security to be provided voluntarily. If not, D should submit notice of application to the court with a WS in support.

• Evidence must establish that a condition(s) exists, persuade the court it is just to exercise its discretion in favour of the defendant and justify the amount sought while referring to defendant’s cost budget and include any earlier request made for security and any response
• if order granted, it will specify amount of security, date by which claimant must provide it and firm it will take (most common: payment into court)

Question 23

If a settlement has been reached prior to proceedings - are legal costs recoverable

Answer 23

the prospective claimant will not be entitled to recover their legal costs unless this has been agreed.

Question 24

If settlement is reached AFTER the commencement of litigation - are legal costs recoverable

Answer 24

the terms should be recorded in a consent order or a Tomlin order to ensure that enforcement proceedings may be issued to recover any monies due under the agreement, including costs.

Question 25

Part 36 Offers:

Answer 25

Specific types of settlement offers - with consequences if a party makes a ‘wrong decision’

Question 26

Requirements for a Part 36 offer to be valid

Answer 26

1. be in writing
2. make clear it is made pursuant to Part 36
3. specify a period of not less than 21 days during which, if the offer is accepted, the defendant will pay the claimant’s costs (’relevant period’); and
4. state whether it relates to whole of the claim or to part of it and whether it takes into account any counterclaim

Question 27

Will a trial judge be aware of a Part 36 offer when it is decided?

Answer 27

Part 36 offer treated as ‘without prejudice save as to costs’ so trial judge not made aware of it until case has been decided (both liability and quantum) - only introduced when costs are being dealt with

Question 28

When is a part 36 offer treated as ‘made’

Answer 28

When it is deemed served on the other party

Question 29

Effect of Acceptance of a Part 36 Order within the relevant period

Answer 29

If D makes offer + accepted by C - sum must be paid to claimant within 14 days
- Claimant is also entitled to their costs of the proceedings up to the date on which notice of acceptance is served on D on standard basis for multi-track and fixed for F+I tracks

If C makes offer + accepted by D - D must pay money to C within 14 days
- D pays C’s costs up to date of acceptance on standard basis for multi-track and fixed for F+I tracks

Question 30

Effect of Late Acceptance: Claimant Accepts Defendant’s Part 36 Offer Late

Answer 30

1. D pays C’s costs up to the date on which the relevant period expired; and
2. the claimant pays D’s costs thereafter until the date of acceptance

Question 31

Effect of Late Acceptance: Defendant Accepts Claimant’s Part 36 Offer Late

Answer 31

D pays C’s costs up to the date of acceptance on the standard basis in multi-track and FC in the F+I tracks

Question 32

When would it be unjust for the court to penalise a claimant / defendant for not accepting a Part 36 Offer

Answer 32

It may be unjust where the offeror has not provided sufficient disclosure to allow the offeree to make an informed decision; or, for example, the Part 36 offer expired only days before the trial and crucial allegations that had not been pleaded were raised in the opening of the case.

Question 33

Claimant’s Part 36 Offer: C wins at trial and is awarded a sum that equals or beats their own offer

Answer 33

1. D must pay ‘extra damages’ or 10% on damages of up to 500 000 and 5% of damages exceeding that amount (up to a maximum of 75 000)
2. From Day 22 onwards, the percentage rate of interest that is charged on some or all of the damages awarded increases to a rate not exceeding 10% above the base rate – higher than the usual rate claimed in most proceedings (this is for some or all of the period from Day 22 onwards)
3. Multi-track: However, the effect of Part 36 is that the defendant is ordered to pay those costs on the indemnity basis from Day 22 onwards. This will result in the claimant being able to recover more of their costs.
4. F+I tracks: the claimant is entitled to an amount equivalent to 35% of the difference between the fixed costs for the stage applicable when the relevant period of their Part 36 offer expired and the stage applicable at the date of judgment.
5. interest is awarded on those indemnity or enhanced fixed costs and this may be as high as 10% above the base rate. (running from day 22)

Question 34

Claimant’s Part 36 Offer: C wins the case but obtains a judgement less than their own offer

Answer 34

No extra penalty is imposed on either party (claimant was right to make an offer must made it too high whereas D was right to turn it down for the same reason)

Question 35

Claimant’s Part 36 Offer: C loses at trial

Answer 35

The claimant would be ordered to pay the defendant’s costs on a standard basis (multi-track) or fixed costs (fast and intermediate track) and would not be awarded damages at all

• Part 36 would have no effect

Question 36

Defendant’s Part 36 Offer: Claimant wins at trial and beats D’s Part 36 offer

Answer 36

The defendant would be ordered to pay:

• amount of judgement plus interest claimed in the particulars of claim; and
• claimant’s costs on the standard basis (multi-track) or fixed costs (fast and intermediate costs)
• Part 36 has no effect

Question 37

Defendant’s Part 36 Offer: C wins at trial but fails to beat D’s part 36 offer

Answer 37

the court will make an order which punishes the claimant financially for continuing with the claim when they should have accepted the offer (making a ‘split costs’ order)
a. Defendant pays claimant’s costs on standard basis (multi) or fixed costs (fast and intermediate) from when those costs were incurred until the relevant period expired (Day 21)
b. After, claimant pays defendant’s costs on the standard basis (multi) or fixed (fast and intermediate) from date of expiry of relevant period (Day 22) until judgement; plus
c. interest on those costs (commercial rate of 1% or 2% above base generally adopted)

Question 38

When assessing costs on the standard basis (with a CMO) when will the court depart from budgeted costs (if at all)?

Answer 38

If there is likely to be good reason to do so

ie. mediation is budgeted for but the costs were never incurred

Question 39

How long does a Part 36 offer remain ‘open’

Answer 39

Open for acceptance by an offeree until offeror either withdraws it by serving written notice of withdrawal or its terms are changed by serving a written notice of change

Question 40

If two parties reach a settlement outside of court that they wish to remain CONFIDENTIAL in its terms. What should they do?

Answer 40

Make a Tomlin order, referring to a separate agreement identifiable only by date, stated to be confidential

• if schedule is used it may be open to scrutiny by third parties even if marked confidential