12) Costs Flashcards
General Rule
The term ‘costs’ includes solicitor’s charges, disbursements such as court fees, expert’s fees and
even pre-action costs. The unsuccessful party pays the successful party’s costs.
Cost management and budgeting
Before the case management conference is heard, the
parties must file a costs budget setting out the costs incurred to date and those anticipated for
the future. The court may also impose a costs management order giving greater control over costs
Effect of costs management order
A party awarded its costs on the standard basis at trial will normally recover the amount of its last approved or agreed budgeted costs. On the standard basis, the court may depart from the budgeted costs only if persuaded there is a good reason to do so, for example where the costs of a phase were:
∘ not incurred at all; or
∘ much less than budgeted.
Costs awarded on the indemnity basis and incurred costs will be assessed by the court in the usual way,
Procedure for determining costs - Small claims track
Legal costs are not recoverable and so the costs payable will only relate to disbursements.
Procedure for determining costs - Fast and intermediate tracks
Fixed costs apply. The court must will assign it to a complexity band which determines the amount of legal costs that can be recovered. In general, the higher the band of claim and the later that settlement is reached or the closer to trial, the higher the costs payable by the loser to the winner.
Procedure for determining costs - Multi-track
Summary or detailed assessment of the costs will be carried out.
Procedure for determining costs - Multi-track - Summary Assessment
Only where costs are not fixed. It involves the court determining the amount that is payable immediately, at the end of the hearing. The general rule is the court should, unless there is a good reason not to do so, make a summary assessment of the costs at any hearing that has not lasted more than a day. The parties must file and serve a statement of costs – a detailed breakdown of their costs – at least 24 hours before.
Procedure for determining costs - Multi-track - Detailed Assessment
If the court cannot make a summary assessment of costs an order will be made for the detailed assessment of those costs. Within three months of the date of the judgment 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, such as receipts.
Procedure for determining costs - Multi-track - Detailed Assessment - Challenging the bill
- The paying party has 21 days to serve points of dispute
- The receiving party has 21 days to file a reply
- The receiving party must then file a request for an assessment hearing within 3 months of the expiry of the period for commencing detailed assessment proceedings
- if the costs claimed are less than £75k the court undertakes a provisional assessment
Inter-partes costs (costs the losing party has to pay) - Interim hearing
Means between the parties. At the end of each interim hearings, the question of costs must be considered. Unless fixed costs apply (as on the fast and intermediate tracks), the judge will determine who is to pay the costs of the particular application and will usually summarily assess the amount.
Inter-partes costs (costs the losing party has to pay) - Final Hearing - Factors for assessing costs
To assist the judge in multi-track claims factors which the court should take into account in deciding the amount of costs the receiving party is entitled to:
- conduct of the parties and the efforts made to try and resolve the dispute
- value of any money or property involved
- importance of the matter to the parties
- complexity of the matter
- skill, effort, specialised knowledge and responsibility involved
- time spent on the case
- place and circumstances in which the work was done
- receiving party’s last approved or agreed budget
Inter-partes costs - Final - Standard basis
The standard basis will apply in most multi-track cases and costs awarded on this basis must be proportionate to the matters in issue. Total costs will be proportionate if they bear a reasonable relationship to the sums in issue, the value of any non-monetary relief in issue, the complexity of the litigation, any additional work generated by the conduct of the paying party and any wider factors.
Inter-partes costs - Final - Indemnity basis
Are awarded as a penalty, usually to reflect the court’s
displeasure with the manner in which a party has behaved either pre-action and/or during
proceedings. Costs on this basis must be:
(a) reasonably incurred; and
(b) reasonable in amount.
Non-Party costs
If the losing party can’t pay the costs the court has a discretionary power to make an order that a non-party meets the costs. The court would have to be satisfied that the non-party was the real party interested in the litigation or that they were responsible for bringing the proceedings. 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.
Security for Costs
For defendants worried about not receiving money if they win. Security for costs will help.
Security for Costs - The Order
The court has the discretionary power to make an order for the security for costs if:
- it is satisfied, having regard to all the circumstances of the case, it is just to make such an order; and
- one or more of the conditions apply
Security for Costs - The Conditions
Defendant can apply where:
1) Claimant is resident out of the jurisdiction and is not resident the EU
2) There is reason to believe the claimant will be unable to pay the defendant’s costs if ordered to do so. Evidence of the company’s financial assets and the
likely total costs of the litigation will be essential.
3) The claimant has taken steps in relation to their assets such that, if they lose the case and a costs order
is made against them, the order will be difficult to enforce. Failure to disclose assets.
Security for Costs - Justness
Just to make the order. Factors are important:
- The strength of the claim and the defence - the less likely the defendant is to win at trial the less justified they are in seeking security
- The claimant’s ability to provide security
- The causes of the claimant’s impecuniosity - claimant may be able to persuade the court that their poor finances are caused by or contributed to by the defendant’s behaviour
- Property within the jurisdiction
- The timing of the application
Part 36 Offers - Formalities
The offer must:
- be in writing;
- make clear it is made pursuant to Part 36;
- 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
- state whether it relates to the whole of the claim or to part of it and whether it takes into account any counterclaim
Part 36 Offer - Service
The offer is made when it is served on the other party and the rules of deemed service apply. It is inclusive of interest until the relevant period expires
Part 36 Offer - Without Prejudice
Treated as ‘without prejudice save as to costs’. The trial judge will not be made aware of the offer until the case has been decided. Only unless the issue of costs fails to be dealt with will any relevant offer be produced to the judge.
Part 36 Offer - Acceptance
May be accepted at any time unless notice has been given of its withdrawal. There will be adverse costs consequences of late acceptance.
Part 36 Offer - Acceptance within relevant period
The sum must be paid to the claimant within 14 days and, if not, they can enter judgment. They are also entitled to their costs of the proceedings up to the date on which the notice of acceptance is served.
Part 36 Offer - Late Acceptance
If the claimant accepts a defendant’s offer after the relevant period has expired and the parties cannot agree costs, the court will normally order that:
(a) the defendant pays the claimant’s costs up to the date on which the relevant period expired; and
(b) the claimant pays the defendant’s costs thereafter until the date of acceptance.
However, if the defendant accepts the claimant’s offer late, the defendant will usually be ordered to pay the claimant’s costs of the proceedings up to the date of acceptance.
Part 36 Offer - Effect of non-acceptance
The proceedings will continue. The penalties will be imposed from the day after the relevant 21 day period for acceptance expires (namely, from Day 22) and will apply unless the court rules that it would be unjust to do so.
Part 36 - Consequences at trial of a claimant’s offer - Outcomes
If the claimant makes a Part 36 offer, there are three possible outcomes. They could:
(a) win at trial and be awarded a sum that equals or beats their own offer;
(b) win the case but obtain a judgment that is less than their own offer; or
(c) lose at trial.
Part 36 - Consequences at trial of a claimant’s offer - Claimant wins at trial and equals or beats their own offer
The claimant will get:
1) Additional amount
+
2) Up to day 21
+
3) From day 22 to judgment
Part 36 - Consequences at trial of a claimant’s offer - Claimant wins at trial and equals or beats their own offer - Additional amount
As the defendant has lost at trial, they will be ordered to pay damages and interest in the usual way (the sum awarded). However, the defendant will also be required to pay an additional amount – effectively ‘extra’ damages.
(a) For damages of up to £500,000, the defendant must pay an additional amount of 10% of the sum awarded.
(b) For damages in excess of £500,000 and up to £1 million, 10% of the first £500,000 is payable and thereafter, 5% up to a maximum of £75,000. The remaining penalties take effect from Day 22
Part 36 - Consequences at trial of a claimant’s offer - Claimant wins at trial and equals or beats their own offer - Up to Day 21
- Interest on the damages from the date of loss as claimed in the particulars of claim
- Costs on the standard basis (multi-track) or fixed costs (fast and intermediate tracks)
from the date C incurred them
Part 36 - Consequences at trial of a claimant’s offer - Claimant wins at trial and equals or beats their own offer - From Day 22 to judgement
- Interest on the damages and costs at a maximum of 10% above base rate
- Costs on an indemnity basis (multi-track) or with a 35% uplift on the claimant’s fixed
recoverable costs (fast and intermediate tracks)
Part 36 - Consequences at trial of a claimant’s offer - Claimant wins at trial but does not beat their own offer
In this instance, no extra penalty is imposed on either party. Part 36 has no effect.
Part 36 - Consequences at trial of a claimant’s offer - The claimant loses at trial
As a consequence, the claimant will not be awarded damages at all and will be ordered to pay the defendant’s costs on a
standard basis (multi-track) or fixed costs (fast and intermediate tracks) in the usual way. Part 36 has no effect.
Part 36 - Consequences at trial of a defendant’s offer
Outcomes. The claimant:
(a) wins at trial and beats the defendant’s Part 36 offer;
(b) wins at trial but fails to beat the defendant’s Part 36 offer; and
(c) loses at trial.
Part 36 - Consequences at trial of a defendant’s offer - The claimant wins at trial and beats the defendant’s Part 36 offer
The defendant will be ordered to pay:
* the amount of the judgment plus interest as claimed in the particulars of claim; and
* the claimant’s costs on the standard basis (multi-track) or fixed costs (fast and
intermediate tracks).
Part 36 has no effect.
Part 36 - Consequences at trial of a defendant’s offer - The claimant wins at trial but fails to beat the defendant’s Part 36 offer
(a) the defendant pays the claimant’s costs on the standard basis (multi-track) or fixed costs (fast and intermediate tracks) from when those costs were incurred until the relevant period expired (Day 21);
(b) thereafter, the claimant pays the defendant’s costs on the standard basis (multi-track) or fixed costs (fast and intermediate tracks) from the date of the expiry of the relevant period (Day 22) until judgment; plus
(c) interest on those costs (a commercial rate of 1% or 2% above base rate has generally
been adopted).
Part 36 - Consequences at trial of a defendant’s offer - The claimant loses at trial
The general rule as to costs would apply and the claimant,
as the losing party, would be ordered to pay the winner’s (the defendant’s) costs. However, to penalise the claimant for not accepting the defendant’s Part 36 offer, they would also be ordered to pay interest on those costs from Day 22 until judgment – usually at 1% or 2% above base rate.
