12) Costs

Question 1

General Rule

Answer 1

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.

Question 2

Cost management and budgeting

Answer 2

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

Question 3

Effect of costs management order

Answer 3

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,

Question 4

Procedure for determining costs - Small claims track

Answer 4

Legal costs are not recoverable and so the costs payable will only relate to disbursements.

Question 5

Procedure for determining costs - Fast and intermediate tracks

Answer 5

Fixed costs apply. When a claim is allocated to the fast or intermediate track, the court must also assign it to
a complexity band which determines the amount of legal costs that can be recovered. The bands set out an ascending scale of fixed recoverable costs which increase as the complexity does. 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.

Question 6

Procedure for determining costs - Multi-track

Answer 6

A detailed assessment of the costs will be carried out.

Question 7

Procedure for determining costs - Multi-track - Summary Assessment

Answer 7

Where costs are not fixed. Summary assessment 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. To assist the court, the parties must file and serve a statement of costs – a detailed breakdown of their costs – at least 24 hours before an interim hearing.

Question 8

Procedure for determining costs - Multi-track - Detailed Assessment

Answer 8

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.

Question 9

Procedure for determining costs - Multi-track - Detailed Assessment - Challenging the bill

Answer 9

• 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

Question 10

Inter-partes costs - Interim

Answer 10

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.

Question 11

Inter-partes costs - Final - Factors for assessing costs

Answer 11

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

Question 12

Inter-partes costs - Final - Standard basis

Answer 12

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.

Question 13

Inter-partes costs - Final - Indemnity basis

Answer 13

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.

Question 14

Non-Party costs

Answer 14

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.

Question 15

Security for Costs

Answer 15

For defendants worried about not receiving money. Even if the defendant wins they will never recover the full amount. Sometimes the claimant may be unable or unwilling to pay. The defendant will then have to choose between bearing their own costs or investing further time and money in trying to enforce the costs order. Security for costs will help.

Question 16

Security for Costs - The Order

Answer 16

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

Question 17

Security for Costs - The Conditions

Answer 17

1) The defendant may apply for an order for security for costs where the claimant – whether it be an individual or a company – is resident out of the jurisdiction and is not resident in a State bound by the Hague Convention (which includes the EU and the UK)
2) The defendant must establish 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 defendant must demonstrate that 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.

Question 18

Security for Costs - Justness

Answer 18

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

Question 19

Part 36 Offers - Formalities

Answer 19

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

Question 20

Part 36 Offer - Service

Answer 20

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

Question 21

Part 36 Offer - Without Prejudice

Answer 21

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.

Question 22

Part 36 Offer - Acceptance

Answer 22

May be accepted at any time unless notice has been given of its withdrawal. There will be adverse costs consequences of late acceptance.

Question 23

Part 36 Offer - Acceptance within relevant period

Answer 23

If the defendant makes an offer and this is accepted by the claimant within the relevant period, the sum must be paid to the claimant within 14 days and, if not, the claimant can enter judgment. The claimant is also entitled to their costs of the proceedings up to the date on which the notice of acceptance is served on the defendant. If the claimant makes a Part 36 offer that is accepted by the defendant within 21 days, the
consequences are the same. The claimant will be entitled to their costs up to the date of acceptance as above.

Question 24

Part 36 Offer - Late Acceptance

Answer 24

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.

Question 25

Part 36 Offer - Effect of non-acceptance

Answer 25

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.

Question 26

Part 36 - Consequences at trial of a claimant’s offer - Outcomes

Answer 26

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.

Question 27

Part 36 - Consequences at trial of a claimant’s offer - Claimant wins at trial and equals or beats their own offer

Answer 27

As the defendant has lost at trial, they will be ordered to pay damages and interest due under the contract or statute 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

Question 28

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

Answer 28

• 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

Question 29

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

Answer 29

• Interest on the damages 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)
• Interest on the costs at a maximum of 10% above base rate

Question 30

Part 36 - Consequences at trial of a claimant’s offer - Claimant wins at trial but does not beat their own offer

Answer 30

In this instance, no extra penalty is imposed on either party. Part 36 has no effect.

Question 31

Part 36 - Consequences at trial of a claimant’s offer - The claimant loses at trial

Answer 31

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.

Question 32

Part 36 - Consequences at trial of a defendant’s offer

Answer 32

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.

Question 33

Part 36 - Consequences at trial of a defendant’s offer - The claimant wins at trial and beats the defendant’s Part 36 offer

Answer 33

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.

Question 34

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

Answer 34

(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).

Question 35

Part 36 - Consequences at trial of a defendant’s offer - The claimant loses at trial

Answer 35

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.