1.3 Overview of costs

Question 1

Which statutory provision confers the court’s discretion to award (or not award) costs?

Answer 1

Section 51 Senior Courts Act 1981

Question 2

What are ‘inter-party costs’?

Answer 2

The actual figure of costs awarded by the court.

Question 3

Aiden Shipping v Interbulk Ltd (“The Vimeira”) (No 2) [1986] A.C. 965

Answer 3

Aiden Shipping v Interbulk Ltd (“The Vimeira”) (No 2) [1986] A.C. 965

Section 51(3) SCA (“full power to determine by whom … the costs are to be paid”) empowers the court to award costs against non-parties to the litigation.

Question 4

When is the court likely to award costs against a non-party?

Answer 4

Aiden Shipping v Interbulk Ltd (“The Vimeira”) (No 2) [1986] A.C. 965
1.
Exceptionally;
2.
Where it is just;
3.
Generally only where the non-party substantially controls or stands to benefit from the proceedings, i.e., it is a ‘real party’;
4.
Under CPR 46.2 the non-party should be added to proceedings for the purposes of costs only and given a a reasonable opportunity to attend the hearing.

Question 5

What does the court’s discretion regarding costs under CPR 44.2(1) encompass?

Answer 5

CPR 44.2(1)
The court has discretion as to –
(a)
whether costs are payable by one party to another;
(b)
the amount of those costs; and
(c)
when they are to be paid.

Question 6

What is the general rule with costs?

Answer 6

CPR 44.2(2)(a)

“Costs follow the event”, i.e., the loser pays the winner.

Question 7

What can the court take account of when exercising its discretion to depart from the general rule as regards costs?

Answer 7

CPR 44.2(4)
(a)
the parties' conduct;
(b)
whether a party has succeeded on part of its case, even if that party was not wholly successful;
(c)
admissible non-part 36 offers.

Question 8

What aspects of a party’s conduct are likely to be relevant in assessing costs?

Answer 8

CPR 44.2(5)
The conduct of the parties includes -
(a)
conduct before, during and after proceedings especially compliance with the practice directions and pre-action protocols;
(b)
whether it was reasonable to raise, pursue or contest an allegation or issue;
(c)
the manner in which the party pursued or defended its case or a particular allegation or issue;
(d)
whether the claimant exaggerated its claim even though it won.

Question 9

What are the two bases of costs?

Answer 9

CPR 44.3(1)
(a)
 the standard basis
(b)
the indemnity basis

Question 10

Which Rule sets out the two bases of assessing costs?

Answer 10

CPR 44.3

Question 11

How will the court resolve doubt over whether costs were reasonably and proportionately incurred when assessing on the standard basis?

Answer 11

CPR 44.3(2)(b)

In favour of the paying party.

Question 12

How will the court resolve doubt over whether costs were reasonably and proportionately incurred when assessing on the indemnity basis?

Answer 12

CPR 44.3(3)

In favour of the receiving party.

Question 13

Costs will be allowed on the standard basis when they are… ?

Answer 13

CPR 44.4(1)
The court will have regard to all the circumstances in deciding whether costs were –
(a)
if it is assessing costs on the standard basis –
(i)
proportionately and reasonably incurred; or
(ii)
proportionate and reasonable in amount, or

Question 14

Costs will be allowed on the indemnity basis when they are… ?

Answer 14

CPR 44.4(1)
The court will have regard to all the circumstances in deciding whether costs were –
(b)
if it is assessing costs on the indemnity basis –
(i)
unreasonably incurred; or
(ii)
unreasonable in amount.

Question 15

What is the usual reason for the court to award indemnity costs?

Answer 15

The conduct of the paying party. e.g., unreasonable refusal to agree to mediation.

Question 16

What is the threshold test for a party’s conduct to justify indemnity costs?

Answer 16

Three Rivers DC v Bank of England [2006] EWHC 816 (Comm)
1.
The court should have regard to all the circumstances and its discretion is extremely wide;
2.
the critical requirement is that some conduct or circumstance takes the case out of the norm;
3.
the test is not conduct attracting moral condemnation, but unreasonableness.

Question 17

What is the less common way for a party to be awarded indemnity costs?

Answer 17

Alafco Irish Aircraft Leasing Sixteen Ltd v Hon Kong Airlines Ltd [2019] 11 WLUK 355
Parties can contract for indemnity costs.

Question 18

How is the court to establish whether costs are proportionate?

Answer 18

CPR 44.3(5)
If costs bear a reasonable relationship to -
(a)
the sums in issue;
(b)
the value of any non-monetary relief;
(c)
the complexity of the litigation;
(d)
additional work generated by the paying party's conduct; and
(e)
wider factors such as reputation or public importance.

Question 19

What factors are relevant to the amount of costs?

Answer 19

CPR 44.4(3)
(a)
conduct;
(b)
amounts of money;
(c)
importance of the matter to the parties;
(d)
complexity;
(e)
skill, effort, specialised knowledge and responsibility;
(f)
time spent on the case;
(g)
circumstances and location of the work;
(h)
the receiving party's last approved or agreed budget.

Question 20

How much time does a party have to comply with a costs order?

Answer 20

CPR 44.7
(a)
14 days of the date of the judgment or order stating the amount of costs.
(c)
such other date as the court may specify.

Question 21

When is qualified one way costs shifting available?

Answer 21

CPR 44.13

Death and personal injury cases.

Question 22

What is the effect of QOCS?

Answer 22

CPR 44.14
(1)
Orders for costs against C may be enforced but only to the extent that the aggregate amount does not exceed any orders for damages and interest.
(2)
Orders for costs against C may only be enforced after the proceedings have been concluded and the costs assessed or agreed.

Question 23

What are the exceptions to QOCS?

Answer 23

CPR 44.15
Where C’s case has been struck out, or

CPR 44.16
Where the claim is ‘fundamentally dishonest’.

Question 24

What is a Bullock Order?

Answer 24

C sues D1 and D2 knowing that one is liable but not which. C succeeds against D1 but not D2.

D2 recovers costs from C who later recovers them from D1.

Question 25

What is a Sanderson Order?

Answer 25

C sues D1 and D2 knowing that one is liable but not which. C succeeds against D1 but not D2.

D2 recovers costs from D1.

Question 26

What is the difference between Bullock Orders and Sanderson Orders?

Answer 26

Sanderson Orders - simpler and better for C. D2 recovers costs from D1.

Bullock Orders - more complicated for C. D2 recovers costs from C, who then recovers them from (unsuccessful) D1.