Costs

Question 1

When are costs most commonly dealt with?

Answer 1

By the court after trial or judgment

Question 2

What could be covered by costs?

Answer 2

• solicitor’s fees
• disbursements
• court fees
• barristers’ fees
• experts’ fees

Question 3

On what basis is a client bound to pay a solicitor’s costs?

Answer 3

Contractual basis - they are liable to pay the costs properly incurred for work done by their solicitor in line with retainer signed

Question 4

What happens if the court is not able or decides not to award the full value of the costs claimed to a party?

Answer 4

That party still needs to pay any shortfall to their solicitor

Question 5

What is the general principal as to who pays the costs?

Answer 5

Loser pays the winner’s costs

Question 6

How are costs generally dealt with on the small claims track?

Answer 6

Costs are limited to fixed commencement costs and third party-costs, such as court fees and experts’ fees

Question 7

How are fast tract costs dealt with?

Answer 7

Legal costs and disbursements are recoverable from the other party - they are summarily assessed

Question 8

How are multi-track costs dealt with?

Answer 8

Legal costs and disbursements are recoverable from the other party; however they are generally subject to detailed assessment

Question 9

What are summarily assessed costs?

Answer 9

Where the court takes an instant view on the value of the costs that are to be paid by one party to another.

If costs are assessed summarily, the court will make its decisions based on a costs summary (called a statement of costs) provided to them by the party at least 24 hours in advance of the hearing or trial.

The court should make a summary assessment of costs at the conclusion of a fast track trial or at the conclusion of any other hearing that does not last for more than one day

Question 10

What is detail assessment of costs?

Answer 10

Generally occurs where summary assessment is not possible.

It is procedure by which the amount of costs is decided by the court on the basis of a detailed bill of costs, which is a full breakdown of the legal charges and expenses incurred by a party throughout the litigation

Question 11

What will happen if the court order that costs are to be subject to detailed assessment?

Answer 11

• the party in whose favour the costs order has been made must serve on the paying a notice commencement (a formal document that commences the process) within three months of the date of judgment or order
• the paying party must then serve any points of dispute within 21 days:

(i) if no dispute served, receiving party can apply for a default costs certificate entitling them to payment of the full amount in the bill of costs plus fixed costs and the court fees

(ii) if only minor points are in dispute, then the receiving party can apply for an interim certificate entitling them to the costs that are not in dispute

• if there is no agreement on costs, the receiving party must serve any reply within a further 21 days
• the paying party must then file a request for a hearing within three months of the expiry of the initial three-month period. This hearing is called an ‘assessment hearing’ the format of which depends on the criteria set out below

Question 12

How will the court deal with detailed assessment hearing where the costs are less than £75,000?

Answer 12

The court will carry out a provisional assessment where the judge will consider the documents submitted by the parties without hearing and without the parties present. A decision on the appropriate amount will be taken based on the bill of costs, points of dispute and reply and any supporting evidence filed

Question 13

How will the court deal with detailed assessment hearing where the costs are over than £75,000?

Answer 13

Matter will proceed to a hearing in front of costs judge or a district judge to debate the points that are in dispute

Question 14

What can the party who is to be paid do if the bulk of costs are agreed following detailed assessment but there are some minor points in dispute with regards to payment?

Answer 14

Successful party can apply for an interim certificate which will entitle him to costs that are not in dispute.

Then for court to settle any outstanding points in dispute

Question 15

Why does the court actively manage costs in multi-track cases?

Answer 15

1) costs which are incurred by legal representatives of each party are done so in proportion to the value and complexity of the matter in hand

2) to ensure consistent application of the overriding objective ie proportionate costs

Question 16

What is the costs budget?

Answer 16

Document that provides an estimate of the reasonable and proportionate costs which a party is intending to incur throughout the life of litigation

Question 17

When should costs budgets be filed with the court and exchanged with other parties?

Answer 17

At the same time as the directions questionnaire if the claim is under £50,000 or no later than 21 days before the first case management conference if the claim is valued at over £50,000

Question 18

What happens if the cost budget is approved by the court?

Answer 18

It is highly likely that the party will be able to recover the full value of the costs set out in their budget if they are successful in their claim and the court makes a cost award in their favour

Question 19

What form does court approval of a budget come in?

Answer 19

Costs management order where court will detail whether they approve all or part of a party’s budget

Question 20

What happens if the court only approves part of a management budget?

Answer 20

The costs management order will specify which parts

Question 21

What happens if a cost budget is approved and later in proceedings a party wishes to revise it by either increasing or decreasing the estimate?

Answer 21

Can be revised either by agreement between the parties or approval from the court.

Court will reject revision if it is not reasonable and proportionate

Question 22

What is the effect of the court not approving part of the costs budget?

Answer 22

Does not mean that the legal representatives cannot incur that cost, means that they are unlikely to be recovered from the other side in the event of a successful claim

Question 23

What happens if a party fails to file their cost budget on time?

Answer 23

The party will be limited to recovering court fees alone

Question 24

Will the court be bound by the cost budget when determining the amount of costs to award?

Answer 24

No - it is only on of the factors the court will take into account

Question 25

What is an inter-partes court order?

Answer 25

Simply means costs are awarded by the court in favour of one party against another

Question 26

When is cost order normally given?

Answer 26

Either at conclusion of an interim hearing or after final judgment or order

Question 27

What process will the court follow in making an inter-partes cost order?

Answer 27

• Are costs to be assessed on the standard basis or the indemnity basis?
• Are there any other factors that the court needs to take into consideration?

Question 28

What is the standard basis for assessing costs?

Answer 28

Court will consider every item of costs claimed and decide if they were:

• proportionately and reasonably incurred
• proportionately and reasonable in amount

Question 29

What happens under the standard basis if an item is not reasonably incurred?

Answer 29

It will be disallowed completely

Question 30

What happens under the standard basis if an item is not reasonable in amount?

Answer 30

It will be reduced

Question 31

What happens under the standard basis if the total of the items is not found to be proportionate?

Answer 31

The court will either disallow or reduce the amount claimed for that category

Question 32

How will any doubt in terms of whether to disallow, reduce or award the full value of cost be resolved under the standard basis?

Answer 32

It will be resolved in favour of the paying party.

Standard basis is more advantageous to the party who has had a costs order made against them

Question 33

What will the court look at under the indemnity basis?

Answer 33

The court will look at whether the costs were:

• reasonably incurred
• reasonable in amount

Question 34

What will happen under the indemnity basis if an item is not reasonably incurred?

Answer 34

It will be disallowed completely

Question 35

What will happen under the indemnity basis if an item is not reasonable in amount?

Answer 35

It will be reduced

Question 36

How will any doubt in terms of whether to disallow, reduce or award the full value of cost be resolved under the indemnity basis?

Answer 36

Doubt will be resolved in favour of the receiving party so the indemnity basis is more favourable to the party receiving costs

Question 37

What are the other factors the court will consider in making an order as to costs?

Answer 37

• the conduct of all the parties, including in particular their conduct before as well as during the proceedings in order to try to resolve the dispute
• the amount or value of any money or property involved
• the importance of the matter to all of the parties
• the particular complexity of the matter
• the skill, effort, specialised knowledge and responsibility involved
• the time spent on case
• the place where and the circumstances in which work or any part of it was done
• the receiving party’s last approved or agreed upon budget

Question 38

What is a non-party costs order?

Answer 38

Order where the court makes a costs order against or in favour of somebody who is not party to proceedings.

Question 39

When will a non-party costs order likely be made?

Answer 39

Extremely rare and generally only occurs where a third party (ie somebody who is not named as either the claimant or defendant) is:

• substantially controlling the course of litigation
• stands to benefit from the successful outcome of proceedings

So will not be caught be friend or family member simply funding litigation but would catch private individual who is sole director and shareholder of insolvent company

Question 40

Who can make a security for costs order?

Answer 40

Only defendants

Question 41

What is the purpose of a security for costs order?

Answer 41

To make sure the claimant can meet any possible future costs orders which are made against them

Question 42

What happens if a defendant’s application for security of costs is successful?

Answer 42

The claimant may be ordered to pay a specified sum either not court or to the defendant’s solicitors

Question 43

What happens if there is a successful security of costs order but the claimant wins at trial?

Answer 43

They will receive the money they offered up as security back

Question 44

How is an application by the defendant for security of costs successful?

Answer 44

Applicant must prove:

• it is just in the circumstances for the court to make an order and
• one of the following conditions apply:

(i) the claimant is resident outside of England and Wales

(ii) the claimant is a company and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so

(iii) the claimant has taken steps in relation to their assets that would make enforcement of a costs order more difficult (eg transferring property)

Question 45

What should an application for security of costs centre around?

Answer 45

The risk that the claimant’s circumstances or actions will make it more difficult or impossible for the defendant to recover costs from them if they are successful in making the claim

Question 46

What should a defendant do before making an application for security of costs?

Answer 46

They should try agree a voluntary payment with the claimant

Question 47

How does the defendant make an application for security of costs following an unsuccessful voluntary payment?

Answer 47

Defendant should file and serve an N244 application notice with accompanying witness statement that sets out the grounds and evidence for the application

Question 48

If a defendant makes out both grounds for security of costs order will that mean that the court will grant one?

Answer 48

No. The court has complete discretion on whether to make a security for costs order; even if the applicants meet both of the grounds