COSTS Flashcards
LOSER PAYS THE WINNER’S COSTS
The general rule in litigation is that the loser pays the win-ner’s costs. Costs are the fees incurred in the case. To this must be added disbursements—expenses incurred by the solicitor on behalf of their client.
Costs are always at the discretion of the court. The court may depart from the usual costs rules where there has been:
*A failure to comply with a pre-action protocol;
*A failure to negotiate;
*A refusal to engage in ADR;
*Rejection of a Part 36 ofer
*Exaggeration; or
*A failure to succeed on the whole of the claim.
THE INDEMNITY PRINCIPLE
The indemnity principle states that a party cannot recover
more from an opponent than they are liable to pay their own legal representative. The limit is actual costs.
The Standard Basis
The standard cost basis is where the court allows on**ly
proportionate costs and exercises any doubt in favour of the paying party.
EXAMPLES
1) A District Judge is conducting a detailed assessment of a claimant’s costs in a routine road trafc accident case. The
case settled quickly after exchange of witness statements
and medical evidence. The claimant’s solicitors seek to
recover the cost of spending three hours reviewing medi-
cal records. The defendant objects and contends that two
hours is sufcient. The judge reviews the fles. They are
short and straightforward. The judge will likely apply the
standard basis and allow costs only for two hours for review
The Indemnity Basis
The indemnity basis is used when the court has doubts in the receiving party’s favour. The court does not consider propor-tionality. The efect is that it is difcult for the paying party to object to costs unless it is able to say that it was unreason-
able for the solicitor to do the work at all.
EXAMPLE
The District Judge then hears another assessment where the defendant is seeking costs against a claimant who not only lost the case, but also failed to follow protocol. The or-der in this case is for indemnity costs. The defendant claims eight hours for travelling to and attending two conferences with the barrister. The claimant contends that this is unrea-
sonable, only one conference should be necessary. Noting
that the order is for indemnity costs, the District Judge dis-
regards proportionality and allows the defendant to recover the cost of attending two conferences with counsel.
Exam Tip
Be clear that you know the diference between costs
awarded on the standard and the indemnity basis and
that costs will generally only be awarded on the indem-nity basis as a sanction against a party for incurring
unnecessary costs by their conduct.
ASSESSING COSTS
In the frst instance parties should seek to agree the costs. If
this is not possible, the court will have a hearing to determine the costs, which is known formally as an assessment.
Types of Costs Order
*A stated amount for costs;
*Payment of costs up to a certain date or up to certain
steps in the case; and
*An order to pay only a proportion of the other party’s
costs.
COSTS MANAGEMENT AND BUDGETING
- The aim of costs budgeting is to limit costs.
- In a multi-track
case both parties file and exchange costs budgets. - The par-ties must file their budget with the Directions Questionnaire if the case is worth less than £50,000, or
- 21 days before the frst Case Management Conference, if the value is £50,000 or more.
- The aim is to give the court control over costs and ensure that the parties are on an equal footing.
Costs and Case Management Conference
The budgets are often considered by the judge at the Case Management Conference. When the court proposes to deal with costs at this hearing, the order will be for the parties to attend a Costs and Case Management Conference (‘CCMC’)
Costs Management Order
At the hearing, the judge may make a costs management or-der (‘CMO’). Once a CMO has been made, the costs budget should not be departed from (though there is a small per-
centage leeway (typically 20% at most)). During the proceed-ings, if a party sees they will exceed the CMO, they must
apply to the court for a new order.
No Budget, No Costs
The parties need to budget for the entire action. If no bud-
get is fled, the risk is that no costs will be awarded, only the applicable court fees.
INTER-PARTES COSTS
- Inter-partes
simply means a party in the claim is awarded costs against
another party; the term is used to distinguish these from a
party’s own costs, which is the amount they have agreed to
pay their own solicitor. - Such costs are usually assessed on the standard basis. The successful party may not be awarded the entirety of their legal costs, as the costs incurred will be assessed by an officer of the court. This can be done in one of two ways.
(1) summary assessment
(2) detailed asessment
Summary Assessment
- In lower value cases and interim applications, a statement of costs must be filed by the parties 24 hours before a hearing **
or two days before a trial**, and the judge will make a summary assessment of the costs payable at conclusion of the hear-
ing. - The court normally orders the costs to be paid within 14
days, and the receiving party is entitled to interest from the
time of judgment until costs are paid.
Detailed Assessment
In larger value claims or cases of greater complexity, the
court is likely to order ‘detailed assessment’
Exceptions—No Order for Costs and Fixed
Costs
On the small claims track, the court will generally make no or-der for payment of legal costs. However, there are situations in which the costs payable to a successful party are fxed. **
*The amount payable in lower value road trafc accident
claims is limited to fxed** recoverable costs;
*Fixed costs apply in small claims cases or money claims;
*Costs recovery in cases proceeding through the portal
for low value road trafc and employer’s liability claims
are subject to fxed amounts; and
*Fixed trial costs apply in fast track claims
