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.
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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 offer
*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 trafffic 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 sufficient. The judge reviews the files. 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 effect is that it is difficult for the paying party to object to costs unless it is able to say that it was** unreasonable 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 unreasonable, only one conference should be necessary. Noting that the order is for indemnity costs, the District Judge disregards proportionality and allows the defendant to recover the cost of attending two conferences with counsel.
Exam Tip
Be clear that you know the difference 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 first 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.
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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.
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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 parties must file their budget with the Directions Questionnaire if the case is worth less than £50,000, or
- 21 days before the first 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’)
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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 percentage 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 budget is filed, 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
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Summary Assessment
- In interim applications \9excluding those on the fact track for summary judgment, interim payments, and interim injunctions where the costs are fixed), a statement of costs must be filed by the parties 24 hours before a hearing or 2 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 Multi track cases , the court is likely to order ‘detailed assessment’
Exceptions—No Order for Costs and Fixed
Costs
- On small claims track, a successful party cannot rever its legal cost, but fixed amounts can be claimed for issue fee, and for witness’s expenses and expert fee, subject to a maximum 750
- On the fast and intermediate tracks, a successful party may, in principle, recover, legal costs, but the amount awarded is not determined by actual costs. In stead, it is determined in accordance with fixed amount set out in CPR PD45.
