Costs

Question 1

Court’s jurisdiction to order costs

Answer 1

Court has the full power to determine by whom and to what extent costs of proceedings are to be paid.

Includes costs prior to proceedings such as when complying with a pre-action protocol and spent negotiating

Court will consider costs orders at the end of interim hearsing and end of trial

If no order, parties simply pay their own costs

Question 2

Solicitor-client costs

Answer 2

Costs payable by the client to the solicitor under the contract of retainer. Client is primarily responsible for their solicitor’s costs.

If party is successful will seek an order from the court that the other party should pay the legal costs it incurred but it is likely that there will be shortfall between sum received and sum owed.

Indemnity principle provides that a party will not be able to recover a sum in excess of their liability to their own solicitor.

Question 3

Inter-party costs

Answer 3

Inter-party costs is the term used for the actual figure for costs awarded by the court which one party has to pay the other party.

Question 4

Non-party costs

Answer 4

Court has jurisdiction to award costs against a non-party.

Might occur where there is a ‘funder’ who is not party but is funding the litigation.

• Court will ask whether it is just to make the order, but these are ‘exceptional’ cases
• where non-party funds and substantially controls or benefits from the proceedings, justice will require that if the proceedings fail the non-party will pay the successful party’s costs

Question 5

General rule: costs

Answer 5

Successful party is awarded costs.

But court has complete discretion. Can depart from the general rule and take a number of other factors into account to make a different costs order.

Matters it will take into account:
- parties’ conduct
- whether a party has been successful on only some issues

Question 6

Unreasonable refusal to engage in ADR

Answer 6

Court can refuse to order costs if the successful party failed to engage in ADR.

Question 7

Two basis of assessment for costs

Answer 7

• Standard basis
• Indemnity basis

Question 8

Standard basis

Answer 8

Court will allow costs which:

• have been proportionately and reasonably incurred; and
• are proportionate and reasonable in amount

Any doubt is resolved in favour of the paying party.

Around 60% of costs are recovered on this basis from the paying party.

Question 9

Indemnity basis

Answer 9

Court will allow costs which:

• have been reasonably incurred; and
• are reasonable in amount

Any doubt is resolved in favour of the receiving party

Around 70-80% of the legal costs are recovered from the paying party under this basis.

Indemnity is generally awarded where there has been some element of a party’s conduct of a case which deserves some mark of disapproval.

Question 10

Factors to take into account in deciding the amount of costs

Answer 10

In assessing the actual amount of costs the court will take into account all the circumstances of the case including the conduct of the parties, the complexity of the case, place where and circumstances in which the work was done and receiving party’s last approved or agreed budget.

Question 11

Time for complying with a costs order

Answer 11

Unless court orders otherwise, a party must comply with an order for payment within 14 days of:

• date of judgment if it states the amount of costs
• if the amount of costs is decided later, the date of the certificate which states the amount

Question 12

What types of claims have fixed costs?

Answer 12

Fixed costs apply to:

• small claims
• Fast track
• intermediate track

Question 13

Complexity band

Answer 13

There are four complexity banks in the fast track and intermediate track.

Complexity band determines the amount of fixed costs that can be recovered.

Question 14

Assessed costs

Answer 14

Where costs are not under a fixed costs regime, the court will need to be involved with the decision and calculation of the amount payable by way of costs from one party to another.

Assessment generally only occurs when the parties are unable to agree the amount of costs one should pay to the other.

Two bases:
- standard
- indemnity

Question 15

Two processes for the assessment of costs

Answer 15

• summary
• detailed

Question 16

Summary assessment

Answer 16

Involves the court determining the amount payable by way of costs immediately at the end of a hearing.

To carry out a summary assessment, the parties must prepare statements of costs (form N260) and file and serve them on each party not less than 24 hours before hearing.

Court will review these and hear the parties’ short submissions in relation to them and then make a decision as to how much should be paid.

Question 17

When should the summary assessment procedure be used?

Answer 17

• In fast track cases at the end of the trial (costs of the whole case are assessed this way)
• At the end of the hearing of an interim application or matter which has not lasted more than a day. In this case, usually only the costs of the interim application will be assessed.

Question 18

Detailed assessment procedure

Answer 18

More complex procedure than summary.

1. Court, on deciding that one party should pay the other party’s costs, orders that they be subject to detailed assessment.
2. To commence the detailed assessment proceedings, the receiving party serves a notice of commencement and a copy of its bill of costs (more detailed) on the paying party
3. Points of dispute in relation to any item in the bill of costs should then be served on the receiving party by the paying party within 21 days of service of the notice of commencement.
4. If parties cannot reach an agreement, then the receiving party should then file a request for a detailed assessment hearing at which a costs officer will determine the sum to be paid

Question 19

Budgets and cost

Answer 19

Any consideration of costs orders made by the court must included the role played by the parties’ respective budgets.

The budget can impact the assessment of costs.

Question 20

Where costs are fixed by the CPR for a particular item, this means that…

Answer 20

…if the court awards costs for that item, the sum awarded will be as set out in the CPR, unless the court orders otherwise.

Question 21

Interim costs: Costs in any event

Answer 21

The party in whose favour this order is made is awarded its costs of the interim hearing from the other party regardless of who eventually wins at trial

Question 22

Interim costs: Costs in the case

Answer 22

The party who eventually receives its costs at trial (usually the winner) will recover its costs of the interim hearing from the other party (i.e. usually the party that wins at trial will recover the costs of this application)

Question 23

Interim costs: Costs reserved

Answer 23

The decision about who pays the costs of the interim hearing is out off to a later occasion.

If no decision is made then the costs will be in the case.

Question 24

Interim costs: Claimant or defendant’s costs in the case

Answer 24

Claimant’s costs in the case: if the claimant is successful and receives an order that it should be entitled to its costs at the end of trial it can include the costs of the interim application. If defendant is awarded costs, the claimant does not have to pay the defendant’s costs of the interim application

Defendant’s costs in the case: same principles but in reverse

Question 25

Interim costs: costs thrown away

Answer 25

If a judgment or order is set aside, the party in whose favour this costs order is made is entitled to the costs incurred as a result of the judgment or order being set aside.

This potentially includes the hearing at which the original order is made, as well as the hearing at which the order is set aside. The rationale is that the judgment or order should never have been made so the party at fault should be punished by having to pay the costs of it being made and set aside.

Question 26

Interim costs: no order for costs

Answer 26

Each party will bear its own costs of this hearing

Question 27

What does the costs management regime apply to?

Answer 27

All cases except:

• small claims track, fast track, intermediate track
• claims commenced on or after 22 April 2014 (£10M or more)
• claims commenced on or after 22 April 2014 which are for a monetary claim which is not quantified or not fully quantified or is for a non-monetary claim and contains a statement the claim is worth £10M or more
• claims commenced after 6 April 2016 made by or on behalf of a person under the age of 18

Note: court can disapply the costs management regime even when it would apply automatically

Question 28

Overview of costs management regime

Answer 28

1. Budgets
2. Budget discussion reports
3. Case/Costs management conference
4. Directions order and costs management order

Question 29

What is the process for budgets?

Answer 29

• Parties prepare budgets: estimates of future costs
• filed and exchanged usually 21 days before the first CMC
• subsequently discussed by the parties

Question 30

Budget discussion report

Answer 30

• budget discussion reports record the extent to which the parties have agreed budgets
• filed and exchanged usually seven days before the first CMC

Question 31

what happens in a costs management conference?

Answer 31

The budgets and budget discussion reports are considered by the court

Question 32

What are directions and costs management orders?

Answer 32

• Directions are determined in light of estimated costs
• Court might make a costs management order: a provisional indication of what should be considered reasonable and proportionate costs in any later assessment proceedings

Question 33

When should budgets be filed?

Answer 33

• If the claim is less than £50,000: should be filed with the parties’ directions questionnaire
• Any other case: 21 days before the first CMC

Question 33

What is a budget?

Answer 33

An estimate of the reasonable and proportionate costs (including disbursements) which a party intend to incur in the proceedings.

The budget relates to what c party might hope to recover from the other side, therefore a solicitor may be charging more than is in the budget for each stage of the litigation.

Statement of truth at the end must read:

“This budget is a fair and accurate statement of incurred and estimated costs which it would be reasonable and proportionate for my client to incur in this litigation”

Question 34

What is the form for a budget?

Answer 34

Prescribed form: precedent H.

Requires practitioners to set out any assumptions on which the budget is based and any possible contingencies and is signed by a statement of truth.

Note: only about future costs.

Question 35

Costs budget - incurred costs

Answer 35

Incurred costs and included in precedent H but they cannot be altered by the court.

Rule that a party will only recover budgeted costs unless there is a good reason does not apply to costs incurred prior to the production of the costs budget.

Question 36

When is the budget discussion report filed?

Answer 36

No later than seven days before the first CMC.

Question 37

What is a budget discussion report?

Answer 37

Once parties have filed and exchanged costs budget, they are required to discuss budgets with each other in order to agree costs figures where possible.

Parties indicate:
- The figures which are agreed and not agreed for each phase of the litigation
- A brief summary of the grounds of the dispute

Completing the budget discussion report enables the court to focus on those parts of the costs budget where there is disagreement between the parties.

Question 38

What happens at a costs management conference?

Answer 38

Usually takes place at the first case management conference or may have a sole hearing for it.

Where the court considers the parties budgets and budget discussion reports.

Consideration results in:
- case management decisions
- costs management order

Question 39

Case management decisions

Answer 39

When the court is making any case management decision it is to have regard to any available costs budget and the costs involved in each procedural step of the litigation.

Applies at any stage in the litigation but it is particularly significant when the court is making important case management decisions at the first CMC such as giving directions for the preparations of the case for trial.

Question 40

Costs management orders

Answer 40

The court may at any time make a costs management order (CMO).

Court will consider whether the budgeted costs fall within the range of reasonable and proportionate costs and then the CMO will:

• record the extent to which the costs budgets are agreed between the parties
• where the figures are not agreed, record the court’s approval of a costs budget after making appropriate revision

Question 41

Approval of costs budget

Answer 41

Approval is an indication the budget is reasonable and proportionate.

Where a costs management order has been made and costs are awarded on the standard basis, the court will have regard to the last approved costs budget and will not depart from it unless satisfied that there is a good reason to do so.

Departing means allowing costs in excess of the budget or CMO to be recovered (but can never recover more in costs than has been incurred - even where the budget is greater).

Question 42

Assessment if there is no costs management order

Answer 42

If no costs management order is made, then the position is less strict.

If there is a difference of 20% or more between the costs claimed by a receiving party on a detailed assessment and the costs show in the budget filed - the receiving party must provide a statement of the reasons why for the difference with the bill of costs and the court may reduce the recoverable sum if the paying party reasonably relied on the budget.

Question 43

Revising costs budgets

Answer 43

If significant developments warrant a revision to a party’s budget then:

1. An amendment budget should be submitted to the other parties for agreement if possible (Form T); and
2. The amended budget then needs to be submitted to court for consideration.

The process is for addressing ‘significant developments’ in the litigation, not for correcting inadequacies or mistakes in the preparation of a costs budget in the first place which is generally not allowed.

Question 44

Failure to file a costs budget

Answer 44

The party will be automatically treated as having filed a costs budget comprising of only the applicable court fees unless the court orders otherwise.

This is a huge issue if it happens.

Question 45

Parties should only use page 1 of the Precedent H if:

Answer 45

The monetary value of the claim is less than £50,000 or if the party’s budgeted costs do not exceed £25,000.

Question 46

When will the court make a costs management order (CMO)?

Answer 46

The court will make a CMO unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without a CMO.

Question 47

Where a court has decided to make a Costs Management Order (CMO), how does it deal with a part of a party’s budget in relation to estimated costs which the other party has agreed (as recorded in the relevant Budget Discussion Report)?

Answer 47

The CMO records that the relevant part of the budget has been agreed. The court will not change the agreed figure.

The court cannot interfere with agreed parts of the budget: if it objects to the figure agreed, the court is likely to record a comment to that effect which a subsequent judge might take into account when it comes to assessment (CPR 3.15).

Question 48

If a judge is assessing costs on the standard basis at the conclusion of a matter, what impact does a Costs Management Order (CMO) have on her task?

Answer 48

The judge will cap the costs at the figures in the budget, unless there is good reason not to do so.