Costs (W17)

Question 1

CPR 44.2 - Court’s discretion as to costs

Answer 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.
• If the court decides to make an order about costs—
  (a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
  (b) the court may make a different order.
• The general rule does not apply to the following proceedings—
  (a) proceedings in the Court of Appeal on an application or appeal made in connection with proceedings in the Family Division; or
  (b) proceedings in the Court of Appeal from a judgment, direction, decision or order given or made in probate proceedings or family proceedings.
• In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including—
  (a) the conduct of all the parties;
  (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and
  (c) any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.
• The conduct of the parties includes—
  (a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction—Pre-Action Conduct or any relevant pre-action protocol;
  (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
  (c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and
  (d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim.
• The orders which the court may make under this rule include an order that a party must pay—
  (a) a proportion of another party’s costs;
  (b) a stated amount in respect of another party’s costs;
  (c) costs from or until a certain date only;
  (d) costs incurred before proceedings have begun;
  (e) costs relating to particular steps taken in the proceedings;
  (f) costs relating only to a distinct part of the proceedings; and
  (g) interest on costs from or until a certain date, including a date before judgment.
• Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so.

Question 2

CPR 44.3 - Basis of costs assessment

Answer 2

• Where the court is to assess the amount of costs (whether by summary or detailed assessment) it will assess those costs—
  (a) on the standard basis; or
  (b) on the indemnity basis,
  but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.
• Where the amount of costs is to be assessed on the standard basis, the court will—
  (a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and
  (b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.
• Where the amount of costs is to be assessed on the indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party.
• Where—
  (a) the court makes an order about costs without indicating the basis on which the costs are to be assessed; or
  (b) the court makes an order for costs to be assessed on a basis other than the standard basis or the indemnity basis,
  the costs will be assessed on the standard basis.
• Costs incurred are proportionate if they bear a reasonable relationship to—
  (a) the sums in issue in the proceedings;
  (b) the value of any non-monetary relief in issue in the proceedings;
  (c) the complexity of the litigation;
  (d) any additional work generated by the conduct of the paying party;
  (e) any wider factors involved in the proceedings, such as reputation or public importance; and
  (f) any additional work undertaken or expense incurred due to the vulnerability of a party or any witness.
• Where the amount of a solicitor’s remuneration in respect of non-contentious business is regulated by any general orders made under the Solicitors Act 1974, the amount of the costs to be allowed in respect of any such business which falls to be assessed by the court will be decided in accordance with those general orders rather than this rule and rule 44.4.

Question 3

CPR 44.4 - Factors to be taken into account in deciding the amount of costs

Answer 3

• 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
  (b) if it is assessing costs on the indemnity basis—
  (i) unreasonably incurred; or
  (ii) unreasonable in amount.
• The court will also have regard to—
  (a) the conduct of all the parties, including in particular—
  (i) conduct before, as well as during, the proceedings; and
  (ii) the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;
  (b) the amount or value of any money or property involved;
  (c) the importance of the matter to all the parties;
  (d) the particular complexity of the matter or the difficulty or novelty of the questions raised;
  (e) the skill, effort, specialised knowledge and responsibility involved;
  (f) the time spent on the case;
  (g) the place where and the circumstances in which work or any part of it was done; and
  (h) the receiving party’s last approved or agreed budget.

Question 4

CPR 44.6 - Procedure for assessing costs

Answer 4

Where the court orders a party to pay costs to another party (other than fixed costs) it may either—
(a) make a summary assessment of the costs; or
(b) order detailed assessment of the costs by a costs officer,
unless any rule, practice direction or other enactment provides otherwise.

Question 5

CPR 44.7 - Time for complying with an order for costs

Answer 5

A party must comply with an order for the payment of costs within 14 days of—

(a) the date of the judgment or order if it states the amount of those costs;
(b) if the amount of those costs (or part of them) is decided later in accordance with Part 47, the date of the certificate which states the amount; or
(c) in either case, such other date as the court may specify.

Question 6

CPR 44.11 - Court’s powers in relation to misconduct

Answer 6

• The court may make an order under this rule where—
  (a) a party or that party’s legal representative, in connection with a summary or detailed assessment, fails to comply with a rule, practice direction or court order; or
  (b) it appears to the court that the conduct of a party or that party’s legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper.
• the court may—
  (a) disallow all or part of the costs which are being assessed; or
  (b) order the party at fault or that party’s legal representative to pay costs which that party or legal representative has caused any other party to incur.
• Where—
  (a) the court makes an order against a legally represented party; and
  (b) the party is not present when the order is made,
  the party’s legal representative must notify that party in writing of the order no later than 7 days after the legal representative receives notice of the order.

Question 7

CPR 44.13 - Qualified One Way Costs Shifting (QOCS)

Answer 7

applies to proceedings which include a claim for damages—

(a) for personal injuries;
(b) under the Fatal Accidents Act 1976; or
(c) which arises out of death or personal injury and survives for the benefit of an estate by virtue of section 1(1) of the Law Reform (Miscellaneous Provisions) Act 1934.

Question 8

CPR 44.14 - Effect of QOCS

Answer 8

• orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for damages and interest made in favour of the claimant.
• Orders for costs made against a claimant may only be enforced after the proceedings have been concluded and the costs have been assessed or agreed.

Question 9

CPR 44.15 - Exceptions to QOCS where permission not required

Answer 9

• Orders for costs made against the claimant may be enforced to the full extent of such orders without the permission of the court where the proceedings have been struck out on the grounds that—
  (a) the claimant has disclosed no reasonable grounds for bringing the proceedings;
  (b) the proceedings are an abuse of the court’s process; or
  (c) the conduct of—
  (i) the claimant; or
  (ii) a person acting on the claimant’s behalf and with the claimant’s knowledge of such conduct,
  is likely to obstruct the just disposal of the proceedings.

Question 10

CPR 44.16 - Exceptions to qualified one-way costs shifting where permission required

Answer 10

• Orders for costs made against the claimant may be enforced to the full extent of such orders with the permission of the court where the claim is found on the balance of probabilities to be fundamentally dishonest.
• Orders for costs made against the claimant may be enforced up to the full extent of such orders with the permission of the court, and to the extent that it considers just, where—
  (a) the proceedings include a claim which is made for the financial benefit of a person other than the claimant or a dependant within the meaning of section 1(3) of the Fatal Accidents Act 1976; or
  (b) a claim is made for the benefit of the claimant other than a claim to which this Section applies.
• the court may, subject to rule 46.2, make an order for costs against a person, other than the claimant, for whose financial benefit the whole or part of the claim was made.

Question 11

CPR 47.1 - Time when detailed assessment may be carried out

Answer 11

The general rule is that the costs of any proceedings or any part of the proceedings are not to be assessed by the detailed procedure until the conclusion of the proceedings, but the court may order them to be assessed immediately.

Question 12

CPR 47.2 - No stay of detailed assessment where there is an appeal

Answer 12

Detailed assessment is not stayed pending an appeal unless the court so orders.

Question 13

44PD.3 - Costs budgets

Answer 13

• In any case where the parties have filed budgets in accordance with Practice Direction 3E but the court has not made a costs management order under rule 3.15, the provisions of this subsection shall apply.
• If there is a difference of 20% or more between the costs claimed by a receiving party on detailed assessment and the costs shown in a budget filed by that party, the receiving party must provide a statement of the reasons for the difference with the bill of costs.
• f a paying party—
  (a)claims to have reasonably relied on a budget filed by a receiving party; or
  (b)wishes to rely upon the costs shown in the budget in order to dispute the reasonableness or proportionality of the costs claimed,
  the paying party must serve a statement setting out the case in this regard in that party’s points of dispute.
• On an assessment of the costs of a party, the court will have regard to the last approved or agreed budget, and may have regard to any other budget previously filed by that party, or by any other party in the same proceedings. Such other budgets may be taken into account when assessing the reasonableness and proportionality of any costs claimed.
• Where it appears to the court that the paying party reasonably relied on the budget, the court may restrict the recoverable costs to such sum as is reasonable for the paying party to pay in the light of that reliance, notwithstanding that such sum is less than the amount of costs reasonably and proportionately incurred by the receiving party.
• Where it appears to the court that the receiving party has not provided a satisfactory explanation for that difference, the court may regard the difference between the costs claimed and the costs shown in the budget as evidence that the costs claimed are unreasonable or disproportionate.

Question 14

44PD.5 - Fees of counsel

Answer 14

• When making an order for costs the court may state an opinion as to whether or not the hearing was fit for the attendance of one or more counsel, and, if it does so, the court conducting a detailed assessment of those costs will have regard to the opinion stated.
• The court will generally express an opinion only where—
  (a) the paying party asks it to do so;
  (b) more than one counsel appeared for a party; or
  (c) the court wishes to record its opinion that the case was not fit for the attendance of counsel.

Question 15

44PD.6 - Basis of assessment of costs

Answer 15

• If costs are awarded on the indemnity basis, the court assessing costs will disallow any costs—
  (a) which it finds to have been unreasonably incurred; or
  (b) which it considers to be unreasonable in amount.
• If costs are awarded on the standard basis, the court assessing costs will disallow any costs—
  (a) which it finds to have been unreasonably incurred;
  (b) which it considers to be unreasonable in amount;
  (c) which it considers to have been disproportionately incurred or to be disproportionate in amount; or
  (d) about which it has doubts as to whether they were reasonably or proportionately incurred, or whether they are reasonable and proportionate in amount.

Question 16

44PD.8 - Procedure for assessing costs

Answer 16

• An order for costs will be treated as an order for the amount of costs to be decided by a detailed assessment unless the order otherwise provides.
• Where a party is entitled to costs some of which are fixed costs and some of which are not, the court will assess those costs which are not fixed.

Question 17

44PD.9.1 - When the court should consider whether to make a summary assessment

Answer 17

Whenever a court makes an order about costs which does not provide only for fixed costs to be paid the court should consider whether to make a summary assessment of costs.

Question 18

44PD.9.2 - Timing of summary assessment

Answer 18

The general rule is that the court should make a summary assessment of the costs—
(a) at the conclusion of the trial of a case which has been dealt with on the fast track, in which case the order will deal with the costs of the whole claim; and
(b) at the conclusion of any other hearing, which has lasted not more than one day, in which case the order will deal with the costs of the application or matter to which the hearing related. If this hearing disposes of the claim, the order may deal with the costs of the whole claim,
unless there is good reason not to do so, for example where the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with summarily.

Question 19

44PD.9.5(1), (2) and (4) - Duty of parties and legal representatives

Answer 19

• It is the duty of the parties and their legal representatives to assist the judge in making a summary assessment of costs.
• Each party who intends to claim costs must prepare a written statement of those costs showing separately in the form of a schedule—
  (a) the number of hours to be claimed;
  (b) the hourly rate to be claimed;
  (c) the grade of fee earner;
  (d) the amount and nature of any disbursement to be claimed, other than counsel’s fee for appearing at the hearing;
  (e) the amount of legal representative’s costs to be claimed for attending or appearing at the hearing;
  (f) counsel’s fees; and
  (g) any VAT to be claimed on these amounts.
• The statement of costs must be filed at court and copies of it must be served on any party against whom an order for payment of those costs is intended to be sought as soon as possible and in any event—
  (a) for a fast track trial, not less than 2 days before the trial; and
  (b) for all other hearings, not less than 24 hours before the time fixed for the hearing.

Question 20

44PD9.6 - Failure of party to comply with duties as to costs assessment

Answer 20

The failure by a party, without reasonable excuse, to comply with paragraph 9.5 will be taken into account by the court in deciding what order to make about the costs of the claim, hearing or application, and about the costs of any further hearing or detailed assessment hearing that may be necessary as a result of that failure.

Question 21

CPR 44.2.3 - Inclusion of pre-litigation costs

Answer 21

• It is clear that costs incurred prior to proceedings are capable in principle of being recoverable as costs in the proceedings.
• There is a general principle that the costs of a claim do not include costs incurred by a party in seeking funding either for the prosecution or for the defence of that claim.
• disputes antecedent to the proceedings which bear no real relation to the subject of the litigation, could not be regarded as part of the costs of the proceedings, but disputes which are in some degree relevant to the proceedings, as ultimately constituted and the other parties’ attitude made it reasonable to apprehend that the litigation would include them, could be allowed.

Question 22

CPR 44.2.4 - Reasons for costs

Answer 22

• The Court of Appeal has repeatedly stated that, when making an order for costs, judges should clearly state their reasons, particularly where the costs incurred are disproportionate to the amount in issue.
• The reasons for a judge’s costs order made at the end of a trial may be largely discernible from the transcript of the judgment, but where counsel are not sure they should seek from the judge a note of the reasons for the order.

Question 23

CPR 44.2.5 - The indemnity principle

Answer 23

• a successful party cannot therefore recover a sum in excess of their liability to their own solicitor
• the court is hostile to indemnity principle challenges, and will find the principle satisfied even if the liability of the beneficiary of the costs order to pay costs is close to notional
• The relevant question for the court is whether the receiving party has become liable to pay the costs claimed; who actually pays the costs is not relevant

Question 24

CPR 44.2.6 - Court does not have to make an order as to costs

Answer 24

• In the exercise of its discretion as to costs the court may make an order about costs or not make such an order.
• In the latter event, the costs incurred by the parties lie where they fall, leaving the matter of costs wholly for the parties to agree amongst themselves.
• In deciding whether to make an order about costs the court will have regard to all the circumstances.

Question 25

CPR 44.2.10 - Issues based orders

Answer 25

• among the circumstances which the court should take into account, in deciding what order (if any) to make about costs, is whether a party has succeeded on part of its case, even if that party has not been wholly successful.
• among the “different” orders as to costs which the court may make, is an order requiring a party to pay costs “relating only to a distinct part of the proceedings”, called an“issue-based” (or “issues-based”) order
• the position is that, where a party successful overall has been unsuccessful on an issue (or issues), being an issue which that party raised, pursued or contested, a court (1) should consider adopting an issue-based approach, and (2) in deciding what order to make in relation to that issue (or issues) may decide (a) that party should be deprived of his costs of that issue, or a proportion of those costs, or those costs from or until a certain date; or even (b) that that party should pay the costs of the otherwise unsuccessful party on that issue, or a proportion of those costs, or those costs from or until a certain date.

Question 26

CPR 44.2.12 - Payment on account of costs

Answer 26

• where the court orders a party to pay costs subject to detailed assessment, “it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so”. The object of the rule is to enable a receiving party to recover part of his expenditure on costs before the possibly protracted process of carrying out a detailed assessment.
• his may be important, particularly (but not only) in cases where the paying party has limited resources and the receiving party would otherwise be forced to engage in detailed assessment proceedings before receiving any money at all
• The making of an order under the rule may have the effect of reducing the points of dispute in the detailed assessment proceedings and of discouraging the paying party from seeking to prolong such proceedings.
• It may also avoid an application for an interim costs certificate.

Question 27

CPR 44.2.14 - Where there is success both ways (claims and counterclaims and costs of issues)

Answer 27

• Where there is a claim and a counterclaim and each party succeeds on one the usual order is that each party has the costs of the claim in which they succeeded.
• where both parties succeed, in most cases it will be desirable that the judge should consider whether a special order should be made as to costs “because the issues are often very much interlocked, and the usual order does not always give a just result”. A counterclaim may be by way of a defence to the claim, raising the same issues as the claim, or it may be a cross-action, raising unrelated issues. In most cases therefore an order giving the overall winner a proportion of its costs may be preferable to orders for costs going in opposite directions.
• In deciding what order to make the court may also wish to consider the “rule in Medway Oil” as to the assessment of costs where one party succeeds on and is awarded the costs of the claim and the other succeeds on and is awarded the costs of the counterclaim. In short, the party who is awarded the costs of the counterclaim will, on assessment, be allowed only those costs which are specifically referable to the counterclaim. All of the other costs will be costs of the claim.
• The party who is awarded the costs of the counterclaim but ordered to pay the costs of the claim may therefore be at a particular disadvantage if the same issues arise in both the claim and the counterclaim.
• (1) where a claim and counterclaim are both dismissed with costs, upon the taxation of the costs, the true rule is that the claim should be treated as if it stood alone and the counterclaim should bear only the amount by which the costs of the proceedings have been increased by it, (2) no costs not incurred by reason of the counterclaim can be costs of the counterclaim, (3) in the absence of special directions by the court there should be no apportionment, (4) the same principle applies where both the claim and the counterclaim have succeeded.

Question 28

CPR 44.2.17 - Consideration of ‘all the circumstances’ generally

Answer 28

• In deciding what order (if any) to make about costs, the court “will have regard to all the circumstances”.
• There is no rule or statutory provision which prevents evidence relevant to costs from being considered by the court if it has not already been admitted during the trial, e.g. evidence as to a document which had no probative value on what was in issue at the trial but which is of considerable relevance on costs. It is a matter for the court in its unfettered discretion to admit any evidence (oral or written) which it considers relevant.
• If the trial has been contested, generally the judge, by the process of having heard evidence and reached conclusions on factual issues arising (either agreed by the parties or determined by the judge), will be well-placed without the need for evidence to evaluate any conflicting submissions made by the parties as to circumstances relevant to “deciding what order (if any) to make about costs”.

Question 29

CPR 44.2.18 - Where a party has ‘succeeded on part of its case’

Answer 29

• Among the circumstances to which the court will have regard, in deciding what order (if any) to make about costs, is whether a party has succeeded on part of its case, even if that party has not been wholly successful.
• the general rule does not cease to apply simply because the successful party raises issues or make allegations on which it fails.
• But where the raising of issues or making allegations on which a successful party fails has caused a significant increase in the length or costs of the proceedings that party may be deprived of the whole or part of the costs, whether or not that party acted unreasonably or improperly in so doing.

Question 30

CPR 44.2.24 - Unreasonable refusal to agree to ADR, Halsey guidelines

Answer 30

(1) the court’s discretion as to costs includes power to deprive a successful party of some or all of its costs on the ground that it has refused to agree to ADR
(2) the burden is on the unsuccessful party to show why, for reason of such conduct, there should be a departure from the general rule
(3) such departure is not justified unless it is shown that the successful party acted unreasonably in refusing to agree to ADR
(4) in determining whether the successful party conducted itself unreasonably the court should have regard to all the circumstances of the particular case
(5) factors which may be relevant will include (a) the nature of the dispute, (b) the merits of the case, (c) the extent to which other settlement methods have been attempted, (d) whether the costs of ADR would be disproportionately high, (e) whether any delay in setting up and attempting ADR would have been prejudicial, and (f) whether the ADR had a reasonable prospect of success.

Question 31

CPR 44.2.25 - Party conduct before the proceedings began

Answer 31

• the extent to which parties followed Practice Direction (Pre-Action Conduct and Protocols) or any relevant pre-action protocol
• Where a defendant offers the full amount of the claim before the issue of proceedings but declines to offer to pay the claimant’s costs, there is no principle that the claimant cannot properly bring proceedings to obtain a costs order and recover the pre-action costs.

Question 32

CPR 44.2.28 - Bullock order

Answer 32

• Where in the same proceedings a claimant (C) sues two defendants (D1 and D2) and succeeds against one only (say D1) there are two successful parties (C and D2) and two unsuccessful parties (C and D1).
• C is both a receiving party and a paying party.
• A strict application of the general rule as to costs would require that C should pay D2’s costs and that D1 should pay C’s costs.
• But the court’s discretion “as to whether costs are payable by one party to another” (r.44.2(1)(a)) is wide enough to enable it to order that the costs payable by C to D2 should be recoverable by C from D1 as part of C’s costs in the proceedings.
• So C pays to D2 and recovers from D1.

Question 33

CPR 44.2.28 - Sanderson order

Question 34

CPR 44.2.28 - Factors taken into account on whether to make a Bullock or Sanderson order

Answer 34

• the particular usefulness of this discretionary power lies in the fact that it avoids injustice to C in a case where he does not know which of two defendants (D1 or D2), or more, should be sued for a wrong done to him, and is at risk of having what he recovers in damages from D1 eroded or eliminated by an order for costs against him in respect of his action against D2; but it has to be recognised that, because its exercise entails making D1 liable for the costs of more than one party, it is a power capable of working injustice to D1.
• there are no hard and fast rules
• the dominant consideration, but not the only one, is whether the original joinder of D2 in the proceedings was reasonable. If the joinder was unreasonable C cannot seek to pass costs payable by him to D2 over to D1.
• A further relevant factor is whether the causes of action relied on against D1 and D2 are connected with each other or independent causes of action.
• The fact that one defendant blamed the other is a relevant factor but on its own does not make the joinder reasonable.
• If D1 has done nothing to cause or contribute to the joinder of D2, that will be a point in D1’s favour. The converse also applies.
• (1) that the fact that the claimant was not suing two or more defendants for the same loss (albeit the paradigm situation, but not a necessary condition) was not a powerful factor against the making of an order, (2) that one of two or more defendants sued should have blamed the other is a relevant consideration but it is not determinative, (3) that the claimant’s case against one group of defendants (ostensibly seeking rescission and/or damages) was inconsistent with its claims against another group (seeking registration of the transfer of shares) was not “a disqualifying feature”

Question 35

CPR 44.16.2 - Fundamental dishonesty (in which QOCS would not apply)

Answer 35

• A claim is fundamentally dishonest if the dishonesty goes to the root of either the whole of the claim or a substantial part of it; “a claim which depended as to a substantial or important part of itself upon dishonesty”
• A court may conclude that a claim is fundamentally dishonest even if that has not been pleaded, provided that the claimant has had fair notice of the challenge to his or her honesty and an opportunity to deal with it.
• Where a claimant was found to have failed to disclose evidence as to his ability to pay car hire charges, which formed a substantial part of his claim following a road traffic accident, the claim was fundamentally dishonest and the claimant was not entitled to costs protection.
• Where a claimant had lied to his medical expert and to the court about the extent of his injuries, the claim was fundamentally dishonest because the extent of the injuries was not merely incidental or collateral but formed the very basis of the claim.

Question 36

Jackson ADR - Liability to pay for ADR process

Answer 36

• Each party will be liable to pay their own costs and expenses in relation to an ADR process, unless some other agreement is reached.
• While cost recoverability is not the norm for ADR, there are ways in which costs can be shifted in and in relation to the use of ADR.
• as part of a settlement reached in negotiation or mediation
• through the use of a Part 36 offer
• in an adjudicative ADR process as part of an award made by a third party, if the third party has been given power to award costs by agreement
• if a case is litigated, through the general powers of the court in relation to costs where there has been a failure to make reasonable use of ADR
• if proceedings have been issued and the action is discontinued the claimant will be liable for the defendant’s costs.