Disputes - Costs (15) Flashcards
What is the general process of deciding costs?
Costs: Costs are a crucial element of civil litigation, covering fees, disbursements, hiring of experts and solicitors, as well as certain pre-action costs.
(1) Costs Orders: Depending on the track, the losing party is generally ordered to pay the costs of the successful party (CPR 44). In practice, this will not cover the full extent of the successor’s costs.
(2) Assessment: Following trial, the court will generally be required to assess the costs of the winning party, to determine how much the loser pays. This will differ by track and case.
What are interim cost orders?
Interim Costs: Interim costs are those awarded following interim hearings, and are usually subject to ‘summary assessment’.
What cost orders are generally given to each track?
Final Costs: Final costs are those awarded at the end of a full trial. The type of assessment will differ.
(1) Small Claims: Only disbursements and certain fixed costs are recoverable.
(2) Fast Track: Fixed costs.
(3) Intermediate track: Fixed costs.
(4) Multi Track: Costs are usually recoverable, calculated by ‘summary assessment’ for simple cases, and ‘detailed assessment’ for complex or longer cases, unless the parties agree.
What are fixed costs?
Fixed Costs: Certain costs are fixed in the CPR, and cannot be assessed by the court. However, they may be altered by agreement.
(1) Complexity band: Within the fast track the claims are now assigned to a complexity band which will determine the amount of fixed recoverable costs. There are four complexity bands per track. The bands set out an ascending scale of fixed recoverable costs which increase as the complexity increases.
(2) Application to alter costs: Parties can make an application for costs greater than the fixed recoverable costs but this will only be ordered in exceptional circumstances. Costs can be increased for ‘unreasonable conduct’.
(2) Effect: Fixed recoverable cost cases will not require a costs budget in advance of trial or a cost assessment afterwards. The parties only need to select the assigned complexity band and read down to the stage at which the case ends in order to identify the relevant costs liability (net of VAT, disbursements and court fees). For example, a solicitor’s court appearance fee may be fixed at £1,000. The solicitor can still charge the client whatever they like, but the client can only recover £1,000 of that sum from the opponent.
(3) Examples: Examples of fixed costs include fees for default judgment, fees for enforcement of costs, and fees for an advocate’s court appearance on the fast track.
What are costs management orders?
Costs Management Orders: If parties are subject to a costs management order on the multi track (as is typical), cost assessments will only relate to costs incurred prior to the costs budget. The last approved budget is accepted for all other costs unless there is a good reason to depart from it.
What is summary assessment?
Summary Assessment: Simple multi track costs are summarily assessed at the end of trial, unless agreed.
(1) Statement of Costs: Parties file a written statement of their costs to the court and each other. This is 24 hours before an interim hearing, or 2 days before the final hearing.
(2) Assessment: The court will determine the appropriate costs order then and there (below).
What is detailed assessment?
Detailed Assessment: Complex multi track claim costs are generally assessed by detailed assessment following trial, unless agreed. This is a separate hearing conducted by a ‘Costs Officer’ (usually a District Judge). The process is as such:
(1) Notice of Commencement: The receiving party must serve notice on the paying party within 3 months of judgment, outlining their intention to have costs assessed if they cannot be agreed by the parties.
>They must include a bill of their sought costs, and supporting evidence.
(2) Points of Dispute: The paying party has 21 days to serve points of dispute. If they do not dispute, the receiving party can ask the court to issue a costs order for the full amount of the bill provided, plus fixed costs and fees.
>The receiving party has 21 days to reply to any points of dispute.
(3) Provisional Assessment: For costs under £75,000, the court will assess costs in the absence of parties.
(4) Full Assessment: For costs of at least £75,000, provided the parties are in dispute, the court will conduct an oral hearing within 21 days of request.
>If the paying party does not reduce costs by at least 20% of the sum requested, they also pay for the hearing.
What is the formula for assessing costs?
Assessment: The formula for assessing costs is the same for both summary and detailed assessments. Costs may be ordered on the standard basis or the indemnity basis. The latter is likely if the receiving party has performed improperly at trial.
(1) Standard Basis: Costs are awarded if ‘reasonably incurred’, ‘reasonable in amount’, and ‘proportionate’ to total costs of the matter. Any doubt is construed in favour of the paying party.
>Intermediate track is now on a standard basis.
>Fast-track now predominantly governed by fixed costs.
(2) Indemnity Basis: Costs are awarded if ‘reasonably incurred’ and ‘reasonable in amount’, but do not need to be proportionate. Any doubt is construed in favour of the receiving party.
“Reasonable”
Reasonable: Whether costs are reasonably incurred and reasonable in amount will differ by the following factors (CPR 44):
(1) Conduct: The conduct of parties and extent of efforts to resolve the dispute.
(2) Value: The value of the claim.
(3) Importance: The importance of the matter.
(4) Complexity: The complexity of the matter.
(5) Skill: The skill, knowledge and responsibility required to solve the matter.
(6) Time: The time spent on the matter.
(7) Circumstances: The circumstances in which work was done, including the location.
(8) Costs Budget: The effect of the last approved costs budget.
“Proportionate”
Proportionate: Courts will disallow/alter disproportionate costs if assessing on the standard basis, even if reasonable (May v Wavell). Whether costs are proportionate depends on whether they bear a reasonable relationship to the following factors:
(1) Sums: The sums in issue (i.e. the value of claim and counterclaim).
(2) Other Reliefs: The value of non-monetary reliefs sought.
(3) Complexity: The complexity of the litigation.
(4) Paying Party Conduct: Any additional work generated for the receiving party by the conduct of the paying party.
(5) Wider Factors: Any wider factors.
