Disputes - Other Aspects of Costs (16) Flashcards
What is security for costs?
Security for Costs: Security for costs is a form of interim order, requiring claimants or counterclaimants to provide ‘security’ to guarantee any potential costs order that may be awarded against them following an unsuccessful claim (CPR 25).
(1) Purpose: This reduces the risk posed by impecunious and speculative claimants from pursuing an unsuccessful claim against a defendant without means to pay their costs.
(2) Procedure: Defendants should seek voluntary security from the Claimant or Claimant’s insurer, otherwise they should apply to court on Form N244 as soon as practicable, with a witness statement supporting their grounds.
(3) Order: In making an order, the court will specify the sum required, the date to be delivered, and the method of transfer. It is typically paid to court. It is usually subject to an Unless Order, risking strike-out for non-compliance.
What are the grounds for security for costs?
Grounds: Only Claimants and Counterclaimants can be subject. The court must be satisfied that two elements are met:
(1) Part 25 Condition: A CPR 25 condition must be met:
- Outside Jurisdiction: Respondent or their assets are domiciled outside of the UK or a Hague State.
- Impecunious Company: Respondent is a company in financial difficulty and will not be able to pay costs.
Judgment Proof: Respondent has taken steps to become judgment proof, intentionally or otherwise (i.e. assets held on trust by others).
(2) Interests of Justice: It must be in the interests of justice to order security, considering factors such as:
- Prospects of Success: Applicant’s prospects of success should be good.
- Stifle Opponent: Security for costs should not stifle opponent’s prospects of success.
- Culpability: Applicant should not be responsible for opponent’s impecuniosity.
- Domestic Assets: Foreign opponents should not have sufficient domestic assets.
- Prompt Application: Applicant should have applied as soon as reasonably practicable.
What is a non-party costs order?
Non-Party Costs Order: Third-parties to the claim may be subject to an order for costs if the court deems them a ‘real party’ to the claim - these should only be granted in exceptional circumstances (CPR 36).
(1) Real Party: This is the ‘true’ interested party in a claim, such as a commercial litigation funder or sole director on behalf of a company. It is not friends and family that have simply helped fund the case.
(2) Procedure: The third-party is added as a party to the proceedings, and the order is made. It does not require any impropriety on their behalf. These orders should be dealt with as soon as practicable (Symphony v Hodgson).
What is a Part 36 offer?
Part 36 Settlement: At any point prior to judgment, either party can make an offer of settlement to the opponent. If this is made under CPR 36, it can have major consequences on subsequent orders for costs and damages (CPR 36). It is treated as ‘without prejudice save for costs’.
What are the conditions of a Part 36 offer?
Part 36 Conditions: Part 36 offers must comply with various formalities. They are effective from the date of deemed service, and can be withdrawn by notice (but will not expire nor be implicitly overruled by a later offer).
(1) Clear Writing: The offer must be written, and state clearly that it is made pursuant to Part 36 of the CPR.
(2) Relevant Period: The offer must specify a period of acceptance no shorter than 21 days, known as the ‘Relevant Period’. Offers can still be accepted after this period, but have more of an effect on costs.
(3) Relevant Part: The offer must specify which part of the claim it relates to (including if it relates to the whole claim). It must also specify whether it accounts for counterclaims.
What is the effect of acceptance of Part 36 offer within the relevant period?
(1) Within Relevant Period: The liable party must pay within 14 days of the offer being accepted, including the opponent’s costs to date (which can be summarily assessed). The offer is inclusive of interest during this time.
What is the effect of a claimant accepting a defendant’s Part 36 offer late?
Claimant Accepts Late: If the Claimant accepts late, the Defendant must pay costs on the standard basis until the expiry of the relevant period (Day 21). The Claimant pays costs from Day 22 onwards until date of acceptance.
What is the effect of acceptance of Part 36 offer if the defendant accepts it late?
Defendant Accepts Late: If the Defendant accepts late, the Defendant pay all costs on the standard basis until the date of acceptance.
Claimant wins better, claimant wins less, defendant wins
What are the consequences if the defendant rejects or does not accept the claimants offer?
Non-Acceptance: If the Defendant rejects or does not accept the Claimant’s offer, there may be significant cost penalties.
(1) Claimant Wins Better: If the Claimant wins at trial, and the judgment is equal to or more favourable to the Claimant than the Claimant’s offer, it is deemed unreasonably rejected, and it is just to impose these penalties:
Damages: Defendant pays additional 10% on first £500,000 damages, and 5% on the next (up to £75,000).
Interest on Damages: Defendant pays additional interest on damages up to 10% above base rate (from Day 22 onwards).
Costs: Defendant pays 35% uplift on costs (from Day 22 onwards), and on standard basis (until Day 22).
>It was previously costs on indemnity basis (changed after SQE1).
Interest on Costs: Defendant pays additional interest on costs up to 10% above base rate (from Day 22 onwards).
(2) Claimant Wins Less: If the Claimant wins less at trial than it would have accepted by settlement offer, the Defendant was reasonable to reject it, and no penalties apply. The Claimant receives damages and interest as per particulars of claim but regarding the Part 36 offer the Defendant only pays costs on the standard basis.
(3) Defendant Wins: If the Defendant wins at trial, no penalty is imposed. The Claimant pays costs on the standard basis.
Claimant wins better, claimant wins equal/less, defendant wins
What is the effect of a Part 36 offer if the claimant rejects or does not accept the offer?
Non-Acceptance: If the Claimant rejects or does not accept the Defendant’s offer, there may be cost penalties (but less significant).
(1) Claimant Wins Better: If the Claimant wins at trial, and the judgment is better than the Defendant’s offer, then they were reasonable to refuse it. The Claimant receives damages and interest as per particulars of claim but regarding the Part 36 offer the Defendant pays costs on the standard basis.
(2) Claimant Wins Equal/Less: If the Claimant wins at trial, and the judgment is equal to or worse than the Defendant’s offer, the court will generally impose a split costs order on costs.
Damages: Claimant is awarded damages and interest from the date of loss as claimed in particulars of claim.
Claimant Costs: Defendant pays Claimant costs on standard basis up and including to Day 21.
Defendant Costs: Claimant pays the Defendant’s costs on the standard basis from Day 22 and interest on those costs at 1 or 2 % above the base rate.
(3) Defendant Wins: If the Defendant wins at trial, then the Claimant was very unreasonable to reject an offer of settlement. Claimant pays all costs (on the standard basis), and interest 1-2% above the base rate from Day 22.
