UNIT 7: COSTS Flashcards
When might the court produce a non-party costs order?
- Court has discretionary power to make an order that a non-party meets the costs (Part 46)
- Requirement: This order is exceptional; could needs to be satisfied that the non-party was a real party interested in the litigation or that they were responsible for bringing the proceedings
o EG no interest: external litigations eg family, friends, or people who have given to a fund-raising campaign and who have no interest in the outcome
o EG interest: third party funders in a more formal context may be
What must happen before an order is made?
- Before an order can be made, the third party must be added as a party to the proceedings and may attend the hearing when the court determines the issue of costs. Note there is no requirement to make a finding that the non-party acted improperly before making an order.
Who can rely on security for costs?
defendant, or claimant in counterclaim
who is concerned abt
* not being repaid all costs even if they successfully defend the claim
* claimants being unable or unwilling to pay costs order
When may the court make an order for security of costs
- it is satisfied, having regard to all the circumstances of the case, it is just to make such an order; and
- one or more of the conditions in Part 25 applies
What are the relevant p25 conditions?
- Claimant resident outside a 2005 Hague Convention State
- Claimant is an impecunious company (unable to pay)
- Claimant has taken steps to make enforcement difficult
- Claimant resident outside a 2005 Hague Convention State
elements?
o D can apply for an order for security for costs where C - either individual or company - is resident outside of the jurisdiction and is not resident in a State bound by the Hague convention
o For individuals: this is where they normally and habitually live
o For companies: it is where their central control and management are located
o This condition recognises the difficulties D may experience in enforcing a costs order outside
- Claimant is an impecunious company (unable to pay) elements?
o Requirement: D must establish there is reason to believe C will be unable to pay D’s costs if ordered to do so
o Evidence of the company’s financial assets and likely total costs of the litigation
- Claimant has taken steps to make enforcement difficult elements?
o Requirement: D must demonstrate that C has taken steps in relation to their assets that make enforcement of a security for costs order difficult
o The court will consider the effect of any such action and not the motivation
EG an order can be made even if C is relocating to take up a new employment opportunity
failure to disclose assets may be sufficient to establish this requirement
o NB. In these circumstances, a freezing injunction may also be appropriate
Justness factors for a security costs order
The court must also be satisfied that it is just to make the order and the following factors are considered important
1. The strength of the claim and the defence: the less likely the defendant is to win at trial, the less justified they are in seeking security.
2. The claimant’s ability to provide security: where the claimant has a reasonable prospect of success, the courts will be reluctant to make an order for security with which they cannot comply as the effect will be to stifle the claim.
3. The causes of the claimant’s impecuniosity: the claimant may be able to persuade the court that their poor finances are caused by or contributed to by D’s behaviour.
4. Property within the jurisdiction: where the application is made against a claimant resident outside the EU, the court is unlikely to grant security if they have sufficient assets within the jurisdiction that would be available to meet the defendant’s costs.
5. The timing of the application: the order should be applied for as soon as practicable.
Security costs order - procedure
- As will all interim applications, D should write to C first and ask for security to be provided voluntarily
- If C does not provide, D should submit a notice of application to the court with a witness statement in support
o Evidence must
1. establish that a condition exists,
2. persuade the court it is just to exercise its discretion in favour of D, and
3. justify the amount sought
What will the security costs order specify if granted?
o the amount of security,
o the date by which C must provide it, and
o the form it will take
* Common: C is required to make a payment to the court
Are parties encouraged to settle?
The parties are encouraged to negotiate to settle the claim before the litigation starts and, if unsuccessful, to continue to review the case throughout to seek agreement.
What is the claimant entitled to o where a settlement is reached prior to the issue of proceedings?
C is not entitled to recover their legal costs unless this has been agreed.
If settlements are reached after litigation has commenced?
the terms should be recorded in a consent order or a Tomlin order to ensure that enforcement proceedings may be issued to recover any monies due under the agreement, including costs.
Who can make a part 36 offer and when?
- Can be made by either side
- Can be made at any point in the proceedings
- A party may make an offer to settle in any way they choose and the court will take this into account when deciding the issue of costs
What if a relevant party makes a wrong decision?
- BUT if an offer is made under Part 36, there are significant penalties attached if the relevant party makes a ‘wrong’ decision and rejects an offer that the court subsequently deems suitable
o So, pressure on opponent to accept an offer made in accordance with Part 36
What are the formalities of a part 36 offer?
- be in writing;
- make clear it is made pursuant to Part 36;
- specify a period of not less than 21 days during which, if the offer is accepted, the defendant will pay the claimant’s costs (known as ‘the relevant period’); and
- state whether it relates to the whole of the claim or to part of it, and whether it takes into account any counterclaim.
* Practice: most offers will state that acceptance is required within 21 days
o NB. a longer period may be specified
Part 36 - when is delivery deemed served?
- Deemed delivery: offer is made when it is served on the other party; rules of deemed service apply here
o It is inclusive of interest until the relevant period expires
Are Part 36 offers without prejudice?
A Part 36 offer is treated as ‘without prejudice save as to costs’. As a consequence, the trial
judge will not be made aware of the offer until the case has been decided, both liability
and quantum. Only when the issue of costs fails to be dealt with will any relevant offer be
produced to the judge.
How long does the offeree have to request clarification of the offer?
- Once a Part 36 offer has been made, the offeree has 7 days in which to request clarification of the offer
What is the effect of acceptance?
- May be accepted at any time in the relevant period unless notice is given of withdrawal
- Late acceptance: may be adverse costs consequences
If D makes the offer during the relevant period?
- If D made the offer, the sum must be paid to C within 14 days and, if not, C can enter judgment
o C is also entitled to their costs up to the date of acceptance
If parties cannot agree costs?
o If the parties cannot agree costs, a judge will assess them on the standard basis in multi-track cases, but those on the fast and intermediate tracks will be subject to fixed recoverable costs.
If C makes the offer?
o C will also be entitled to costs up to the date of acceptance on a standard basis
What if the claimant accepts D’s offer after the relevant period has expired and the parties cannot agree costs?
- D pays the claimant’s costs up to the date on which the relevant period expired; and
- the claimant pays the defendant’s costs thereafter until the date of acceptance.
What if if D accepts C’s offer late?
D will usually be ordered to pay C’s costs up to date of acceptance
What happens with proceedings in all these scenarios ^
- In all these scenarios, proceedings will be stayed (paused) to allow for the sum offered and the costs to be paid
Effect of non-acceptance?
- Proceedings will continue
- Depending on who made the offer and whether it is beaten at trial, there may be significant consequences: damages, interest, and costs awarded
- Penalties will be imposed from the day after [expiry] the relevant 21 day period for acceptance expires (namely, from Day 22) and will apply unless the court rules that it would be unjust to do so
In considering imposing penalties for non-acceptance, the judge will take into account all circumstances including….?
o the terms of the Part 36 offer,
o when it was made and in particular how close to the trial,
o what information was available to the parties at the time,
o their conduct, and
o whether it was a genuine attempt to settle
When will an offer be unjust?
✅ An order will be made in most cases and it will be the exception not to do so. It is irrelevant how small an amount the offer is beaten
❌ It may be unjust where the offeror has not provided sufficient disclosure to allow the offeree to make an informed decision
* EG the Part 36 offer expired only days before the trial and crucial allegations that had not been pleaded were raised in the opening of the case
Fixed recoverable costs?
The introduction of fixed recoverable costs to the fast and intermediate tracks has affected the rules which apply to successful Part 36 offers made on those tracks.
Instead of costs being assessed on the standard basis, the costs are fixed in accordance with Parts 45 and 46 of the CPR. The provision for indemnity costs for a claimant’s Part 36 offer is replaced with a 35% uplift on the claimant’s fixed recoverable costs. The stage in which the relevant period of a Part 36 offer expires is the equivalent of Day 22.
- The claimant wins at trial and equals or beats their own offer
- This is where C obtains judgment which is at least as advantageous as their Part 36 offer
- Severe penalties will be enforced on D, unless it is unjust to do so
What is the additional amount of damages?
- As D lost at trial, they will be ordered to pay damages and interest due under contract or statute as typical
- D will ALSO be required to pay ‘extra’ damages
1. For damages of up to £500,000, the defendant must pay an additional amount of 10% of the sum awarded.
2. For damages in excess of £500,000 and up to £1 million, 10% of the first £500,000 is payable and thereafter, 5% up to a maximum of £75,000. - Where the remedy awarded is non-monetary, the term ‘sum awarded’ refers to the costs.
Enhanced interest?
- From Day 22 onwards, the percentage rate of interest charged on the damages awarded increased to a rate not exceeding 10% above the base rate
Multi-track: costs on an indemnity basis?
- Normally: D pays C’s costs on a standard basis from the date they were incurred up to and including trial and judgment
- BUT Part 36: D is ordered to pay costs on an indemnity basis from Day 22 onwards
o ie, C is able to recover more costs
Fast and intermediate tracks: enhanced fixed costs
in recognition that indemnity costs are paid at a higher rate, the claimant is entitled to an amount equivalent to 35% of the difference between the fixed costs for the stage applicable when the relevant period of their Part 36 offer expired and the stage applicable at the date of judgment. It is important to be aware that this is not a straight uplift on all the costs.
Interest on costs?
The final penalty imposed is that interest is awarded on those indemnity or enhanced fixed costs and this may be as high as 10% above the base rate. This is in contrast with the general
rule that interest is not payable on costs incurred before judgment. Again, the sanction runs
from Day 22.
