Unit 7 – Costs Orders

Question 1

What is the effect of a costs management order on the multi track?

Answer 1

1) A party awarded its costs on the standard basis at trial will recover the amount of its last approved / agreed budgeted costs.

2) On the standard basis, the court may depart from the budgeted costs only if persuaded there is a good reason to do so, E.g., costs were:

– Not incurred at all; or
– Much less than budgeted

3) Costs awarded on the indemnity basis and incurred costs will be assessed by the court in the usual way, unless agreed.

Question 2

Even where a CMO is not made, will the court still have regard for any costs budget when assessing costs?

Answer 2

Yes.

Question 3

For the different tracks, how will costs be assessed?

Answer 3

1) Small claims = legal costs are not recoverable & costs payable only relate to disbursements

2) Fast track – costs usually be summarily assessed (at the end of the trial)

3) Multi track – Detailed assessment of the costs will be carried out.

Question 4

What are Part 45 Costs?

Answer 4

A claimant who applies for default judgement will usually only be able to claim the costs that are fixed by Part 45 of the CPR (whatever sums they have actually spent so far – i.e., will only be the costs of preparing the case and appearing at trial).

Question 5

What is a summary assessment of costs?

Answer 5

= involves the court determining the amount that is payable immediately, at the end of the hearing

Question 6

When is summary assessment of costs given?

Answer 6

General rule = The court should, unless there is good reason not to do so, make a summary assessment of the costs:

(a) At the conclusion of a fast-track trial; and

(b) At any other hearing that has not lasted more than one day.

 Parties must file and serve a statement of costs – a detailed breakdown of their costs – no less than two days before a fast track trial and at least 24 hours before an interim hearing.

Question 7

What is the procedure for a detailed assessment of costs?

Answer 7

Where the court cannot make a summary assessment of costs an order will be made for the detailed assessment of those costs – standard way of dealing with multi-track costs.

– Within 3 months of the date of judgement/order, the receiving party must service on the paying party a Notice of Commencement of detailed assessment proceedings together with their bill of costs and evidence (like receipts).

Question 8

Where the paying party wishes to challenge the bill for a detailed assessment of costs, how should they do this?

Answer 8

1) Paying party has 21 days to serve points of dispute.

2) The receiving party has 21 days to file a reply.

3) The receiving party must then file a request for an assessment hearing within 3 months of the expiry of the period for commencing detailed assessment proceedings.

4) If the costs claimed are less and £75,000, the court undertakes a provisional assessment where the judge decides what costs are allowable in the absence of the parties.

5) If either party is unhappy with the provisional assessment, they need to request an oral hearing within 21 days; but if the party fails to achieve an adjustment in their favour by at least 20% they will be ordered to pay the costs of the hearing.

Note – Preferable to avoid this procedure by agreeing costs.

Question 9

Where there are interim hearings, how are costs determined for each of these throughout the course of the trial? (inter-partes costs: interim)

Answer 9

As the trial progresses, there may be interim hearings (e.g., application for summary judgement / set aside default judgement).

– At the end of each interim hearing, costs must be considered.

– Judge determines who is to pay the costs of the particular application and will usually summarily (instantly) assess the amount.

Question 10

What are the 2 questions the judge will ask on inter-partes costs: final (i.e., final costs assessment)?

Answer 10

1) Who pays

2) How much

Question 11

What are the Part 44 factors in assessing the final amount of costs?

Answer 11

 Conduct of the parties and the efforts made to try and resolve the dispute;
 The value of any money or property involved;
 The importance of the matter to the parties;
 The complexity of the matter;
 The skill, effort, specialised knowledge and responsibility involved;
 The time spent on the case;
 The place and circumstances in which the work was done; and
 The receiving party’s las approved or agreed budget.

Question 12

What are the terms of awarding costs on a standard basis?

Answer 12

1) Costs must be reasonably incurred and proportionate

2) Any doubt will be resolved in favour of the paying party

Question 13

What is ‘proportionate’ under standard basis?

Answer 13

The figure is proportionate if it bears a reasonable relationship to:

1) Sums in value
2) The value of any non-monetary relief in issue
3) The complexity of the litigation
4) Any additional work generated by the paying party’s conduct
5) Wider factors like reputation or public importance.

Question 14

If the judge deems a figure to be unproportionate, what will they do?

Answer 14

Reduce it. This is final.

Question 15

What are costs on the indemnity basis?

Answer 15

Costs must be:

(a) Reasonably incurred; and

(b) Reasonable amount.

– Any benefit is resolved in favour of the receiving party.

Question 16

What are the 2 major differences between indemnity & standard basis?

Answer 16

1) Standard = costs need to be proportionate to matters in issue.

1a) Indemnity = no test of proportionality.

2) Standard = doubts resolved in favour of paying party

2a) Indemnity = doubts resolved in favour of receiving party.

Question 17

What is a Part 46 Non-Party Costs order?

Answer 17

Part 46 order = the court has the discretion to make an order that a non-party meets the costs.

Question 18

When would a Part 46 order be made?

Answer 18

When the court is satisfied that the non-party was the real party interested in the litigation / or were responsible for bringing the proceedings.

1) Third party needs to be added as a party to the proceedings and may attend the hearing when the court determines the issues of costs.

2) No requirement to make a figinf that the non-party acted improperly before making the order.

Question 19

What is Part 25 order?

Answer 19

Security of costs order.

Question 20

Who can apply for part 25 order?

Answer 20

defendant ONLY.

Question 21

When is Part 25 ordered?

Answer 21

When the defendant is concerned they may not be able to recover costs from the claimant in the event they win litigation.

Question 22

When will the court make an order for security of costs?

Answer 22

a) JUST – It is satisfied (having all regard to all the circumstances of the case) it is JUST to make such an order; and

b) PART 25 CONDITIONS – One or more of the conditions in Part 25 applies.

Question 23

What are the key Part 25 conditions?

Answer 23

1) claimant resides outside a 2005 Hague Convention State (e.g., outside the EU)

2) Claimant in an impecunious company (impecuniosity = lacking sufficient money or material possessions)

3) Claimant taken steps to make enforcement difficult.

Question 24

What are the factors to consider when considering justness of a Part 25 order?

Answer 24

1) Stenght of the claim / defence
2) Claimant’s ability to provide security
3) The causes of the claimant’s impecuniosity
4) Property within the jurisdiction
5) Timing of the application

Question 25

What is the procedure for applying for a part 25 order?

Answer 25

Treated like an interim application.

1) D should submit a notice of application to the court with a witness statement in support

2) Evidence must establish 1) JUSTNESS and 2) PART 25 CONDITION exists.

Question 26

Where a settlement occurs after litigation has commenced but before it ends, i.e., during, how should it be recorded?

Answer 26

1) Consent order or

2) Tomlin order

Tomlin order = confidential

Question 27

What is a Part 36 Offer?

Answer 27

• If an offer is made under Part 36, there are significant penalties attached if the relevant party makes the ‘wrong’ decision and rejects an offer that the court subsequently deems to be suitable.

Question 28

What are the Part 36 formalities?

Answer 28

(a) Be in writing;

(b) Make clear it is made pursuant to Part 36;

(c) ‘Relevant period’ = Specify a period of not less than 21 days during which, if the offer is accepted, the defendant will pay the claimant’s costs; and

(d) State whether it relates to the whole of the claim or to part of it, and whether it takes into account any counterclaim.

Note – A longer period than 21 days may be specified.

Question 29

When is the Part 36 offer made?

Answer 29

When it is served on the other party.

Question 30

Will the trial judge be aware of the Part 36 offer made?

Answer 30

• Part 36 offer is treated as ‘without prejudice save as to costs’.

– I.e., The trial judge will not be made aware of the offer until the case has been decided, both liability and quantum.

– The offer will only be produced to the judge when the issue of costs is to be dealt with.

Question 31

When can the Part 36 offer be accepted?

Answer 31

• Part 36 offer may be accepted at any time unless notice has been given of its withdrawal, which then makes the relevant period of 21 days redundant.
• Adverse costs consequences for accepting late.

Question 32

What are the formalities within the relevant period?

Answer 32

• If D makes an offer and this is accepted by the claimant within the relevant time period, the sum must be paid to the claimant within 14 days. If not, the claimant can enter judgement.
• The claimant is also entitled to their costs of the proceedings up to the date on which the notice of acceptance is served on D.
• If parties cannot agree costs, a judge will assess them on the standard basis.
• If a claimant makes a Part 36 offer that is accepted by D within 21 days, the consequences are the same. The claimant will be entitled to their costs up to the date of acceptance on the standard basis.

Question 33

What is the effect of late acceptance?

Answer 33

• If the claimant accepts a defendant’s offer after the relevant period has expired and the parties cannot agree costs, the court will normally order that:

(a) The defendant pays the claimant’s costs up to the date on which the relevant period expired; and

(b) The claimant pays D’s costs thereafter until the date of acceptance.

• If D accepts the claimant’s offer late, D will usually be ordered to pay the claimant’s costs of the proceedings up to the date of acceptance.

Note – In all of these scenarios, the proceedings will be stayed (paused) to allow for the sum offered and the costs to be paid.

Question 34

What is the effect of non-acceptance of Part 36 offer?

Answer 34

1) Penalties imposed from the day after the relevant 21 days period for acceptance expires (i.e., from day 22) and will apply unless the court rules it would be unjust to do so.

Question 35

When would it not be just to impose penalties?

Answer 35

1) Where the offeror has not provided sufficient disclosre to allow the offeree to make an informed decision; or

2) The PART 36 offer expired only days before the trial and curcial allegations that had not been pleaded were raised in the opening of the case.

Question 36

If the claimant makes a Part 36 Offer, there are 3 possible outcomes – what are they?

Answer 36

1. Win at trial and be awarded a sum that equals or beats their own offer;
2. Win the case but obtain a judgement that is less than their own offer; or
3. Lose at trial.

Question 37

What is the effect if the claimant wins at trial and equals or beats their own offer?

Answer 37

• Usual damages & interest
• Additional 10% of sum awarded (for claims up to £500,000) and additional 5% on any figure from 500,000 to £1million (up to a maximum of £75,000).
• From day 22 (i..e, after offer expired), enhanced interest on damages (not exceeding 10% above base rate)
• Costs on indemnity basis from day 22.
• Interest on indemnity costs (up to 10% above base rate).

Question 38

What is the effect if the claimant wins at trial but does not beat their own offer?

Answer 38

No penalty imposed on either party.

I.e., Part 36 has no effect here as neither party did anything ‘wrong’. The claimant was right to make an offer but pitched it too high whereas the defendant was correct to turn it down for the same reason.

Question 39

What is the effect if the claimant loses at trial (after having given a Part 36 Offer)?

Answer 39

• Claimant is not awarded damages and will be ordered to pay D’s costs on a standard basis in the usual way.
• Part 36 has no effect here

Question 40

If the DEFENDANT makes the offer, what are the 3 scenarios to consider?

Answer 40

1) Claimant wins at trial and beats the defendant’s Part 36 offer;

2) Claimant wins at trial but fails to beat the defendant’s Part 36 offer; and

3) Claimant loses at trial.

Question 41

1) Claimant wins at trial and beats Defendant’s Part 36 offer:

Answer 41

Part 36 has n effect.

I.e., claimant was justified in their refusal because it was too low.

Question 42

2) Claimant wins at trial but fails to beat Defendant’s part 36 offer

Answer 42

SPLIT COSTS ORDER:

(a) D pays the claimant’s costs on the standard basis from when those costs were incurred until the relevant period expired (Day 21);

(b) Claimant pays D’s costs on the standard basis from the date of the expiry of the relevant period (Day 22) until judgement; plus

(c) Interest on those costs (a commercial rate of 1% or 2% above base rate).

Note – commonly called a ‘split costs’ order because the costs are divided between the parties with the split occurring at the expiry of the relevant period of 21 days.

Question 43

3) Claimant loses at trial after rejecting defendant’s offer

Answer 43

General rule as to costs applies = Claimant, as the losing party, would be ordered to pay the winner’s (D’s) costs.

• Claimant would also be ordered to pay interest on those costs from Day 22 – usually at 1% or 2% above base rate.

Question 44

Can a security of costs order be made against a party subject to a Part 20 third party claim?

Answer 44

Yes, a defendant to any claim may apply for security of costs order. This includes defendants of counter claims and Part 20 3rd party claims.