In
English
English usually refers to:
* English language
* English people
English may also refer to:
Peoples, culture, and language
* ''English'', an adjective for something of, from, or related to England
** English national ide ...
civil litigation
Civil law is a major branch of the law.Glanville Williams. ''Learning the Law''. Eleventh Edition. Stevens. 1982. p. 2. In common law legal systems such as England and Wales and the law of the United States, United States, the term refers to non ...
, costs are the
lawyer
A lawyer is a person who practices law. The role of a lawyer varies greatly across different legal jurisdictions. A lawyer can be classified as an advocate, attorney, barrister, canon lawyer, civil law notary, counsel, counselor, solic ...
s' fees and
disbursements of the parties.
In the absence of any order or directive regarding costs, each party is liable to pay their own solicitors' costs and disbursements such as a barrister's fees; in case of dispute, the court has jurisdiction to assess and determine the proper amount. In
legal aid
Legal aid is the provision of assistance to people who are unable to afford legal representation and access to the court system. Legal aid is regarded as central in providing access to justice by ensuring equality before the law, the right to co ...
cases, a similar assessment will determine the costs which the solicitors will be paid from the Legal Aid Fund.
In most courts and tribunals, generally after a final
judgment
Judgement (or US spelling judgment) is also known as ''adjudication'', which means the evaluation of evidence to decision-making, make a decision. Judgement is also the ability to make considered decisions. The term has at least five distinct u ...
has been given, and possibly after any interim application, the
judge
A judge is a person who presides over court proceedings, either alone or as a part of a panel of judges. A judge hears all the witnesses and any other evidence presented by the barristers or solicitors of the case, assesses the credibility an ...
has the power to order any party (and in exceptional cases even a third party, or any of the lawyers personally) to pay some or all of other parties' costs. The law of costs defines how such allocation is to take place. Even when a successful party obtains an order for costs against an opponent, it is usual that he may nevertheless still have to pay his solicitors a balance between the costs recoverable from the opponent and the total chargeable by his solicitor; and if the loser is unable to pay, then the order for costs may be worthless, and the successful party will remain fully liable to their own solicitors.
Costs "follow the event"
The law of costs in
England and Wales
England and Wales () is one of the three legal jurisdictions of the United Kingdom. It covers the constituent countries England and Wales and was formed by the Laws in Wales Acts 1535 and 1542. The substantive law of the jurisdiction is Eng ...
is typical of
common law
In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipresen ...
jurisdiction
Jurisdiction (from Latin 'law' + 'declaration') is the legal term for the legal authority granted to a legal entity to enact justice. In federations like the United States, areas of jurisdiction apply to local, state, and federal levels.
Jur ...
s, save that of the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
.
In the small fraction of cases that do not settle and instead proceed to a judgment, generally costs "follow the event" so that the successful party is entitled to seek an order that the unsuccessful party pay his or her costs. Should a case settle, then the parties can seek to agree costs, with the general rule that the losing party pays costs.
Costs orders
The order that a judge gives as to costs determines who will be the paying and who the receiving party. The amount of costs remains to be determined by assessment if not agreed. Common costs orders, other than on the Small Claims Track, include the following:
Interim costs
As a general rule, after judgment has been handed down, the court "will" order one party to make an advance payment towards the other side's costs. This will be done even before the costs claim has been finalised.
The amount that will be ordered is based upon the parties' disclosed costs estimates, and will take into account the percentage of costs that have been ordered to be paid; any order for Indemnity Basis costs, if relevant, and any costs that are due to the paying party.
Wasted costs
These are defined as "costs incurred by a party—
:(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or
:(b) which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay"
These costs will include the situation in which a party has incurred unnecessarily due to the other side's conduct. For example, if a court hearing is postponed due to one party not turning up at court. As a result, the other party had to pay a brief fee for a
barrister
A barrister is a type of lawyer in common law jurisdictions. Barristers mostly specialise in courtroom advocacy and litigation. Their tasks include taking cases in superior courts and tribunals, drafting legal pleadings, researching law and ...
, for a hearing that ultimately did not take place. Other instances includes failure to follow practice directions, and in some cases, acting in an unnecessarily belligerent manner.
In Hong Kong (and many other Common Law jurisdiction), during the pre-Civil Justice Reforms era, 'macho', 'tough' and 'aggressive' litigators may be prized by lay-clients. However, with the implementation of the Civil Justice Reforms (CJR), 'macho', 'tough' and 'aggressive' litigators may end up causing more harm to their clients. Willingness to reconcile and compromise is, therefore, the new king in Hong Kong's new litigation landscape where the laws requires legal practitioners to advice their clients the importance of settlement negotiations. This was illustrated by the Patrick Wang Ho Yin cost order.
Security for costs
Security for costs is a
common law
In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipresen ...
legal concept of application only in costs jurisdictions, and is an order sought from a court in litigation.
The general rule in costs jurisdiction is that "costs follow the event". In other words, the loser in legal proceedings must pay the legal costs of the successful party. Where a defendant has a reasonable apprehension that its legal costs will not be paid for by the claimant if the defendant is successful, the defendant can apply to the court for an order that the claimant provide security for costs. Furthermore, the amount that is ordered by the judge is in direct correlation to the strength or weakness of the claimant's case brought herewith. The weaker the probability of the claimant prevailing, the higher the security order.
Typically a claimant will be outside the jurisdiction of the court: the law of security for costs recognises that orders of the court relating to payment of a party's legal costs can be very difficult to enforce in non-common law jurisdictions, and so will order security to be provided. Security can also be ordered where a claimant is insolvent, or prone to vexatious litigation.
Security is usually provided in the form of a bank cheque paid into the court, or held in a trust account operated jointly by both the claimant's and defendant's lawyers. If the defendant is successful, the money can be applied against the costs order. If the claimant is successful, the security is returned to the claimant.
Comparison with other countries
The law of costs is often known as the
English rule.
The situation contrasts with that in the U.S. where legal fees may be sought only if the parties agree by
contract
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
before the litigation, or if some special act or
statute
A statute is a formal written enactment of a legislative authority that governs the legal entities of a city, state, or country by way of consent. Typically, statutes command or prohibit something, or declare policy. Statutes are rules made by le ...
allows the successful party to seek such fees, the
American rule. Federal district court and Court of Appeals judges award costs to the prevailing party under
Federal Rules of Civil Procedure
The Federal Rules of Civil Procedure (officially abbreviated Fed. R. Civ. P.; colloquially FRCP) govern civil procedure in United States district courts. The FRCP are promulgated by the United States Supreme Court pursuant to the Rules Enabling ...
.
Generally, state court judges have no common law right to award such fees against the losing party. It has been suggested that the American rule contributes to making the U.S. a litigious society. Individuals have little to lose beyond filing fees and a retainer to start a lawsuit, and they are not at risk of having to pay their opponent's fees if they lose.
Conversely, the English rule has been criticised. Critics point out that it potentially hinders access to justice by increasing the risks of litigation—both by setting up the risk of having to pay both parties' full costs in the event of losing, and by creating incentives for parties to sink increasing resources into their cases to win the action and avoid paying fees, thereby increasing the overall cost-risk of litigation. This strategy cannot succeed under the American rule.
The German costs rule, which allows for fixed recoverable costs, avoids this unfortunate consequence of full-fees recovery.
Hong Kong generally follows the English Rule.
What can be claimed?
Recoverable costs are limited to:
*Fees and charges of the
solicitor
A solicitor is a legal practitioner who traditionally deals with most of the legal matters in some jurisdictions. A person must have legally-defined qualifications, which vary from one jurisdiction to another, to be described as a solicitor and ...
(attorney), which may be hourly, daily or an agreed sum;
*Disbursements, including
barrister
A barrister is a type of lawyer in common law jurisdictions. Barristers mostly specialise in courtroom advocacy and litigation. Their tasks include taking cases in superior courts and tribunals, drafting legal pleadings, researching law and ...
s'/counsels' fees;
*Witness allowances (
conduct money
Conduct money is money paid in some legal systems to a person under the compulsion of a summons to witness (subpoena) to pay for their expenses to attend in court. It generally incorporates a daily rate for each day the witness must attend in cou ...
), including fees paid to
expert witness
An expert witness, particularly in common law countries such as the United Kingdom, Australia, and the United States, is a person whose opinion by virtue of education, training, certification, skills or experience, is accepted by the judge as ...
es;
*Some professional fees for non-witnesses;
*
VAT
A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the en ...
(where chargeable);
*Lawyers' "success fees" allowable by the court under a valid
conditional fee agreement (CFA); and
*After-the-event insurance premium.
The indemnity principle
The indemnity principle, a term unrelated to the concept of indemnity costs, stipulates that a paying party cannot be ordered to pay more than the receiving party has already agreed to pay his solicitor, the
retainer
Retainer may refer to:
* Retainer (orthodontics), devices for teeth
* RFA ''Retainer'' (A329), a ship
* Retainers in early China, a social group in early China
Employment
* Retainer agreement, a contract in which an employer pays in advance for ...
. Illustrated in the case authority of ''Wang Ho Yin Patrick v Fu Chun Lung & Ors.''
018HKDC 301 whilst indemnity costs will be awarded where the opposition is found to have :
# made an unmeritorious application; or
# taking out a summons maliciously; or
# failing to achieve advantageous outcome; or
# caused wasted costs;
It was also established in this case that a separate indemnity cost order can also be imposed against a litigant (whom was a solicitor himself in this case) for failing to act courteously/ and work with his opposing solicitor. In this case, indemnity was ordered where it was found:
"all costs wasted as a result of the unnecessary separate compiling of Bundle C (Correspondence Bundle) by the Defendant’s Solicitors be borne by the Plaintiff’s Solicitors personally on an indemnity basis, such costs to be taxed if not agreed, with certificate for counsel."
Exceptions
The principle causes anomalies for ''
pro bono
( en, 'for the public good'), usually shortened to , is a Latin phrase for professional work undertaken voluntarily and without payment. In the United States, the term typically refers to provision of legal services by legal professionals for pe ...
'' representation where, because the lawyers have agreed to represent the party for no cost, they cannot subsequently ask the court for a costs award when they win. However, since 2008 ''s. 194
Legal Services Act 2007
The Legal Services Act 2007 is an Act of the Parliament of the United Kingdom that seeks to liberalise and regulate the market for legal services in England and Wales, to encourage more competition and to provide a new route for consumer complai ...
'' allows the court to order a party who loses against ''pro bono'' representation to make an appropriate
charitable donation
The practice of charity is the voluntary giving of help to those in need, as a humanitarian act, unmotivated by self-interest. There are a number of philosophies about charity, often associated with religion.
Etymology
The word ''charity'' ori ...
''in lieu'' of costs.
There are also specific exceptions to the principle for:
*
In-house lawyers;
*
Conditional fee agreements;
*
Legal aid
Legal aid is the provision of assistance to people who are unable to afford legal representation and access to the court system. Legal aid is regarded as central in providing access to justice by ensuring equality before the law, the right to co ...
; and
*
Litigants in person.
Exceptions
The rule that "costs follow the event" is observed on the
Multi- and Fast Tracks.
However, the judge has considerable
discretion
Discretion has the meaning of acting on one's own authority and judgment. In law, discretion as to legal rulings, such as whether evidence is excluded at a trial, may be exercised by a judge. Some view discretion negatively, while some view it ...
to apply or disapply these rules if the result would otherwise be
unjust. The paying party can
appeal
In law, an appeal is the process in which cases are reviewed by a higher authority, where parties request a formal change to an official decision. Appeals function both as a process for error correction as well as a process of clarifying and ...
against the costs order by the usual routes of appeal.
Small claims track
If a case is allocated to the
Small Claims Track
Small-claims courts have limited jurisdiction to hear civil cases between private litigants. Courts authorized to try small claims may also have other judicial functions, and go by different names in different jurisdictions. For example, it may b ...
, only specific limited costs such as fixed court fees are usually awarded.
Fast-track trials
On the Fast Track, the actual costs of the
trial
In law, a trial is a coming together of Party (law), parties to a :wikt:dispute, dispute, to present information (in the form of evidence (law), evidence) in a tribunal, a formal setting with the authority to Adjudication, adjudicate claims or d ...
, as opposed to preparatory work, are fixed.
Fixed costs and fees
There are also fixed costs for
road traffic accident (RTA) claims that settle before they are issued; and in certain cases brought by
HM Revenue & Customs
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, co ...
.
In addition, where both the current ''CPR 48'' and old ''CPR 45'' apply, there are fixed success fees in personal injury claims arising from RTAs; injuries at work; and industrial disease claims. These range from 12.5% in RTAs to 100%, in each type of case, if a trial occurs.
Costs limits
In certain Fast-Track or Multi-Track cases, a successful party's costs claim will be limited.
These include cases that are conducted in the
Patents County Court
The Intellectual Property Enterprise Court (IPEC; previously the Patents County Court or PCC) in London is an alternative venue to the High Court for bringing legal actions involving intellectual property matters such as patents, registered desi ...
or in claims under the
Aarhus Convention
The UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters, usually known as the Aarhus Convention, was signed on 25 June 1998 in the Danish city of Aarhus. It entered int ...
.
Formal offers to settle
The court will take account of the conduct of the parties and may vary the usual costs order in the event of misguided or dishonest behaviour. In particular, the claimant is expected to give the defendant an opportunity to settle, and the parties are expected to exchange essential information and details before starting a claim. The court will especially be aware of any formal offers to settle made under Part 36 of the
Civil Procedure Rules
The Civil Procedure Rules (CPR) were introduced in 1997 as per the Civil Procedure Act 1997 by the Civil Procedure Rule Committee and are the rules of civil procedure used by the Court of Appeal, High Court of Justice, and County Courts in civil ...
. Such offers are withheld from the judge during the trial but, during assessment of costs, the judge will compare them with the final
damages
At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognised at ...
awarded.
=Acceptance of offers
=
If a Part 36 offer is accepted, or if the claimant discontinues, the unsuccessful party is usually liable for both parties' costs to that date.
=Rejection of offers
=
If offers are rejected, and the case goes to trial, then one of the following situations can apply.
:If the defendant rejected the claimant's Part 36 offer to settle, then:
:* If the claimant is awarded a sum that is "at least as advantageous" as that offer, then the claimant is entitled to each of the following:
:::Indemnity Basis costs (defined in a separate section further below) from the date the offer expires;
:::Punitive
interest
In finance and economics, interest is payment from a borrower or deposit-taking financial institution to a lender or depositor of an amount above repayment of the principal sum (that is, the amount borrowed), at a particular rate. It is distinct ...
, up to 10% above
base rate
In probability and statistics, the base rate (also known as prior probabilities) is the class of probabilities unconditional on "featural evidence" (likelihoods).
For example, if 1% of the population were medical professionals, and remaining ...
, on the whole or part of any sum awarded, for some or all of the time at issue; and
:::An "additional amount" of up to £75,000 (only if the Part 36 offer dates from 1 April 2013).
:* If there is a judgment for the claimant that is less than the offer, then the general rules apply: the claimant is entitled to standard-basis costs plus interest.
:* If there is a judgment for the defendant that is less than the offer, then the general rules apply: the defendant is entitled to standard-basis costs plus interest.
:If the Claimant rejected the defendant's offer to settle, then:
:* If the Claimant failed 'to obtain a judgment that is more advantageous' than that offer at trial, then the defendant is entitled to, from the date that the offer expired:
:::Standard Basis costs;
:::Interest on the costs.
:* If there is a judgment for the claimant that exceeds the offer, then the general rules apply: the claimant is entitled to Standard Basis costs plus interest.
The unsuccessful party is generally also liable for both parties' costs up to the date that the Part 36 offer expires, on the Standard Basis, plus interest.
=Discontinued claims
=
If the claimant discontinues, they are usually liable for both parties' costs to the date of discontinuance, on the Standard Basis.
Qualified one-way costs-shifting
In personal injury or fatal accident cases since 1 April 2013, there is a further exception to the costs-shifting rules known as "Qualified One-Way Costs-Shifting".
If this applies then orders for costs against the claimant can normally only be enforced by a defendant if they total doesn't exceed the amount of damages and costs which a Defendant has to pay out.
However, it can be enforced in full without the court's permission if the claim was struck-out because:
:(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.
The court's permission to enforce in full is required if the claim was found at trial to be "fundamentally dishonest". If the claim was discontinued, the court can order a hearing to determine whether it was "fundamentally dishonest" to bring it.
Other situations
Other exceptions to the general rules include:
*Applications to extend time limits, usually paid by the applicant;
*Amendments to
statements of case
A statement of case is any of a number of formal documents used in the courts of England and Wales. The Claim Form, Particulars of Claim, Defence and Reply are all statements of case.
See also
* Civil procedure
Civil procedure is the body o ...
, usually paid by the amending party, including the costs of the other side's resulting amendments; and
*Failure to respond to a notice to admit where the receiving party will usually pay the costs of proving the facts alleged.
Who can claim costs?
As a general rule, the losing party pays the costs of the winning party, but the court can order otherwise.
In-house lawyers
The rule also covers in-house
corporate
A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and re ...
legal teams that conduct litigation and have
rights of audience
In common law, a right of audience is generally a right of a lawyer to appear and conduct proceedings in court on behalf of their client.
In English law, there is a fundamental distinction between barristers, who have rights of audience in the ...
. They can claim the remuneration and expenses of the lawyers involved at the rates that external solicitors could claim, even though their fees would be paid as part of the company's overheads.
Litigants in person
Litigants in person will be awarded a fixed hourly rate of
£19 per hour, unless they can prove that they have incurred a financial loss in conducting the action. Practitioners (when suing or sued) have sometimes been observed to abuse existing rules where they would purport to have had their own firm act for them (even though the arrangement is essentially the same as an act in person). The problem being of course is that they can essentially profit when conducting their own litigation. This has resulted in solicitor-litigants being observed to lack sincerity when negotiating for a settlement (hoping that the litigation will continue on for longer and thus resulting in more fees for themselves) as illustrated in the case of ''Patrick Wang Ho Yin''. In that case, Mr. Justice Andrew Li observed
"...''I agree that there was "some" evidence to suggest that P
atrick Wang Ho Yin in his capacity as the handling solicitor, might not have been very sincere or genuine in his attempts to negotiate for the settlement... I find, P, by issuing the Summons even before proper negotiations with D1 had taken place, had conducted the matter in an oppressive manner. For example, before the parties even concluded their first round of negotiations on some matters which could only be described as "a trivial" in late June 2017, P in his email dated 26 June 2017 to D1's former solicitors, stated that "our client’s sincerity for amicable solutions between the parties has already been exhausted … we hereby reserve out client’s rights to apply for the direction of the court and commence civil proceedings for contempt of court, if any" (emphasis added).''"
The costs awarded to a litigant in person cannot exceed two-thirds of what could be claimed by a professional lawyer.
Assessment of costs
Reasonableness
All claims for costs must be "reasonably incurred" or "reasonable in amount". if costs are specified as being paid as part of a contract, they are presumed to be reasonable, unless the contract says otherwise. Reasonableness is assessed against "all the circumstances" and in particular the "seven pillars of wisdom":
*Conduct of the parties:
**Before as well as during proceedings;
**Efforts made to resolve the dispute;
*Value of the property at issue;
*Importance of the matter to the parties;
*Complexity, difficulty or novelty of the case;
*Skill, effort, specialised knowledge or responsibility required;
*Time spent on the case;
*Geographical location where the work was done.
Basis of costs assessment
There are two basic ways in which the court will assess a claim for costs: the Standard Basis and the Indemnity Basis. However, in each situation, the claim must be reasonable.
The manner in that they are assessed goes a long way in determining the overall percentage that will be allowed.
Standard Basis
Costs awarded on the Standard Basis must be "proportionate to the matters in issue". Any doubt as to the costs is resolved in favour of the paying party.
Indemnity Basis
Costs awarded on the Indemnity Basis need not be "proportionate". Any doubt as to the costs is resolved in favour of the receiving party.
As a whole, an award for costs on the Indemnity Basis is much more favourable to the receiving party than an award of the Standard Basis.
For example, in the case of ''Patrick Wang Ho Yin'', Mr. Wang was ordered to pay $375,000 for a half-day hearing after the Court has found it reasonable to impose liability on an indemnity basis. In this case, the Court has found that Mr. Wang's belligerent conduct has caused the parties to have incurred costs of which could have been avoidable.
Proportionality
In considering whether or not a party's claim for costs is "proportionate", the court has to apply one of two different tests.
The old test
This applies where work is done before 1 April 2013, or to the whole of the costs in "cases commenced", i.e. if proceedings are issued, before 1 April 2013.
In these situations, the court should have regard to the seven pillars of wisdom. The court should adopt a two-stage approach:
# Compare the total costs claimed against the total benefits gained by the successful party:
#If the total costs are proportionate to the total benefits:
:a) Perform an item by item test of reasonableness;
— if they are not proportionate:
:b) Perform an item by item test of necessity.
The new test
If the work was done since 1 April 2013, and relates to a case that either does not involve court proceedings, or was issued since 1 April 2013, then a different test applies.
In these situations, the court will hold that costs "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; and
:(e) any wider factors involved in the proceedings, such as reputation or public importance".
In addition, the "necessity" of the costs is not relevant.
Costs estimates
In cases issued before 1 April 2013, parties have to give estimates of their likely costs should the case reach a trial. They are used to give each side and the Court an idea of what the likely costs burden would be.
These are submitted at the
allocation
Allocation may refer to:
Computing
* Block allocation map
* C++ allocators
* Delayed allocation
* File allocation table
* IP address allocation
* Memory allocation
* No-write allocation (cache)
* Register allocation
Economics
* Asset alloca ...
and listing stage, and at any time that the Court orders them.
A party that has costs awarded in their favour will not be limited to their estimate, but if the costs claimed exceed the estimate by 20% they will need to provide reasons. If the paying party has shown that they relied on the estimated, the Court can use the estimate as evidence that the claim is disproportionate.
Costs budgets
If a case is issued since 1 April 2013, and is allocated to the Multi-track, the parties can be forced to submit a budget for their costs, which the court can then approve. They do not apply to proceedings in the Admiralty; Chancery Division; or Commercial Court; or to cases in the Mercantile Court or Technology & Construction Court where damages exceed £10 million.
Impact and effect
The rules relating to costs budgets are more stringent than those relating to estimates.
All parties must file a budget, unless they are a litigant in person. If a party does not file a budget, it "will be treated" as only budgeting for the costs of any appropriate court fees. The costs of preparing a budget can be claimed, up to a maximum of £1,000 or 1% of the budget's total, whichever is greater.
If the Court approves or the parties agree a Costs Budget a Costs Management Order is usually made. Where the parties become aware that their costs are likely to exceed the amount of the Costs Management Order they should apply to the court to vary where "significant developments" warrant that application.
Should a party exceed its budget, their costs will be limited to their last approved budget on assessment unless there is a "good reason". It has been held that "good reasons" include the fact that the costs were otherwise "reasonable and proportionate"; and where there was a simple "tick-box" error. Costs exceeding the budget have been disallowed where a party has not applied to have its budget increased during the proceedings.
If the court has not been able to approve a party's budget, for example, due to the case settling before it was able to do so, then different rules apply. However, these rules are similar to those relating to estimates: if a party's costs claim exceeds its budget by 20%, then the difference must be explained. The paying party must also show how they have relied on the estimate. If the court agrees with the paying party, it can limit the costs to the budget; and if it disagrees with the receiving party it can use the difference as evidence the costs are "unreasonable or disproportionate".
However, should a party ultimately be awarded costs on the Indemnity Basis, then the budget is not relevant in relation to those costs.
The rules relating to costs budgets will be amended as of 1 October 2020 so that, in addition to the test of significant developments, the court may vary the budget if one party is acting oppressively by causing the other party to incur costs. Those same changes introduce a new form Precedent T which must be served and filed to explain the significant developments in the case.
''Inter partes'' costs
Where a party is awarded costs against another they are known as ''inter partes'' costs or between party costs.
Such costs are usually assessed on the standard basis. The successful party may not be awarded the entirety of their legal costs, as the costs incurred will be assessed by an officer of the court. This can be done in one of two ways.
Summary assessment
The simplified procedure is known as summary assessment under which the court will consider a schedule of the costs incurred which will usually be no more than two pages long and is often only a single page. This is the usual method on the Fast Track, for hearings lasting no longer than a single day, for certain appeal hearings and for the costs of the paying party in detailed assessment hearings.
However, summary assessment is not permitted for claims:
*On behalf of children or mental patients; or
*Funded by the
Legal Services Commission
The Legal Services Commission (LSC) was an executive non-departmental public body of the Ministry of Justice which was responsible for the operational administration of legal aid in England and Wales between 2000 and 2013.
Overview
The LSC was re ...
;
— or where:
*Paying party can raise substantial grounds; or
*Costs have been agreed by the parties.
Detailed assessment
For more complex cases a process, formerly called a
taxation of costs, now known as detailed assessment, is used. It is unrelated to "
tax
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...
" in the sense of a method of raising government revenue. The successful party must file with the court (unless the other party fails to respond to the notice of assessment) a detailed breakdown of the costs and disbursements incurred, known as a
bill of costs which sets out the successful party's claim. The bill is usually prepared by a
law costs draftsman
In English law, a law costs draftsman is a specialist lawyer who settles the legal costs of a court case. The role of the law costs draftsman centres on a procedure known as the detailed assessment of costs, which is controlled by statute in Eng ...
, whose skill is often as essential to the successful recovery of costs as the skill of a solicitor or barrister is essential to success on the principal issues of the litigation. An officer of the court, costs judge or
district judge will then assess the reasonableness of the costs (unless the potential paying party failed to respond to the notice of assessment) with reference to a statutory schedule of limits of entitlements of costs, together with legal precedents, unless the costs can be agreed between the parties. The level of reduction can mean that the bill is reduced in some instances substantially, but in most cases at least 80% of the costs originally sought will be allowed. A court order for costs is enforceable as a debt against the unsuccessful party.
Either party can appeal against a detailed assessment, to a costs judge or district judge of the
High Court if the assessment was made by a court officer, or by the usual routes of appeal if the assessment was made by a judge.
=Provisional assessment
=
If a bill of costs of under £75,000 is sent for a detailed assessment since 1 April 2013, it will at first be assessed via a new "provisional assessment" procedure (unless the potential paying party failed to respond to the notice of assessment).
This involves an assessment by the Judge on paper, without the parties being present, and the costs of it are limited to £1,500.
If either party disagrees with the outcome they can apply for an oral hearing, but unless they beat the provisional figure by 20%, they will be liable for the costs of the hearing.
Solicitor/own client costs
The other type of costs, aside from ''inter partes'' costs, is called solicitor-client costs and are usually assessed on the indemnity basis. However, costs are presumed to be reasonably incurred and reasonable in amount if the client gave their express or implied approval, but are presumed to be unreasonably incurred if the client was not told they would be recovered from the other side and if they are unusual.
Unless instructed under a
damages-based agreement, lawyers in England and Wales are not permitted to work for a share of
damages
At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognised at ...
awarded as this would amount to
champerty. A client who is unhappy with a lawyer's
invoice
An invoice, bill or tab is a commerce, commercial document issued by a sales, seller to a buyer relating to a sale transaction and indicating the product (business), products, quantities, and agreed-upon prices for products or Service (economic ...
for services can apply to the court for an order or invoke a statutory procedure whereby the costs are assessed for their reasonableness by an officer of the court, for example a judge. This is also a ''detailed assessment''. If the client does not pay the lawyer, the lawyer has a cause of action if the client does not elect to arbitrate the bill.
There is a statutory time limit on applying for such a procedure, of a year. The frequent result is that the lawyer's invoice is decreased. If the bill is reduced by one fifth or more the solicitor will pay for the process of assessment, but otherwise the client will pay. The client can alternatively apply to the
Law Society
A law society is an association of lawyers with a regulatory role that includes the right to supervise the training, qualifications, and conduct of lawyers. Where there is a distinction between barristers and solicitors, solicitors are regulated ...
for a remuneration certificate in respect of costs arising from other than litigation.
Specific types of funding
Any case can be funded by a standard retainer agreement, i.e. where the solicitor agrees to act and the client pays as the case carries on.
There are also other ways in which a case can be funded, as long as certain requirements are met.
Conditional fee agreements (CFAs)
These are commonly referred to as "
no win, no fee A contingent fee (also known as a contingency fee in the United States or a conditional fee in England and Wales) is any fee for services provided where the fee is payable only if there is a favourable result. Although such a fee may be used in man ...
" agreements. Under this type of agreement, the solicitor and/or barrister agrees not to charge the client unless the case succeeds.
If the client does win their case, then the solicitor and/or barrister is entitled to claim a percentage bonus (a "success fee") on top of their usual fees.
To be valid, the CFA agreement must comply with certain requirements. All CFAs must:
* Be in writing
* Not relate to proceedings that cannot be the subject of an enforceable conditional fee agreement
* Comply with any requirements prescribed by the Lord Chancellor
However, what can be claimed under it, and other additional requirements that may have to be met for the CFA to be valid, depend upon the date of the CFA.
CFAs dated from 1 April 2000 to 31 October 2005
If the CFA was entered into between these dates, the ''Conditional Fee Agreements Regulations 2000'' must also be complied with.
The main requirement is that before entering into the CFA the solicitor must advise the client, amongst other things, as to its effect; of alternative funding methods; and whether he has any interest in nay particular insurance policy.
If these regulations are not complied with, the CFA will not be valid.
If they are complied with, it will be valid and a success fee can be claimed from the other side, as long as they are informed of its existence.
CFAs dated from 1 November 2005 to 31 March 2013
Only the requirements of ''s. 58 Courts and Legal Services Act 1990'' need to be complied with.
If so, then it will be valid and a success fee can be claimed from the other side, as long as they are informed of its existence.
CFAs dated from 1 April 2013
If a CFA is entered into from this date then, unless the claim is for defamation; breach of privacy; diffuse mesothelioma, or is in a set of insolvency proceedings, a success fee cannot be claimed from the other side.
It can still be claimed from the client, but in personal injury claims is subject to a 25% limit of the client's damages.
The solicitors' or barrister's normal fees can still be claimed from the other side.
Collective conditional fee agreements (CCFAs)
A CCFA is CFA that covers numerous people, for example, members of a trade union, in relation to different claims, which could occur at different times.
The rules relating to CFAs generally apply to CCFAs, but, in relation to success fees, the following rules apply to CCFAs:
:If the CCFA dates from 1 April 2013, then a success fee cannot be recovered from the other side;
:If the CCFA pre-dates 1 April 2013, then a success fee can only be recovered from the other side if work was done before 1 April 2013
Insurance policies
Most litigants will have the benefit of some form of
insurance
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
will cover both their legal costs, and those of the other side.
However, both types will be subject to an upper limit on the amount of costs covered.
Before-the-event (BTE) policies
This kind of insurance policy before-the-event (BTE) against paying the other party's legal costs as part of their
domestic
Domestic may refer to:
In the home
* Anything relating to the human home or family
** A domestic animal, one that has undergone domestication
** A domestic appliance, or home appliance
** A domestic partnership
** Domestic science, sometimes c ...
or
automobile insurance
Vehicle insurance (also known as car insurance, motor insurance, or auto insurance) is insurance for cars, trucks, motorcycles, and other road vehicles. Its primary use is to provide financial protection against physical damage or bodily injur ...
policies (although many are unaware of it).
The premium for this type of policy cannot be claimed from the other side.
After-the-event (ATE) policies
If a litigation does not have a BTE policy, they can purchase after-the-event (ATE) legal expenses insurance at the start of litigation.
If the policy was taken out before 1 April 2013, the premium can be claimed from the other side as part of a normal claim for costs.
However, if it was taken out since 1 April 2013, it can only be recovered if it was taken out to cover the costs of an expert's report in a claim for clinical negligence.
Damages-based agreements (DBAs)
These are a type of
contingency fee A contingent fee (also known as a contingency fee in the United States or a conditional fee in England and Wales) is any fee for services provided where the fee is payable only if there is a favourable result. Although such a fee may be used in many ...
, i.e. the solicitor and barrister agree to take a percentage of the client's damages if the claim succeeds.
They generally have to comply with the ''Damages-Based Agreements Regulations 2013'', and there is a maximum percentage that can be claimed varies depending on the type of claim and the level of court that the DBA relates to. The solicitors' disbursements can also be claimed.
Employment claims
If a DBA pre-dates 1 April 2013, then the ''Damages-Based Agreements Regulations 2010'' apply. If not, then the 2013 Regulations apply.
However, there is no significant difference between the two sets, because in both situations, the solicitors and barristers' fees are limited to 35% of the client's damages.
In addition, before entering into the DBA, the client must be given information relating to funding, mediation, and when the fee becomes payable.
Non-employment claims
Different rules apply to non-employment cases funded by a DBA: specifically, the client does not have to be provided the information needed in employment cases, and the percentage fee varies.
=First-instance cases
=
If the DBA is entered into in a personal injury claim, then up to 25% of the client's damages plus Counsel's fees can be claimed.
In other cases, up to 50% of the client's damages, including Counsel's fees can be claimed.
=Appeals
=
If the DBA relates to an appeal, then up to 100% of the client's damages can be charged as the fee.
Costs against other parties
Costs in third-party claims
Sometimes a defendant brings a claim, for a
contribution or an
indemnity
In contract law, an indemnity is a contractual obligation of one party (the ''indemnitor'') to compensate the loss incurred by another party (the ''indemnitee'') due to the relevant acts of the indemnitor or any other party. The duty to indemni ...
towards damages, against a third party. For example, a diner claims against a restaurant for a dose of
food poisoning
Foodborne illness (also foodborne disease and food poisoning) is any illness resulting from the spoilage of contaminated food by pathogenic bacteria, viruses, or parasites that contaminate food,
as well as prions (the agents of mad cow disease) ...
and the restaurant claims against their supplier of
shellfish
Shellfish is a colloquial and fisheries term for exoskeleton-bearing aquatic invertebrates used as food, including various species of molluscs, crustaceans, and echinoderms. Although most kinds of shellfish are harvested from saltwater envir ...
. Again, "costs follow the event". If the restaurant successfully defends the claim, they pay the supplier's costs and recover the same amount from the unsuccessful claimant. This can cause injustice when the unsuccessful claimant is
insolvent
In accounting, insolvency is the state of being unable to pay the debts, by a person or company (debtor), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms: cash-flow insolvency and balance-sheet inso ...
and the successful defendant is still liable for third-party costs. The courts will only rarely allow a "cut through" of the third-party's costs to the claimant but the interests of justice prevail.
Costs against non-parties
The courts have a wide discretion in awarding costs, and non-parties are not immune, unless they are a BTE insurer.
This is particularly relevant in cases of
champerty and maintenance
Champerty and maintenance are doctrines in common law jurisdictions that aim to preclude frivolous litigation:
*Maintenance is the intermeddling of a disinterested party to encourage a lawsuit. It is: "A taking in hand, a bearing up or upholdin ...
.
Criminal proceedings
If a defendant is found to be innocent of a crime, then they are also entitled to claim their incurred legal costs, but the costs are payable out of money raised through taxes.
A bill of costs is submitted in the normal way, but the costs are assessed by the National Taxing Team in a manner similar to a claim for costs in a civil case.
Costs assessed in this way do not require a formal detailed assessment, but any amount awarded can be appealed in the usual way.
Proceedings commenced before October 2012
If a prosecution started before October 2012, then the costs will be assessed with no general restrictions on what can be claimed.
Proceedings commenced since October 2012
If a prosecution has started since 1 October 2012, then the amount that can be claimed is much lower. Effectively, the costs are limited to legal aid rates.
See also
*
Court costs
Court costs (also called law costs in English procedure) are the costs of handling a case, which, depending on legal rules, may or may not include the costs of the various parties in a lawsuit in addition to the costs of the court itself. In the ...
References
Bibliography
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{{DEFAULTSORT:Costs (English Law)
English civil law
Civil procedure
Legal costs