The legal costs incurred by a party to civil proceedings can be substantial.
It is therefore often important to a party who is successful in their claim, or successful in defending a claim brought against them, to recover as much of those costs as possible.
The costs a party usually incurs in civil proceedings are solicitor’s and Counsel’s costs, Court fees and disbursements to third parties, such as expert’s fees. Recovery is limited to costs directly attributable to the dispute. Reimbursement is allowed to litigants in person although the level of costs recoverable is lower (CPR Rule 46.5 and CPR PD paragraph 46.3).
1. Can I cover my costs?
Whether a successful party to litigation is able to recover their costs, and to what extent, depends on which court track the claim has been allocated to. There are three tracks for civil claims, being the Small Claims Track for claims valued up to £10,000 (CPR Part 27); the Fast Track for claims valued over £10,000 but less than £25,000 (CPR Part 28); and the Multi Track for more complex claims and claims valued at over £25,000 (CPR Part 29).
The costs rules in relation to litigation are governed by CPR44 and the specific CPR of the relevant track.
The court retains discretion in relation to costs at all times and has the discretion to decide (CPR Rule 44.2):-
(a) whether costs are payable by one party to another;
(b) the amount of those costs; and
(c) when they are to be paid.
The general rule under CPR Rule 44.2(2)(a) is that the unsuccessful party will be ordered to pay the costs of the successful party, although the court has discretion to make a different Order. The general rule does not apply, however, to low value and straightforward claims allocated to the Small Claims Track. Regardless of which track a claim is allocated to, the court will always place emphasis on the overriding objective to deal with the claim justly and at proportionate expense (CPR 1.1).
2. Costs in the Small Claims Track
The Small Claims Track is designed for laypersons to navigate the court process for low value and straightforward claims without the need to necessarily instruct legal representation. As such, and in order to keep costs proportionate to the claim value, recovery of costs within Small Claims Track claims is strictly limited. The costs rules for the Small claims Track are governed by CPR Rule 27.14 and the court will only order a losing party to pay specific fixed costs to a successful party, although there may be exceptions where a party has acted unreasonably within the proceedings. These fixed costs are detailed in the tables shown in CPR Part 45, but other costs may be awarded in addition as detailed in CPR Rule 27.14, such as court fees and limited expenses incurred by the winning party and any expert when attending court.
2. Costs in the Fast Claims Track
Costs recoverable in the Fast Claims Track may still be limited to adhere to the overriding objective to deal with claims in a timely fashion and cost effectively. The court will apply the proportionality test taking into account the value and complexity of the claim, the financial position of the parties and the importance of the case.
The costs of a Fast Track trial, being the costs of an advocate to prepare for and attend trial, are limited pursuant to CPR Rule 28.2(5) and Part VI of CPR Part 45. How much the court can award is detailed at CPR Rule 45.38 and is based upon the amount of the judgment awarded, less interest and costs and any reduction for contributory negligence. The court has the power to deviate from the set costs in some circumstances.
3. Costs in the Multi-Track
In Multi-Track claims, the usual costs rule is that the successful party can recover their costs from the losing party.
Costs are, however, managed by the court within the proceedings to ensure that the parties’ costs remain reasonable and proportionate.
Costs can be agreed by the parties, but if the court is asked to make an order on costs, this will usually be assessed on the standard basis, meaning that the incurring party must show the costs as being reasonable and necessary and any costs will be disallowed if deemed disproportionate. An order of costs can also be made on an indemnity basis if so requested, meaning that the incurring party must only show the costs as being reasonable. If the court has any doubts, however, with regard to whether costs have been reasonably incurred the court will usually resolve any doubt on the side of the paying party.
It should be noted that where costs are awarded to a successful party, such an award will likely represent a percentage of the costs incurred and not the full amount of costs sought. The usual award is around 60%-70% of a party’s total legal costs and therefore that party will need to bear the deficit. The percentage recovery will be higher in the event of costs being assessed on an indemnity basis.
If a party issues a claim and then discontinues it, then then the standard rule is that the party will pay its opponent’s costs pursuant to CPR Rule 38.6, except in rare circumstances. Therefore, this cost rule should be borne in mind prior to the issue of a claim.