Recovering costs in litigation

Litigation can be a lengthy and expensive process and we believe that it should always be considered as an alternative of last resort. However, we understand that it is not always possible to avoid Court proceedings.

It is important that our clients are fully aware of the costs implications which are involved in such proceedings and be aware of the costs that the ‘successful party’ may be able to recover from the unsuccessful party.

At the resolution of proceedings, and even during proceedings, any party to a matter may have to pay costs of some kind. These costs may just be to the solicitor who acted for them in the particular matter but, in some circumstances, may include payment of the other party’s legal costs.

It is rare that one party will ever pay the 100% of the other party’s legal costs. Instead, the type and amount of the costs to be paid varies according to different principles, depending on the outcome of the proceedings, as set out below.

Court “Scale” Costs

There are certain situations where an order for costs is limited to a scale set by the Courts, regardless of the actual costs incurred by the successful party. For example, in debt recovery matters and or where a Default Judgment obtained, then the successful party’s recovery is limited (as per the scale set out in Schedule 2 of the Legal Profession Regulation 2005).

Solicitor/Client Costs

Solicitor/Client Costs are costs that a party pays to their own solicitor for the work that the solicitor performs in relation to the matter. Normally, a party must pay these costs regardless of whether they win and/or lose, or whether the other party is also ordered to pay some contribution to the costs.

Party/Party Costs

Party/Party Costs are the costs which the successful party may recover from the unsuccessful party in Court proceedings in the event that an “ordinary” costs order is made. These costs are to compensate the successful party for that part of their solicitor/client costs which have been “reasonably incurred” as a result of the proceedings.

It should be noted that party/party costs will not completely cover the total solicitor/client costs and will usually range between 55% and 80% of the actual costs incurred.

Indemnity Costs

The Court may make an indemnity costs order in favour of a successful party in proceedings where the successful party has been subjected to unnecessary costs and/or expenses in the proceedings as a direct result of the conduct of the other party, such as where a party’s conduct has been unreasonable, i.e. where one party deliberately delays the proceedings or argues matters not seriously in contention.

Indemnity costs may also be awarded where one party has made and served a formal offer of compromise (that is, an offer to settle the matter before a Court Hearing). If this offer is rejected or not accepted by the other party and the offer was more favourable than the final outcome for the offeree, then the offeror (the person who made the offer) may be awarded costs on an indemnity basis (“Indemnity Costs”).

If indemnity costs are awarded, a party may well recover up to 90% of the solicitor/client costs incurred.

Leave a Reply