If an organisation is involved in a court case it will have to pay its lawyer's costs and disbursements/expenses. Depending on the outcome of the case a proportion of the costs and disbursements payable to the lawyers may be recoverable from the opponent.
Recovery of costs if you win
Other than in 'small claims' cases, the losing party in court proceedings will normally be ordered to pay costs.
Except in limited circumstances where only fixed costs are awarded, the court or an arbitrator has full discretion to decide which party should pay costs to an opponent and as to the amount of costs payable. Factors which may be taken into account in that decision include:
- In court proceedings the 'track' the case has been allocated to - this will principally depend on the value of the claim and could be small claims, fast track or multi-track;
- all the circumstances of the case, including matters such as:
- the conduct of the parties before and during the course of the proceedings - including whether it was reasonable for a party to raise, pursue or contest a particular issue, the manner in which a party has pursued or defended a claim and whether or not a party exaggerated its claim;
- whether a party has succeeded on part or all of its case;
- offers to settle made by either party;
- a party's refusal to mediate or to attempt to settle the case.
- whether the amount of costs claimed is proportionate, and has been reasonably incurred;
- the complexity of the case, specialised knowledge involved, time spent and other facts relevant to the amount of work undertaken;
It may occasionally be possible to recover your own in-house costs from the losing party if these relate to work undertaken by your employees, consultants or an in-house expert. The cost of this work has to be in principle recoverable by solicitors or external experts if they had been engaged to carry out the work - for example, helping to prepare primary or supporting evidence. To achieve the maximum amount of recovery it is important to keep thorough records of all time spent on such activities. For more information, please see our separate OUT-LAW Guide to recovering time spent.
Although a successful party will normally be entitled to an award of costs, in light of the court or arbitrator's full discretion and the matters which will be taken into account there is no guarantee that a successful party will receive any specific proportion of its costs, and in most instances there will be a shortfall between the successful party's liability for costs and disbursements to its lawyers and the costs recoverable from the losing party.
If you have after the event legal expenses insurance or you have entered into a conditional fee agreement with your lawyers, you may be able to recover any premium or success fee from your opponent or a third party. For more information, please see our separate OUT-LAW Guides to litigation costs insurance and conditional fee agreements.
Payment of legal fees is not conditional on recovery of costs from an opponent or third party. You will remain liable for these costs, including for any shortfall between the costs paid by another party and your actual costs.
If an opponent or third party is ordered to meet all or some of your costs but fails to do so, you will remain liable. Bear in mind that in court proceedings where your opponent is public funded by the Legal Services Commission in most cases it will be difficult to enforce an order for the payment of costs in your favour, especially if you are a business or an individual of independent financial means.
The court or an arbitrator has power to order a losing party to pay interest on costs. They may also order that party to pay some money up front before the final costs calculation has been made.
Time of assessment
The costs awarded will usually be assessed either at the conclusion of a particular application or at the conclusion of the full proceedings. Costs will generally have to be paid within 14 days.
Payment of costs where you are unsuccessful, in whole or in part
If you are unsuccessful on the hearing of any application or at a trial, have all of part of your case struck out or you discontinue all or part of your case then you are likely to be ordered to pay a proportion of the other party's costs. Those costs will be assessed by the court or arbitrator in the absence of agreement and may include:
- legal fees and disbursements and expenses;
- any success fee under a conditional fee agreement;
- any insurance premium paid by the other party for the benefit of after the event legal expenses insurance;
- costs arising from a litigation funding agreement with a third party funder.
If you are ordered to pay your opponent's costs you will also be liable for your own costs, in addition to any damages awarded against you.
Funding and the future
The Government is considering changes to the way litigation is funded, and to what costs will be recovered from a losing party. It has published a draft Bill that is likely to come into effect late in 2011 or in 2012 following a period of consultation in parliament. The Bill proposes that ATE premiums and CFA success fees will no longer be recoverable from opponents and widens the scope of damages based fee agreements (contingency fees).