Legal costs play a huge part in any decision-making process when considering whether to bring a claim or how best to defend one. It is a complex area – but our experts have decade’s experience helping clients.
Whether you are
- considering starting legal proceedings;
- facing the prospect of defending as legal case;
- already involved in an issued claim at court; or
- coming to the conclusion of a legal case
the issue of the legal costs that will be payable is very important issue to consider and understand.
Legal costs in larger claims can be so significant that they can even lead to a case settling on the basis that a defendant simply cannot risk running a case to trial. Whilst the ability to defend a claim has been made easier in recent years with the advent of solicitor funding arrangements and funding of litigation claims (and, more rarely, defences), it is still a matter of concern.
Added to all this is that the litigation procedure itself makes the issue of costs very complicated – whether that is
- the type of costs ordered, and
- the way in which costs are assessed and the strategies that can be employed to mitigate or protect against legal costs.
With the best legal advisors, you can navigate a litigation claim whilst also being aware of where you can best protect against your opponent’s potential claim for legal costs.
At Francis Wilks & Jones these considerations are always central to our advice and assistance in litigation proceedings.
Whether you are a defendant accepting part of a claim, or a claimant uncertain about part of your claim, it is sensible to exploit any opportunity to settle the admitted or uncontested aspect, or at least seek to do so.
There are various types of offer a party can be made, both before and during litigation proceedings, which adheres to the overriding objective of all civil proceedings (namely to mitigate costs and ensure that legal costs are not wasted on unnecessary litigation). Our other webpages on Offers to Settle set out in more detail the types of offers which can be made in a claim.
However, once an offer is made, it is important to understand fully the consequences of the legal costs you or your opponent have incurred to date. This depends on the type of offer made to settle the proceedings, which generally fall into two camps – Calderbank offers and Part 36 Offers.
- Calderbank Offers tend to be slightly more generic, covering the sums claimed and the legal costs together. This can have advantage where there is uncertainty as to the division of such categories or where different payment terms are sought.
- Part 36 Offers are stricter, and very different dependant on whether you are the claimant or defendant. For a claimant, a Part 36 offer (if not accepted) can in certain circumstances enhance the value of any judgment eventually obtained and any costs ordered to be paid. For a defendant, a Part 36 offer (if not accepted) can raise the bar from you having to defend the entire claim, to having to defend the claim above the value offered. It is worth discussing these aspects with your solicitors.
Types of Costs Orders
Commercial litigation proceedings, when concluded, generally result in an order providing the remedy sought, or a variation (i.e., the judgment) and may also set out who is liable for the entire legal costs of the proceedings (with one party potentially having to pay their own solicitor’s fees and expenses and the opponent’s legal costs, subject to assessment).
During those proceedings there may also be parts of the proceedings where costs are awarded to a party, for example where their opponent seeks to amend their claim or defence or where unreasonable changes to the dates for complying with certain requirements (for example deadliness for evidence) are requested. These are known as interim applications/orders.
For interim applications (and any orders made during the course of a claim rather than at trial) a party may be required to pay the costs of that specific interim application. This obligation may be against a party who eventually wins the whole claim – where such costs will be carved out of any future costs order in the judgment.
Costs orders vary – they can be reserved or left within the proceedings (for interim applications), and they can be summarily assessed or subject to a detailed assessment (see below) if not agreed. Where a costs order is summarily assessed it will be payable within 14 days, after which date interest begins to accrue on the amount ordered to be paid.
Before most hearings which may conclude with an order for costs, whether they are the trial or the hearing of an interim application, it is sometimes wise for the parties to file a costs statement, to guide the judge on the appropriate type of costs order to be made.
- For low-cost claims and interim applications, this may enable the judge to make a summary assessment of the costs to be awarded (and thus avoid the necessity for separate assessment proceedings).
- For trials and other proceedings where more substantive costs are sought to be awarded, these can assist the Judge in reaching a decision as to whether a summary assessment is appropriate, alternatively the amount of any sum to be paid pending a consequential agreement or separate assessment in costs assessment proceedings).
To be Paid on Account
Sometimes, usually at the final judgment of a claim, the Court will order costs to be assessed if not agreed, enabling the parties to negotiate the costs payable as a last attempt to avoid a further set of proceedings (costs assessment).
Twinned with this order, especially where the proceedings were lengthy and denying some immediate remedy to the successful party may cause them prejudice, may be an order for the paying party to pay a sum “on account”. This will usually be a proportion of the total sum claimed on the Costs Statement, on the basis that this proportion is likely to be less than the sum eventually agreed or assessed as payable.
Assessment of Costs
Once proceedings are concluded, the judgment may provide for costs to be assessed if not agreed. The objective of this order is that ideally the parties should negotiate the amount of costs that are payable by the paying (usually losing) party.
If they cannot agree such costs, despite the judgment and outcome of the proceedings, then separate proceedings (which can last as long) must be issued for the winning party’s legal costs to be assessed. The eventual assessment is a second judgment awarding a sum which is equally enforceable as a judgment debt, in addition to the judgment.
As costs assessment proceedings are effectively a new set of litigation proceedings, further offers to settle may be made in a similar manner to the Costs Offers described above.
There is then the simultaneous problem of the costs of the assessment proceedings, which will ultimately be resolved in a more summary fashion to avoid such disputes going on forever.
At Francis Wilks & Jones we are continuously aware of the ultimate bottom line including the issues of costs, and any risk as to costs will always be considered as part of our advice to you.