Out-Law / Your Daily Need-To-Know

Out-Law Guide 4 min. read

Payment and recovery of costs and disbursements in proceedings

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

Save for 'small claims' cases, or where there are fixed recoverable costs, a party that loses an application or at trial or otherwise will normally be liable to pay costs. Except in limited circumstances, the court or an arbitrator has full discretion as to what costs order to make in respect of both entitlement and amount.

Factors which may be taken into account in determining a party's entitlement to and/or the amount of costs to be awarded include:

  • in court proceedings, whether the case is in the High Court or County Court (which will principally depend on the value of the claim);
  • whether the proceedings have been conducted at reasonable cost;
  • whether any order relating to recoverable costs has been made or any costs estimates or budgets have been exchanged by the parties;
  • whether the court or an arbitrator has made any costs 'capping' order;
  • all the circumstances of the case including matters such as the conduct of the parties prior to 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;
  • whether any lodgement or 'Calderbank' offer has been made by either party;
  • a party's refusal to mediate or to attempt to settle the case;
  • whether the amount of costs claimed is reasonable and necessary considered by the court or an arbitrator to have been reasonably incurred and reasonable in amount having regard to all the circumstances of the matter including the issues involved, and the value of the claim, the complexity of the case, the time spent and other factors relevant to the work undertaken.

In very limited circumstances, it may be possible to recover from the losing party your own in-house costs if these relate to work undertaken by your employees or consultants (e.g. an in-house expert). To facilitate such recovery (if applicable) it is important to keep contemporaneous records of all time spent on such activities

Whilst a successful party will normally be entitled to an award of costs, in the light of the court or arbitrator's full discretion to award and assess costs, and the matters which will be taken into account, there is no guarantee that you can expect an award of any specified or minimum proportion of your costs relating to a particular application or issue, or the proceedings as a whole. In most instances there will be an element of irrecoverable costs from an opponent

If you have purchased or have the benefit of an after the event legal expenses insurance policy, or have entered into a funding agreement with a third party funder (if permissible), you may be able to recover the 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 publicly funded, there is likely to be difficulty in obtaining and enforcing 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 the power to order that a losing party pays interest on costs payable to a successful party. They may also order that party to pay some money on account of costs prior to the final amount of such costs being assessed.

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 unless otherwise stated.

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, but are not limited to:

  • 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.

For more information contact Paul Abbott, head of law costs team at Pinsent Masons.

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