Deminor Wiki - Costs Orders

Types of Costs Orders

Standard Costs

Standard costs, also known as party-and-party costs, are those deemed necessary and reasonable for the conduct of the litigation. The winning party is typically awarded standard costs, but these do not cover all expenses incurred.

Indemnity Costs

Indemnity costs cover a broader range of expenses than standard costs, often resulting in a higher award. These are granted in exceptional cases, such as when the losing party has acted unreasonably or in bad faith.

Interlocutory Costs

Interlocutory costs are awarded for expenses related to interim applications and procedural steps taken during the litigation process, rather than at the conclusion of the case.

Wasted Costs

Wasted costs are awarded against legal representatives for conduct that results in unnecessary costs, such as negligence or improper behaviour.

Costs in the Cause

Costs in the cause are deferred until the final decision of the case. The party who ultimately wins the case will be entitled to recover these costs.

Costs Reserved

Costs reserved are costs that the court defers deciding on until a later stage in the proceedings or the end of the trial.

Costs Follow the Event

Costs follow the event is the principle where the losing party is ordered to pay the costs of the winning party. This is the standard rule in many jurisdictions, based on the premise that the loser should bear the costs of unsuccessful litigation.

Costs Cap

A costs cap limits the amount of costs that can be recovered, often used in public interest cases to ensure litigation remains affordable and accessible.

Legal Framework and Principles

United States

In the U.S., the general rule, known as the "American Rule," is that each party bears its own legal costs, regardless of the outcome of the case. However, there are several exceptions where costs orders can be made:

Statutory Provisions - Certain federal and state statutes allow for the awarding of attorney's fees and other costs to the prevailing party. Examples include civil rights laws, environmental statutes, and antitrust laws.
Contractual Provisions - Parties can agree in contracts that the prevailing party in a dispute will be entitled to recover legal costs. These provisions are enforceable by the courts.
Bad Faith Litigation - Courts may award costs against a party that has acted in bad faith, engaged in vexatious litigation, or pursued frivolous claims.

United Kingdom

In the UK, the general rule is that costs follow the event, meaning the losing party is usually required to pay the winning party's costs. Key principles include:

Proportionality - Costs awarded must be proportionate to the matters in issue. This principle aims to prevent excessive legal expenses and encourage efficient litigation.
Reasonableness - Only costs that are deemed reasonable and necessary for the conduct of the litigation will be awarded. The court assesses the reasonableness of each item of costs.
Detailed Assessment - If parties cannot agree on the amount of costs, the court conducts a detailed assessment to determine the appropriate sum. This involves a thorough review of the costs incurred.

European Union

In the EU, the rules regarding costs orders vary by member state, but many follow principles similar to the UK. Key considerations include:

National Rules - Each member state has its own procedures and rules for awarding costs. These can differ significantly in terms of what costs are recoverable and how they are assessed.
Cross-Border Litigation - In cross-border disputes, EU regulations such as the Brussels I Regulation provide guidance on the recognition and enforcement of judgments, including costs orders.

Factors Influencing Costs Orders

Conduct of the Parties

The behaviour of the parties during litigation can significantly influence costs orders. Parties who act unreasonably, delay proceedings, or pursue frivolous claims may be penalised with adverse costs orders.

Offers to Settle

Settlement offers, such as offers made under Part 36 of the UK Civil Procedure Rules, can impact costs orders. If a party rejects a reasonable settlement offer and subsequently fails to achieve a better outcome, they may be ordered to pay the other party's costs from the date of the offer.

Complexity and Importance of the Case

The complexity and significance of the legal issues involved can affect costs orders. More complex cases may justify higher costs, while straightforward cases may warrant more modest awards.

Proportionality and Reasonableness

Courts consider whether the costs incurred are proportionate to the issues at stake and whether they are reasonable in amount. This ensures that costs awards are fair and not excessive.

Success on Issues

In cases where both parties achieve partial success on different issues, the court may apportion costs accordingly. This ensures that each party bears a fair share of the costs based on their respective successes and failures.

Enforcement of Costs Orders

Domestic Enforcement

In the jurisdiction where the costs order is made, the prevailing party can take steps to enforce the order. This may involve garnishing wages, seizing assets, or placing liens on property.

International Enforcement

To enforce a costs order in a different jurisdiction, the prevailing party must have it recognised by the courts in that jurisdiction. This often involves complying with local laws and may require a separate legal action.

Challenges and Appeals

Appealing Costs Orders

Parties dissatisfied with a costs order can appeal to a higher court. Appeals are typically based on alleged errors in the application of the law or the assessment of costs.

Challenging the Amount

If there is a dispute over the amount of costs awarded, parties can request a detailed assessment by the court. This process involves a thorough review of the costs incurred and the reasonableness of each item.

Conclusion

Costs orders play a crucial role in the litigation process, determining how the financial burden of legal expenses is allocated between the parties. Understanding the different types of costs orders, the principles guiding their award, and the factors influencing their assessment is essential for legal practitioners and litigants. Effective management of litigation costs and awareness of potential cost liabilities can help parties navigate the legal process more efficiently and promote fair outcomes in legal disputes.