Who pays the costs of litigation?

Litigation is often an expensive process and this is mainly because the course of litigation can be so unpredictable, even to seasoned lawyers.

Whilst our expert litigation lawyers and litigation solicitors will always give estimates of costs, or try and fix fees when we can, it’s important to always think about how you and your company are going to recover your legal spend, whenever possible and as soon as possible.   In essence, it is essential to think about the costs you are likely to incur and your prospects of recovering those costs from your opponent.

Whilst the general rule is that the loser pays the winners costs, the court always has discretion – and sometimes a very wide discretion - when making an order for costs.

How does the court decide who is liable for costs?

When deciding what costs order to make, the court must have regard to all of the circumstances of the case. The factors that the court will take into account are set out in CPR 44.2(4) and are as follows:

• The conduct of the parties both before and during proceedings, to include compliance with the Pre-Action Protocols. For more information on how to comply with the Pre-Action Protocols, click here.
• Whether a party has succeeded on part of its case, even if not wholly successful.
• Any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.

What amount of costs will be awarded?

It is highly unlikely that the court will award the successful party 100% of the costs it has incurred. The parties will usually try to agree the proportion of costs that the losing party is to pay. However, if they are unable to agree, costs will have to be assessed by the court.

When assessing costs, the court will not allow any costs that have been unreasonably incurred or are unreasonable in amount. There are bases on which the court will assess costs: the standard basis and the indemnity basis. On the standard basis, any doubt as to the reasonableness of costs will be resolved in favour of the losing party. On the indemnity basis, any doubt as to reasonableness will be resolved in favour of the successful party.

As a broad guide, a recovery of between 70 – 80% of your legal spend is considered a “decent” recovery – but there are tactics and strategies that our lawyers can do to maximise your chance of meeting or exceeding this recovery.

Recovery of costs from the party found liable

Even if you are successful in the litigation and obtain an order for costs against the opposing party, there is no guarantee that they will be able to pay the costs. Hence, it is important to consider whether your opponent has the means to satisfy an order for costs. If you suspect that there may be an attempt by your opponent to dispose of their assets, you may need to consider obtaining a freezing injunction.

We understand that the costs of litigation can quickly add up. We aim to give our clients as much clarity as possible and provide costs estimates throughout each stage of the litigation process. To find out how our commercial litigation team may be able to help, please call us on 020 7632 4300 or make an enquiry.