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Overview of costs

This content applies to England & Wales

Definition of costs, how the court or tribunal decides which party to a legal dispute should pay the costs, and how much a court or tribunal case is likely to cost.

Definition of costs

Costs are defined as the expenditure or expense that is incurred during the course of a case, and can include:

  • the cost of a solicitor
  • court fees
  • other payments, such as barrister's fees.

Who should pay the costs, and how much they should pay, is at the discretion of the court, which exercises this discretion in the form of a costs order. A costs order is usually made at the conclusion of a case, and is known as a final costs order. It is also possible for an interim costs order to be awarded at a hearing that is not the final hearing during the course of the case.

Who pays the costs?

The general rule in a court case is that the unsuccessful party will be ordered to pay the costs of the successful party, although the court may make a different order, having regard to various factors, such as the conduct of the parties.[1]

In a tribunal case each party will usually pay their own costs. The tribunal may make an order allocating all costs to one of the parties in certain circumstances, such as if one party has behaved unreasonably.[2]

Costs in settled cases

Where a claim is settled before the case comes to court but the issue of costs is not settled, a party may seek a court order for costs.[3] There is statutory guidance as to how the court will approach such applications in judicial review cases after 20 November 2013. This prescribes very tight time limits fo giving directions applicable to parties' submissions.

The Court of Appeal gave general guidance about awarding costs in settled judicial review and other civil litigation cases:[4]

  • where a party has been wholly successful, s/he should be allowed to recover all her/his costs from the unsuccessful party, unless there is some good reason to the contrary. This regardless of whether the successful party is funded privately, publicly, pro bono, or on a no win no fee basis
  • when settling a dispute, the parties should agree not only the substantive provision of the order to be made by the court, but also the issue of costs. The parties can no longer assume that the likely order is no order as to costs and, to avoid an order for costs, they should try to settle before the proceedings are issued
  • where a party has only succeeded in part, the court will have to assess and determine the issue of costs on the particular facts of the case
  • where there has been some compromise which does not actually reflect the claimant's claims, the court should look at the underlying claims and inquire whether it is clear who would have won if the matter had not settled. If it is, then the party who would have won did better out of the settlement and therefore did win
  • where the parties are unable to agree costs and these are left to be determined by the court, it is important that both the work and costs involved in preparing the parties' submissions on costs, and the material the judge has asked to consider, are proportionate to the amount at stake. No order for costs will be the default order when the judge cannot without disproportionate expenditure of judicial time, if at all, fairly and sensibly make an order in favour of either party.

Further, compliance with or breach of the relevant pre-action protocol will be a factor the court will take into account when determining liability for costs.[5]

Refusal to settle

A court hearing civil proceedings can order a defendant to pay the claimant an additional amount, not exceeding a prescribed percentage of the amount awarded to the claimant by the court, if:[6]

  • the defendant does not accept the claimant's offer to settle, and
  • the court subsequently gives judgment for the claimant which is at least as advantageous as the offer.

Different prescribed amounts apply depending on whether the proceedings involve money claims only, both money and non-money claims, or non-money claims only.[7]

How much will a case cost?

The amount of costs will depend on the nature of the case. There are two bases for the assessment of costs: the standard basis and the indemnity basis (see section on How costs are assessed for more information). However, the court will not allow costs that have been unreasonably incurred or are unreasonable in amount in either assessment.[8]

The costs payable for tribunal cases depend on the type of application or appeal in question. The fees are specified by regulations.[9]

The court's discretion

The court has discretion over:[10]

  • whether costs are payable by one party to another
  • the amount of those costs
  • when they are to be paid.

In deciding who should pay the costs of a case and the amount of costs to be paid, the court is required to consider all the circumstances. In particular, it must consider:

  • the conduct of the parties before, and during, the court case
  • compliance with any pre-action protocol
  • the extent to which it was reasonable for the parties to raise, pursue or contest each of the allegations or issues
  • the manner in which the parties pursued or defended the action or particular allegations or issues
  • whether the successful party exaggerated the value of her/his claim
  • whether a party was partially successful
  • whether there has been any payment into court or offer to settle the case.

Tribunals have more limited discretion to allocate the costs of the case to one party. The rules specify certain circumstances, such as unreasonable behaviour or land registration cases, in which a costs order can be made; otherwise each party pays their own costs.[11]

[1] Civil Procedure Rules, rule 44.3(2).

[2] reg 13 Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 SI 2013/1169; reg 3 Tribunal Procedure (Amendment No. 3) Rules 2013 SI 2013/1188.

[3] Civil Procedure Rules, rule 44.12A.

[4] M v Croydon LBC [2012] EWCA Civ 595.

[5] R (on the application of Bahta) and others v Secretary of State for the Home Department [2011] EWCA Civ 895.

[6] s.55 Legal Aid, Sentencing and Punishment of Offenders Act 2012, in force since 1 October 2012 under art. 2(b) The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 2 and Specification of Commencement Date) Order 2012 SI 2012/2412. 

[7] The Offers to Settle in Civil Proceedings Order 2013 SI 2013/93.

[8] Civil Procedure Rules, rule 44.4(1).

[9] First-tier Tribunal (Property Chamber) Fees Order 2013 SI 2013/1179.

[10] Civil Procedure Rules, rule 44.3(1).

[11] reg 13 Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 SI 2013/1169; reg 3 Tribunal Procedure (Amendment No. 3) Rules 2013 SI 2013/1188.

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