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How the court decides the amount of legal costs

This content applies to England & Wales

Once the court has decided which party is to pay for the costs of the case, it will then assess how much the party will have to pay.

Costs

Costs are assessed on either a standard basis or an indemnity basis, and in either case, costs that are unreasonable will not be allowed. If an order does not specify the basis on which the costs are to be assessed, then the standard basis will automatically apply. The standard basis will also apply if the order states some other form of assessment, for instance, assessment on a solicitor/client basis.

See the page on Assessment procedures for an explanation of the factors the court must take into account when assessing costs and two methods used for assessing costs.

Standard basis

If costs are assessed on this basis, the court will only allow those costs that are reasonable and proportionate to the matters in issue. Any doubt that the court may have as to whether costs have been reasonably incurred or are reasonable and proportionate in amount will be resolved in favour of the party that has to pay the other side's costs.[1] The majority of costs orders are assessed on the standard basis.

Indemnity basis

Where costs are assessed on an indemnity basis, the court need only be satisfied that they are reasonable, and issues of proportionality are irrelevant. Where the court is uncertain as to whether costs were reasonably incurred or were reasonable in amount, it will resolve the issue in favour of the receiving party, that is, the party that is getting her/his costs paid.[2] The indemnity basis of costs assessment is generally used to penalise a party, for improper conduct and in some other circumstances provided by the Civil Procedure Rules.[3]

[1] Civil Procedure Rules, rule 44.4(2).

[2] Civil Procedure Rules, rule 44.4(3).

[3] For example, failure to comply with a pre-action protocol, or where claimant beats his Part 36 offer.

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