How do you recover your costs of litigation if you have been successful?
Barrister Stephen Innes considers an under-utilised rule which can assist a successful litigant in recovering costs from the opposing party in civil litigation
If you win your civil litigation case, you will normally be entitled to an order for costs in your favour against the other side. Litigation is expensive, so most litigants will want to make sure they can recover as much as they can of their expenses. The general rule is that the successful party will be entitled to an order for costs; the court has a discretion as to what order to make and must consider all the circumstances, including the conduct of the parties and in particular any offers made.
So much for the principle. Now for the procedure. If you are successful in persuading the court that a costs order should be made in your favour, the next question is how the amount of the costs should be quantified. There are two options:
- summary assessment, where the judge determines the amount of costs then and there, usually in a matter of minutes;
- detailed assessment, where the details of costs go off to a costs judge, to be quantified on a later date, as part of a procedure which requires the service of a breakdown of the Bill and of Points of Dispute, and a separate hearing.
The court has a discretion to order a summary or detailed assessment, and is supposed to be guided by the factors in the Practice Direction to CPR Part 44, paragraph 8: where the hearing has lasted less than a day, the court should conduct a summary assessment, unless, in particular, the paying party shows that there are substantial grounds for disputing the costs which cannot be dealt with summarily.
However, often in practice the decision just turns on the time available: a summary assessment may be more obviously appropriate, but by the time the court has dealt with the substantive part of the hearing it has run out of time and so will send the costs off for detailed assessment. The court is required to consider whether to order a payment on account, and it does not have an entirely free hand: the starting point is that it should order one.
A payment on account has two particular advantages for the receiving party:
- most obviously, from a cash flow perspective, some money will be received sooner. A detailed assessment might take a year to complete, whereas a typical order requires a payment on account to be made within 28 days;
- sometimes there may be a concern that the paying party may not be good for the money; going to detailed assessment can be expensive in itself and carries the risk that it could prove to be an exercise in throwing good money after bad. If an order for a payment on account is made, the receiving party can wait to see whether the order is complied with before deciding whether or not to press ahead with detailed assessment: if the payment is made, that may give confidence that detailed assessment is more likely to be worthwhile; if it is not paid, that may indicate that the detailed assessment would be futile, but at least enforcement action can be considered in respect of the payment on account: for example, a charging order can be sought for that amount against a property in which the paying party has an interest.
On a practical level, thought should be given in advance of the hearing as to the amount of the payment on account of costs which will be sought if successful, and as to how the court can be satisfied as to the amount of costs. If a Schedule of Costs in form N260 has been served, that can obviously be used. Otherwise, some details of costs can be provided in different form, for example in a witness statement indicating the total amount of costs which have been incurred and giving broad details of how that figure is made up, for example the totals of counsel’s fees or other disbursements and the amount of the solicitors profit costs.
No formal application for a payment on account needs to be made in advance; it can be made orally at the hearing. Nevertheless, it is good practice to give the other side some advance warning that a payment will be sought, and as to the level of payment which will be requested. That is particularly so where the other side is not legally represented.
What level of payment is likely to be awarded?
A distinction needs to be made here between cases where a costs management order has been made (ie where a budget has been agreed or has been approved by the court) and one where no such order has been made.
Costs management orders are a more recent innovation. Prior to that, a body of case law developed in which the courts awarded a relatively conservative proportion of the overall costs, typically 40 or 50%. The rationale is that the costs will be reduced on detailed assessment, and the court should not order more for a payment on account than the sum likely to be determined at the final assessment. In my experience it is very difficult to achieve a payment on account of costs of more than 50%.
Where a costs management order has been made, the courts have taken a different approach, and have been prepared to order payments on account of 80% or even 90%. That is because when the costs have been set according to a budget, on a detailed assessment the court will not depart from the budget except for good reason, hence the court can be confident that the amount allowed on assessment is likely to be close to the budgeted sums. However, an important argument for the paying party is that the costs management process only dealt with the estimated (ie future costs) and did not set the incurred costs; thus it can be argued that whilst 80 or 90% may be the appropriate percentage for costs which were estimated in the budget, 40 or 50% would be the appropriate figure for costs which were shown on the budget as incurred.
If an application for a payment on account under CPR 44.2(8) is not made, it is possible to seek an interim payment in the detailed assessment process, under CPR 47.16, which provides for the court to issue an interim costs certificate. However, that only arises once a request for a hearing has been filed, which in turn is after the Bill and Points of Dispute have been served: thus it may be necessary to wait several months.
So these points emphasise the need to be prepared to make an application for a payment on account at the hearing where the order for costs is made.