Can I Get My Legal Costs Back in Litigation?

Litigation is rarely a cheap process, and often the fees that are paid to the lawyers are the biggest cost.  If you are the successful party, can you get the other party to pay your legal costs?  The answer is: it depends.

What are the rules?

Civil litigation in England and Wales is conducted in accordance with a set of rules known as the Civil Procedure Rules (or CPR).  Those rules play a big part in how and when legal costs can be recovered from the other party. 

The rules are complicated and nuanced, and for some types of claims they limit the amount that a winning party can recover from a losing party to specific sums of money, known as ‘fixed costs’, regardless how much has actually been spent.

Aside from those fixed costs limits, there are three important aspects of the rules which play a big part in how costs are dealt with.

The Court’s Discretion

The first is rule 44.2(1), which states that the judge has a discretion as to who should pay the costs, and in what amount.  The court therefore has the power to make an order that one party pays the other party’s costs (and the courts habitually use that power).

The Party that Loses Will Pay the Costs

The second is rule 44.2(2), which states that if the judge decides to exercise the discretionary power referred to above, then “the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party”. 

This means that the starting point is that the judge will order the loser to pay the winner’s costs (assuming the judge is willing to make an order about costs in the first place). 

However, this is only a general rule, and the judge is not required to follow it.  The court retains the ability to depart from the general rule if it wishes to do so.  There is, therefore, no guarantee that the loser will pay the winner’s costs.

In deciding whether to depart from the general rule, a judge can take into account anything and anything that s/he wants.  One thing that will almost certainly be taken into account is how the parties have behaved.  If the winner has behaved badly (either towards the losing party, or towards the court itself) then a judge may well decide not to make the losing party pay costs. 

Offers to Settle the Claim

The third important aspect of the rules that is relevant to whether costs can be recovered is known as ‘Part 36’.  

Part 36 contains rules relating to offers that are made to settle the litigation.  The rules are quite complex, but the basic premise is that:

• if a party makes an offer of settlement which is accepted by the other party, then the first party is entitled to its costs of the litigation that were incurred before the acceptance; and

• if a party makes an offer of settlement which is rejected by the other party, and the first party ultimately wins but gets less than the offer, the court will likely make the winner pay the losing party:

  • costs from (roughly speaking) the date of the offer; and

  • interest on those costs; and

  • an additional penalty of up to £75,000,

What costs will the losing party have to pay?

One important thing to bear in mind is that the court has a great deal of flexibility when it comes to costs.  A court is not just limited to deciding between making one party pay the other’s costs, or not.  Likewise, the court can depart from the general rules referred to above.  The flexibility enjoyed by the court means that as well as making one party pay the whole of the other’s costs, it can order that one party pays:

• a proportion of the other party’s costs, rather than all of them;

• a stated fixed amount towards the other party’s costs, rather than all of them;

• only the costs that were incurred from, or before, a certain date;

• only the costs incurred before the litigation was started;

• only the costs relating to particular steps taken in the litigation;  

• only the costs relating to a distinct stage of the proceedings; and

• any combination of the above.

Hamshaw’s flexible approach to building a cost-effective team of lawyers can help keep your litigation costs low in the first place, but Hamshaw can also help you take the rights steps to limit the risk that you will have to pay the other party’s costs.  This is one way in which consulting Hamshaw can be a good financial decision, even if the value of the dispute is not high. If you would like to talk to us about strategising your approach to litigation costs, click here to contact Hamshaw today.