Legal costs relating to a Court Ruling

WHAT IS A COSTS LAWYER AND HOW CAN THEY HELP ME?

A costs lawyer is a qualified and regulated legal professional who specialises in the law and practice of legal costs. Costs are involved in nearly every type of law and legal case, which is where costs lawyers can help. The costs referred to here are the solicitors’ fees and disbursements* incurred in a case.

To become a costs lawyer, you need to undertake a three-year training course (equivalent to a degree level qualification.) Costs lawyers are regulated by the Costs Lawyer Standards Board (CLSB), which is overseen by the Legal Services Board (LSB). All costs lawyers are also required to carry professional indemnity insurance.

Costs lawyers handle all types of costs issues. If the case cannot be resolved between parties then it is passed to the dedicated Senior Court Costs Office (SCCO) in London.

There are two areas of practice where costs are involved. These are: inter partes costs and solicitor and client costs. Detailed answers and questions on these two areas have been included here as well on a fixed fee basis.

WHAT DOES INTER PARTES MEAN?

This is a Latin term which means ‘between the parties.’ In general terms, each party is liable for their own solicitors’ fees and disbursements in conducting the case. However, courts have the jurisdiction to order one party in the action to pay another party’s legal costs as well as their own. There are many factors to be taken into account by the court, prescribed by the Civil Procedure Rules (CPR), but the usual rule is that the unsuccessful party in the case will be ordered to pay some or all of the successful party’s solicitor’s fees and disbursements.

Solicitor and client costs – in any legal case, you will have to pay your solicitor for their time and disbursements for working on your case. Solicitors have a strict code of conduct which they must comply with to keep you updated of the fees they incur throughout your case. If you are unhappy with the fees charged to you by your solicitor and/or they have not fulfilled their duty in accordance with their retainer (contract), you have the legal right to challenge the same.

* a payment, especially one made by a solicitor to a third party (counsel, experts etc) and then claimed back from the client

I HAVE BEEN ORDERED BY THE COURT TO PAY THE OTHER SIDE’S COSTS. WHAT DOES THIS MEAN AND WHAT DO I HAVE TO DO?

As the court has made an order that you pay the other side’s costs, this means you are called the ‘paying party’ and you are responsible for paying the ‘receiving party’s’ legal costs in the case.

In order to pay the other side’s costs, they should submit to you a schedule of costs/bill of costs which is a breakdown of their solicitors’ legal fees and disbursements incurred while dealing with the case. The usual rule is that any order for costs made is on a basis called the standard basis. Standard basis means the paying party should only pay reasonable and proportionate costs. If there is any doubt as to the reasonableness of a certain item or disbursement claimed by the solicitors, then the doubt will be found in favour of the paying party. What this means is if the paying party challenges a certain item of the solicitors’ costs and the case proceeds to a hearing, the costs judge will have to find in favour of the paying party in relation to their challenge on that specific item.

Just because the receiving party incurs, for example, a large disbursement or spends a significant amount of time on a case does not mean that the paying party should have to pay the full amount of the same. It is of course the receiving party’s prerogative to spend what they wish on their case, but the paying party is only responsible for reasonable and proportionate fees based on the standard basis.

The schedule of costs/bill of costs should be reviewed in detail by your costs lawyers, who will then provide advice as to what should be paid by you as the paying party to the receiving party. The costs lawyer will then enter into negotiations with the receiving party in order to try to resolve the matter between the parties. If no agreement can be reached, formal proceedings will be issued (if not done so already) by the receiving party and the case will be determined by a costs judge in the SCCO.

I HAVE AN ORDER FOR COSTS IN MY FAVOUR FROM THE COURT FOR THE OTHER SIDE TO PAY MY COSTS. WHAT DOES THIS MEAN AND WHAT DO I HAVE TO DO?

As the court has made an order that the other side pays your costs, this means you are called the ‘receiving party’, while the other side is called the ‘paying party’, and are responsible for paying your reasonable legal costs in the case.

In order to recover your solicitors’ legal costs and disbursements, you will need to submit a schedule of costs/bill of costs; this is a breakdown of your solicitors’ legal fees and disbursements incurred in the case. The usual rule is that any order for costs made is on a basis called the standard basis. Standard basis means the paying party should only pay reasonable and proportionate costs. If there is any doubt as to the reasonableness of a certain item or disbursement claimed by the solicitors, then the doubt will be found in favour of the paying party. What this means is if the paying party challenge a certain item in your schedule of costs/bill of costs and the case proceeds to a hearing, the costs judge will have to find in favour of the paying party in relation to their challenge on that specific item.

There is another basis of assessment which is called the indemnity basis, but this is a much tougher test to be awarded the same by the court.

The indemnity basis is similar to the standard basis as mentioned above, but any doubt as to reasonableness will be found in favour of the receiving party whereas on the standard basis, any doubt as to reasonableness is found in favour of the paying party.

The other difference between the standard and indemnity basis is that proportionately of the legal fees incurred does not apply to indemnity basis assessment, however it does apply for standard basis assessments.

Once a costs lawyer has prepared the schedule of costs/bill of costs they will then serve the same on the paying party, asking them to pay the amount specified. The paying party will then more than likely challenge certain aspects of the costs claimed and the costs lawyer for the receiving party will challenge the reasonableness of the same. This is where both parties enter into negotiations to try to resolve the matter between the parties. If no agreement can be reached, formal proceedings will be issued (if not done so already) by the receiving party and the case will be determined by a costs judge in the SCCO.

ARE THERE ANY COURT DEADLINES WITH WHICH I MUST COMPLY IF I AM ORDERED TO PAY THE OTHER SIDE’S LEGAL FEES (PAYING PARTY) OR IF THE OTHER SIDE ARE ORDERED TO PAY MY LEGAL FEES (RECEIVING PARTY?)

This question is broken down into two sections, relating to the deadlines applicable if you are a paying party or a receiving party.

Paying party

As soon as you receive an order for costs which requires you to pay the other side’s legal costs and disbursements incurred by their solicitor, it is important to get in touch with a costs lawyer for assistance.

The receiving party has three months from the date of the order for costs to formally submit their solicitors’ fees and disbursement to you by way of a bill of costs. Interest on the amount owed to the receiving party is charged at 8%. If the receiving party do not serve their bill of costs during the three month period, they will likely lose their entitlement to interest after the three month period until the date they serve their bill of costs.

There may be times when the receiving party’s bill of costs could be struck out in its entirety. For example, if a receiving party does not serve their bill within the prescribed three month period, the paying party can make an application to the court to compel the receiving party to serve their bill of costs by a certain date. If the receiving party fails to serve by this date, then the costs may be struck out in their entirety depending on the terms of the order requested by the paying party to the court. This is why it is imperative that you instruct a costs lawyer as soon you as you receive an order for costs against you.

To formally serve a bill of costs, the receiving party will also serve a court document called a notice of commencement. This court document will state the amount the receiving party is seeking from the paying party. It will also state that a court document named point of dispute is due in 21 days’ time. Points of dispute is a document which the costs lawyer will prepare for the paying party. When a costs lawyer reviews the costs claimed, if they wish to challenge any item then they need to put this in the points of dispute document and state the reasons why.

Failure of the paying party to serve points of dispute within 21 days of receiving the receiving party’s notice of commencement will potentially result in the paying party losing their right to challenge the costs claimed, and they will be liable for the full amount claimed.

The receiving party then has 21 days from service of the points of dispute to respond to the challenges made; this is called points of reply.

If both parties are still unable to reach an agreement as to the amount payable by the paying party to the receiving party, then the receiving party will make a request to the court for a hearing where the costs judge will determine the amount payable.

Receiving party

As soon as you receive an order for costs which orders the other side to pay your legal costs and disbursements incurred by your solicitors, it is important to get in touch with a costs lawyer for assistance.

You have three months from the date of the order for costs to formally submit a bill of costs which includes your solicitors’ fees and disbursements. Interest on the amount owed to you is charged at 8%. If you do not serve the bill of costs during the three month period, you will likely lose your entitlement to interest after the three month period until the date you serve your bill of costs.

There may be times when your bill of costs could be struck out in its entirety. For example, if you do not serve your bill within the prescribed three month period, the paying party can make an application to the court to compel you to serve it by a certain date. If you fail to serve by this date, then the costs may be struck out in their entirety depending on the terms of the order requested by the paying party to the court. This is why it is imperative that you instruct a costs lawyer as soon as you receive an order for costs in your favour.

To formally serve a bill of costs, you will also serve a court document called a notice of commencement. This court document will state the amount you are seeking from the paying party. It will also state that another court document named point of dispute is due in 21 days’ time. Points of dispute is a document which the costs lawyer for the paying party will prepare. If the paying party wish to challenge a certain item claimed in the bill of costs, they will need to put this in the points of dispute documents and state the reasons why.

Failure of the paying party to serve points of dispute within 21 days of the receiving party’s notice of commencement will potentially result in the paying party losing their right to challenge the costs claimed and will be liable for the full amount claimed by you in the bill of costs.

You then have 21 days from service of the points of dispute to respond to the challenges made; this is called points of reply.

If both parties are still unable to reach an agreement as to the amount payable by the paying party, then you can make a request to the court for a hearing for the costs judge to determine the amount payable.

WHAT REDUCTION WILL I ACHIEVE IF I CHALLENGE THE OTHER SIDE’S LEGAL FEES?

Each individual case has a different background and the solicitors’ costs and disbursements are all different. There may be circumstances throughout the individual case which will warrant a challenge on the legal fees claimed which will limit the amount payable. For example, if the case was of a routine, non-complex nature, then the case does not warrant a senior solicitor whose hourly rate would be high.

On average, we achieve a reduction of 30% on the costs claimed by the receiving party for their solicitors’ fees and disbursements. This percentage is not set in stone and could be more or less, dependent on the individual facts of the case.

HOW MUCH WILL I RECEIVE IF THE OTHER SIDE CHALLENGE THE AMOUNT OF MY LEGAL FEES?

Each individual case has a different background and your solicitors’ costs and disbursements are all different. There may be circumstances throughout the individual case where the paying party challenge a certain item that is claimed which may warrant a limit on the legal fees. For example, if the case was of a routine, non-complex nature, and you had a senior solicitor working on it whose hourly rate is extremely high, then no doubt the paying party will challenge this by saying that the case did not warrant a senior solicitor. They will then probably offer a lower grade of solicitor who has a lower hourly rate.

On average, cost lawyers can recover 92% of the costs claimed by their clients against the paying party, ie. your solicitors’ fees and disbursements. This percentage is not set in stone and could be more or less depending on the individual facts of the case.

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