Cost of a Civil Litigation
Conducting proceedings through the civil courts in England and Wales has always been, and remains, a relatively expensive enterprise, to the extent that such costs can often be seen as a barrier to anyone seeking any form of remedy through those courts.
There never is, of course, a guarantee of success when seeking redress and, in addition to ‘own costs’ of pursuing an action, liability for those of the opposing party, in the event of failure, has to be considered as part of the equation when considering whether or not the proposed proceedings are justified.
The general rule pursuant to Civil Practice Rule 44.2 (2)(a) is that ‘costs follow the event’ i.e. the unsuccessful party should be ordered to pay the costs of the successful party and, generally, the courts usually comply. However, Rule 44.2(2)(b) provides the court with discretion to make a different order, should the circumstances demand it.
There are certain circumstances in the Small Claims Track of the County Court (specifically Part 27.14(2)(g)), which provide otherwise but the Fast Track, the Multi-Track and, as of recently, the Intermediary Track of the Civil Court system are all subject to the general rule.
Up until the 1 October 2023, even enjoying the benefit of an award for costs, the amount actually recoverable by the successful party would only, in general terms, represent a sum in the region of seventy to eighty per cent of the costs incurred in pursuing the proceedings.
The shortfall between the costs for which the successful would be liable to his own solicitors, known as ‘solicitor-client’ costs and the amount ordered to be recoverable, would remain the liability of the successful client.
This almost certain liability for payment of a part of the litigation costs incurred, despite a successful outcome, should also feature as part of the equation, referred to above, when calculating the justification for pursuing the litigation.
Reforms to the Civil Justice System in England and Wales have included the creation of a new Track, ‘the Intermediary Track’ and a system of ‘Fixed Costs’.
Stuart Southall comments on various aspects of costs requiring consideration.
The Varying Costs Regimes
Historical
Over the years, many attempts have been made to ensure that the conflicting parties have been aware of their potential cost liabilities, but without a satisfactory resolution. Indeed, at one time, where the parties could not agree on the ‘reasonable level’ of costs payable, separate ‘satellite’ litigation ensued alongside the principal litigation with the sole purpose of resolving costs issues. Clearly, given that such ‘satellite proceedings’ incurred their own costs, this was unacceptable.
Precedent H Budgets
Parties are required to file and serve detailed budgets of anticipated costs by the first Costs and Case Management Conference (“CCMC”) and, obviously, if the parties manage to agree them, this would be preferrable. Should agreement not be reached, the Court considers the challenges of both parties and determines the appropriate levels of costs.
Barring significant and substantial reason, such as ’Disclosure of Documents’ requiring far more work than anticipated or a greater number of Witnesses to be called, it is difficult to vary an agreed Precedent H Budget.
Precedent H Budgets cover the dispute up to Trial and enables both parties to be aware of their potential liability and budget accordingly.
The Intermediary Track
As mentioned above, this new Track supplements the existing Fast Track and Multi-Track.
This new Track, which covers non-complex claims above £25,000.00 but less than £100,000.00 provides that the successful party is only entitled to recover prescribed Fixed Costs and is intended to provide transparency to the extent of the potential liability upon conclusion.
It is unlikely that such Fixed Costs will cover the successful party’s solicitor’s total bill.
Comment
- Part 36 settlement offers will be affected prior to 1 October 2023, a successful party matching or bettering a Part 36 Settlement Offer would recover Indemnity Costs. This is amended to reflect thirty-five per cent of the incurred costs.
- The premise of ‘fixed costs’ is not new. The Intellectual Property Enterprise Court (‘IPEC’), for example, has operated on a recoverable fixed cost regime for many years. The IPEC is designed to enable sole traders and SMEs to protect their Intellectual Property Rights without fear of being out-resourced by a much larger opponent seeking to use the High Court. The IPEC guides permits a maximum costs award of £60,000.00 (when dealing with liability) and £30,000.00 (when dealing with quantum - whether an Account of Profits or Damages).
How Can We Assist?
Costs considerations and procedural delays for the conduct of civil litigation will remain critical and of concern. For example, the mere cost of issuing a claim is substantial being 5% of any claim above £10,000.00 and capped at a maximum of £10,000.00 for claims of £200,000.00.
There is frequently a major difference between being entitled to recover legal costs, and any other award that the Court may have made, and actually recovering them.
Your unsuccessful opponent may, for example, enter insolvency proceedings of some form or may have dissipated assets with the intent to avoid payment, all of which may lead to more litigation costs when seeking recovery.
It may be a commercially appropriate decision to consider a form of Alternative Dispute Resolution as a means of resolving your dispute, which may well mitigate the potential costs of seeking a suitable outcome.
Who Can I Contact for Advice & Help? | KANGS Commercial Disputes Solicitors
The Team at KANGS Solicitors provides comprehensive and experienced guidance to everyone faced with the need to seek redress against an opponent through any civil process.
Please do not hesitate to contact the Team at Kangs Solicitors through any of the following who will be pleased to speak to you:
