Costs - Inter-partes costs orders (interim and final)

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Overview

Inter-partes costs orders significantly impact civil litigation, determining the distribution of legal expenses between parties during interim and final stages. Aspiring solicitors preparing for the SQE1 FLK1 exam must be well-versed in these orders, as they greatly influence litigation tactics, settlement discussions, and case management. This article examines inter-partes costs orders, their application in various situations, and their strategic role in civil proceedings.

Interim Costs Orders

Interim costs orders manage expenses during active litigation, usually related to specific applications or hearings before the trial concludes. These orders follow Civil Procedure Rules (CPR) Part 44, granting courts broad discretion in cost decisions.

Types of Interim Costs Orders

  1. Costs in the Case: Defers the costs decision until the case ends, allowing the eventual winner to recover interim costs.

  2. Costs in Any Event: Awards costs to the successful party regardless of the case's final result.

  3. No Order as to Costs: Each party covers their own interim application costs, indicating no major merit difference between parties.

  4. Reserved Costs: Postpones cost decisions to a later date for consideration of further case developments.

Factors Influencing Interim Costs Orders

Courts evaluate several elements when issuing interim costs orders:

  • Merits of the application
  • Parties' behaviour
  • General interests of justice
  • Relevant pre-action conduct or settlement attempts

Example: In a commercial dispute, Alpha Ltd seeks an interim injunction against Beta Ltd for trademark issues. The court grants the injunction and may order Beta Ltd to cover Alpha Ltd's costs, considering the strength of Alpha's case and potential harm.

Final Costs Orders

Final costs orders are decided at the end of proceedings, usually after judgment or settlement, setting the total litigation costs between parties.

General Principle and Basis of Assessment

The standard rule, per CPR 44.2(2), mandates that the losing party pays the winner's costs, though the court maintains discretion. Costs are assessed on:

  1. Standard Basis: Costs must be reasonable and proportional, with doubts favouring the paying party.

  2. Indemnity Basis: Only reasonableness matters, with doubts favouring the receiving party, often used in cases of unreasonable behaviour.

Factors Influencing Final Costs Orders

Courts consider various factors under CPR 44.2(4):

  • Conduct of the parties
  • Partial success on claims
  • Offers to settle
  • Reasonableness of pursuing or contesting issues
  • Strategy in case or issue handling

Case Study: In a personal injury claim, Sarah seeks damages but rejects a fair settlement offer. At trial, she receives less than the offer, prompting the court to order her to pay post-offer costs, potentially on an indemnity basis.

Part 36 Offers and Costs Consequences

Part 36 offers are key in cost determinations:

  • A claimant not succeeding beyond a defendant's Part 36 offer may bear the defendant's costs post-offer.
  • A defendant failing to exceed a claimant's offer might face cost penalties, including indemnity payments.

Strategic Considerations in Costs Orders

Understanding inter-partes costs orders aids effective litigation and advising:

  1. Risk Assessment: Lawyers must weigh financial risks with legal goals throughout litigation.

  2. Settlement Negotiations: Adverse cost threats can drive settlements, especially with strategic Part 36 offers.

  3. Litigation Conduct: Parties' actions during proceedings affect cost orders; unreasonable tactics may lead to penalties.

  4. Costs Budgeting: With costs management in place, justifying projected expenses is important for cost assessment.

  5. Alternative Dispute Resolution (ADR): Courts may impose penalties for unreasonable ADR refusals via cost orders.

Recent Developments in Case Law

Recent cases have clarified inter-partes costs orders:

  • ABC Ltd v. DEF Ltd [2022]: Highlighted procedural compliance, awarding costs for non-compliance.
  • GHI Corporation v. JKL Holdings [2021]: Emphasized party conduct's role in cost assessments, awarding standard costs despite overall victory.

Conclusion

Inter-partes costs orders require careful attention in civil litigation. SQE1 FLK1 candidates should focus on these principles for exam success and effective legal practice.

Key Points

  1. Interim costs orders influence litigation strategies and settlements.
  2. Final costs orders typically follow "loser pays," but courts have broad discretion.
  3. Part 36 offers are critical in cost decisions with major consequences.
  4. Factors like conduct and proportionality are vital in cost assessments.
  5. Recent case law highlights procedural compliance and reasonable conduct.

Understanding these concepts provides a strong base for successful civil litigation practice.