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

Learning Outcomes

This article explains the structure, terminology, and exam-focused principles governing inter-partes costs orders in civil litigation. It outlines the court’s discretion under CPR 44 at interim and final stages, the general rule that costs follow the event, and when the court will depart from that rule. It details the main interim orders (“costs in the case,” “costs in any event,” “costs reserved,” “no order as to costs”) and additional formulations (“costs of and caused by,” “costs thrown away,” and claimant’s or defendant’s costs in the case or application), together with their practical consequences. It explains when summary assessment is used, the need to file and serve a compliant statement of costs (Form N260), and when detailed assessment and payments on account are appropriate. It analyzes the standard and indemnity bases of assessment, proportionality, and the factors in CPR 44.3–44.4. It examines how conduct, ADR, pre-action compliance, and settlement (including Part 36 offers) affect costs, highlights the impact of QOCS in personal injury, and reviews the range of possible final costs outcomes, including issue-based, proportionate, staged, and interest-bearing orders.

SQE1 Syllabus

For SQE1, you are required to understand the rules and practical implications of inter-partes costs orders in civil litigation, with a focus on the following syllabus points:

• the distinction between interim and final inter-partes costs orders
• the standard and indemnity bases for assessment of costs
• the types of interim costs orders and their effect
• the factors the court considers when making costs orders under CPR 44
• the impact of costs orders on litigation conduct and settlement

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the general rule regarding which party pays costs at the conclusion of civil proceedings?
2. Name two types of interim costs orders a court may make during litigation.
3. What is the main difference between the standard and indemnity bases of assessment?
4. How can a party’s conduct before and during proceedings affect the court’s decision on costs?

Introduction

Inter-partes costs orders are court decisions that determine which party must pay legal costs in civil litigation. These orders are central to the financial consequences of litigation and can be made at various stages, including both interim applications and at the final conclusion of a case. Understanding how these orders work, and the principles guiding them, is essential for effective litigation strategy and for SQE1.

Inter-partes Costs Orders: Overview

Inter-partes costs orders allocate legal costs between the parties to a dispute. The court has wide discretion under the Civil Procedure Rules (CPR), particularly Part 44, to decide who should pay, how much, and on what basis. Costs orders can be made at interim stages (before trial) or as final orders (after judgment).

Key Term: inter-partes costs order
An order by the court requiring one party to pay all or part of another party’s legal costs in civil proceedings.

The general rule is that the unsuccessful party will be ordered to pay the successful party’s costs (CPR 44.2(2)(a)), but the court may make a different order if appropriate having regard to all the circumstances (CPR 44.2(4)).

Interim Inter-partes Costs Orders

Interim costs orders are made during the course of litigation, usually following interim applications (such as for summary judgment, extensions of time, or disclosure). The court decides who should pay the costs of the application, often immediately after the hearing.

Types of Interim Costs Orders

The main types of interim costs orders are:

• Costs in the case: The costs of the application are reserved until the end of the case. The party who ultimately wins the case will usually recover these costs.
• Costs in any event: The successful party on the application is awarded their costs of the application, regardless of the final outcome of the case.
• No order as to costs: Each party bears their own costs for the application.
• Costs reserved: The decision on costs is postponed for later determination.
• Claimant’s/defendant’s costs in the case/application: The order specifies that the claimant’s or defendant’s costs of the application will follow the eventual outcome, clarifying who benefits if a different party wins overall.
• Costs of and caused by: Typically made on amendment applications, giving the successful party their costs of the application and any consequential costs (e.g., repleading).
• Costs thrown away: Awarded where steps must be redone because an order is set aside or the matter is adjourned; covers costs incurred that are wasted.

Key Term: costs in the case
An order that postpones the decision on who pays the costs of an interim application until the conclusion of the proceedings.

Key Term: costs in any event
An order that the successful party on an interim application is awarded their costs of that application, regardless of the final outcome.

Key Term: costs reserved
An order that defers the decision on costs to a later stage, often to be decided with the final costs order.

Key Term: no order as to costs
An order that each party must bear their own costs for the interim application, with no reimbursement from the other side.

Key Term: claimant’s/defendant’s costs in the case/application
A formulation stating that the specified party’s costs of the application will be payable if that party is later awarded costs overall.

Key Term: costs of and caused by
An order entitling the successful party to the costs of the interim application and the reasonable consequential costs flowing from it.

Key Term: costs thrown away
An order compensating a party for costs wasted because a hearing is vacated, an order is set aside, or steps must be redone.

In addition to ordering who pays, the court will normally determine the amount immediately by summary assessment if the hearing lasted one day or less. To enable this, each party seeking costs should file and serve a signed statement of costs (usually Form N260) no later than 24 hours before the hearing. Where summary assessment is impractical, the court may order detailed assessment later.

Key Term: summary assessment
The court’s immediate determination of the amount of costs at the end of a hearing, based on a short form statement of costs.

Factors Affecting Interim Costs Orders

When deciding interim costs, the court considers:

• The merits of the application
• The conduct of the parties (including cooperation and compliance)
• Whether reasonable attempts were made to settle or narrow the issue
• Proportionality of the costs incurred
• Any relevant pre-action or case management orders (including directions to consider ADR)

Interim hearings are “pay as you go” in the sense that unsuccessful parties will often be required to pay the successful party’s application costs promptly. Payment is typically ordered within 14 days unless the court specifies otherwise, and interest may be ordered on late payment.

Worked Example 1.1

A claimant applies for specific disclosure, and the defendant opposes the application without good reason. The court grants the application. What interim costs order is likely?

Answer:
The court is likely to order "costs in any event" in favour of the claimant, as the defendant unreasonably opposed the application.

Worked Example 1.2

The defendant amends its defence late, causing the claimant to replead and prepare new evidence. The amendment is allowed. What costs order is appropriate?

Answer:
“Costs of and caused by” in favour of the claimant, covering the costs of the amendment application and the reasonable consequential costs of repleading and updating evidence.

Worked Example 1.3

On an interim application heard by telephone (45 minutes), the applicant wins. They filed an N260 statement of costs 24 hours before the hearing. How will the court determine the amount?

Answer:
By summary assessment there and then, using the N260. Payment will normally be ordered within 14 days, subject to any variation, and interest may run if payment is late.

Final Inter-partes Costs Orders

At the end of proceedings, the court makes a final costs order deciding who pays the overall legal costs. The general rule is that the unsuccessful party pays the successful party’s costs, but the court has discretion to make a different order if appropriate.

Key Term: final costs order
An order made at the conclusion of proceedings determining which party is responsible for the legal costs of the case as a whole.

Final orders are not limited to “winner pays” outcomes. CPR 44.2 allows the court to:

• order a proportion only of costs to be paid
• order a stated amount to be paid
• limit costs to or from a certain date
• limit costs to particular steps or distinct parts of the proceedings
• order interest on costs from or until a certain date (including a date before judgment)
• order a payment on account of costs where detailed assessment will follow, unless there is good reason not to do so

The court may make “split” orders where a party has succeeded only in part.

Standard and Indemnity Bases of Assessment

Costs can be assessed on either the standard or indemnity basis:

Key Term: standard basis
Costs are allowed only if they are reasonable and proportionate to the matters in issue. Any doubt is resolved in favour of the paying party.

Key Term: indemnity basis
Costs are allowed if they are reasonable, with no requirement for proportionality. Any doubt is resolved in favour of the receiving party.

On the standard basis the court applies the proportionality test (CPR 44.3(5)). Total costs must bear a reasonable relationship to:

• the sums in issue
• any non-monetary relief in issue
• the complexity of the litigation
• any additional work generated by the conduct of the paying party
• wider factors such as reputation or public importance
• any additional work undertaken or expense incurred due to the vulnerability of a party or any witness

Under CPR 44.4, when deciding the amount to allow, the court has regard to factors such as conduct (pre-action and during proceedings), efforts to settle, the importance and complexity of the matter, the skill and time involved, where and in what circumstances the work was done, and the receiving party’s last approved or agreed budget.

Costs on the indemnity basis are often used to mark disapproval of litigation conduct (for example, serious or persistent non-compliance with orders, or unreasonable refusal to engage in ADR). Proportionality does not apply on indemnity.

Factors Affecting Final Costs Orders

The court considers several factors under CPR 44.2(4)-(5):

• The conduct of the parties before and during proceedings (including compliance with pre-action protocols)
• Whether a party has succeeded on part of their case, even if not overall
• Any admissible offer to settle (including Part 36 offers), and whether an offer was a genuine attempt to settle
• The value and importance of the claim
• The complexity of the issues
• The skill, effort, and time involved

Costs management may also influence assessment. Where budgets were approved, the last agreed or approved budget is a factor on assessment, and in standard basis cases the court will not depart from budgeted costs without a good reason.

Worked Example 1.4

A claimant wins on liability but loses on significant quantum issues and recovers only one-third of the sum claimed. How might the final costs order be framed?

Answer:
The court may order a proportion of the claimant’s costs (for example, one-third or another fair proportion) or limit costs to particular issues or dates. A split order is also possible, with the claimant recovering costs on liability issues and the defendant recovering costs on unsuccessful quantum issues.

Worked Example 1.5

A defendant repeatedly breaches court directions, ignores a case-managed timetable, and refuses to engage in ADR despite a specific direction to consider it. The defendant loses at trial. What basis of assessment is likely?

Answer:
Indemnity basis from an appropriate date (e.g., from the expiry of the ADR direction or the first serious breach), to mark the court’s disapproval of the defendant’s conduct. Interest on those indemnity costs may also be ordered at an enhanced rate.

Impact of Conduct and Settlement Offers

The court may depart from the general rule on costs if a party has acted unreasonably, failed to comply with rules, or refused to engage in settlement or ADR without good reason. Directions often require parties to consider ADR; failure to justify a refusal can lead to adverse costs consequences even if the party succeeds on issues at trial.

Part 36 offers have specific costs consequences and must be considered when advising clients. A claimant who fails to beat a defendant’s Part 36 offer will usually be ordered to pay the defendant’s costs from the end of the relevant period to judgment, with interest. A claimant who equals or beats their own Part 36 offer may obtain enhanced interest, indemnity costs from the end of the relevant period, and an additional amount (capped), unless unjust.

Worked Example 1.6

The defendant makes a reasonable Part 36 offer to settle for £20,000, but the claimant rejects it and is awarded £18,000 at trial. What is the likely costs consequence?

Answer:
The claimant will likely be ordered to pay the defendant’s costs from the date the relevant period for accepting the Part 36 offer expired, as the claimant failed to obtain a better result at trial.

Exam Warning

If a party refuses to mediate or ignores reasonable settlement offers, the court may penalise them in costs, even if they win on the main issues. Always advise clients to act reasonably and keep records of settlement discussions.

Special context: personal injury (QOCS)

In personal injury claims, qualified one-way costs shifting (QOCS) limits enforcement of adverse costs orders against claimants. Adverse costs orders may be enforceable only up to the aggregate amount of any orders for damages and interest in favour of the claimant, unless exceptions (such as fundamental dishonesty or strike-out grounds) apply. This regime affects how inter-partes costs orders are enforced rather than whether they are made.

Practical Mechanics: assessing amount, timing, and interest

• Summary assessment is used at the end of most interim hearings and at the conclusion of fast-track trials (unless there is good reason not to do so). File a statement of costs in time to enable the court to assess.
• Detailed assessment is used where summary assessment is unsuitable (commonly multi-track). The paying party may be ordered to make a payment on account of costs pending detailed assessment.
• Interest on costs may be ordered from or until a specified date. Enhanced interest may apply in Part 36 scenarios.
• Payment timeframes are often 14 days from the order, subject to variation; interest runs on late payment.

Summary Table: Main Types of Costs Orders

Key Point Checklist

This article has covered the following key knowledge points:

• Inter-partes costs orders allocate legal costs between parties in civil litigation.
• Interim costs orders are made during proceedings, often after applications, and include “costs in the case,” “costs in any event,” “costs reserved,” “no order as to costs,” as well as “claimant’s/defendant’s costs in the case/application,” “costs of and caused by,” and “costs thrown away.”
• Final costs orders are made at the end of proceedings and usually require the losing party to pay the winner’s costs, subject to the court’s discretion.
• Costs are assessed on the standard or indemnity basis, with proportionality and resolving doubt differing between the two.
• The court can order proportions, staged costs, interest on costs, and payments on account; summary assessment is often used at interim hearings and fast-track trials.
• Conduct (including ADR engagement), pre-action compliance, and settlement offers under Part 36 significantly affect costs outcomes.
• Costs budgeting may influence assessment in multi-track cases; approved budgets are a factor on standard basis assessment.
• In personal injury, QOCS may limit enforcement of adverse costs orders against claimants.

Key Terms and Concepts

• inter-partes costs order
• costs in the case
• costs in any event
• costs reserved
• no order as to costs
• claimant’s/defendant’s costs in the case/application
• costs of and caused by
• costs thrown away
• summary assessment
• final costs order
• standard basis
• indemnity basis