What Are Costs Orders in England?

As an individual or a business in a dispute, you must understand how courts make costs orders. A costs order is a court order concerning the costs of a proceeding. For example, a costs order could direct the unsuccessful party to pay part of the successful party’s legal costs. When a court makes a costs order, it will typically consider several factors when working out its value. This article will explain these factors, how cost orders work, and how courts calculate their value.  

What is a Costs Order?

A costs order is a court instruction for one party to pay the legal costs of the other party. 

When a court makes a costs order, it will consider the parties’ conduct before and during the litigation when assessing the costs each party should pay. Courts can penalise unreasonable conduct by the parties, or improper conduct by legal representatives, by a costs sanction or by a ‘wasted costs order.’ A wasted costs order is when your lawyer has to pay for the costs incurred as a result of their improper conduct.

Once a court has made a costs order, it will make a detailed assessment when calculating the amount to be paid.  This must be a ‘reasonable sum’ unless there is a good reason to pay a different amount. Importantly, a costs order can also be obtained against a person who is not a party to the litigation itself. 

What if an Order is ‘Silent With Respect to Costs’?

If an order is silent with respect to costs, as a general rule, this means that no party can claim costs. 

In effect, this means that each party has to pay their own legal costs and cannot rely on the other to cover the costs for them. 

What About Costs Prior to Litigation?

Costs prior to the beginning of litigation are referred to as ‘pre-action costs’. These can be included in costs orders. 

Before beginning a claim, the parties to litigation are bound by pre-action conduct rules outlined in the Pre-Action Practice Direction. For certain specific issues (such as personal injury or professional negligence), there are specific Practice Direction rules on pre-action conduct. These are worth checking as they might apply to your case.

The general idea behind the Practice Direction is to encourage the parties to exchange all of the relevant information about their prospective claim, to try to settle the dispute without going to court (for example, through mediating), and to make sure that the litigation process is as efficient as possible. These can be done by serving valid and adequate particulars to a claim.

If you fail to comply with the appropriate pre-action protocol, the Court will be less inclined to make a costs order in your favour. The court can also make decisions about how to manage your case, including potentially striking it completely. As a result, you must understand your pre-action obligations. 

How Much Discretion Does the Court Have?

The general rule in a costs order is that the unsuccessful party will pay the successful party’s legal costs. However, courts must openly consider arguments about how to split these costs. In particular, they could decide to make a percentage order for costs. Aside from a percentage order, a court could also decide that the paying party will pay:

• legal costs from or until a certain date;
• costs relating to a particular part of the proceedings;
• interest on costs from a certain date; and
• costs before the claim began;

What Conduct Will the Court Consider?

When making costs orders, the court will consider several factors, including:

• whether it was reasonable for a particular party to pursue or contest a particular issue or allegation;
• the manner in which the parties have defended themselves or pursued particular parts of the claim;
• whether the successful party exaggerated their claim; and
• whether the parties followed the pre-action protocol.

Key Takeaways

As a business entering into a dispute, you must understand how a costs order works. A costs order is a direction by the court for one party to pay the legal costs of the other. This can be the full amount, or it can be a percentage, or it can be an amount in relation to a particular part of the claim. 

When making a detailed assessment of how the costs are to be divided between the parties, the court will look at how the parties conducted themselves before and throughout the trial. This will include an assessment of whether the parties followed the relevant pre-action protocol. As a result, it is important that you understand your pre-action obligations to the other party before you initiate your claim. 

If you have any questions about your claim or your obligations, LegalVision’s experienced dispute lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions