I appreciate that the title of this article may be rather dull, but anyone contemplating becoming involved in serious litigation should consider this issue. Failure to do so could prove very costly indeed.
The normal rule in litigation is that the loser will pay their own costs and the other sides, but this is subject to exceptions. The party who is awarded their costs, will have these costs assessed by the Court, if they cannot be agreed.
If costs are awarded on the standard basis, the party seeking payment needs to prove that the costs they are claiming are reasonable. If costs are awarded on the indemnity basis, the presumption is reversed, so that the Court will need to find a reason not to award the costs claimed.
Costs are assessed either on a summary basis i.e. in about 10 or 15 minutes by a judge, looking at a short schedule at the end of a hearing or trial, or or on a detailed basis where a bill of costs is submitted and the responding party replies to it in writing within 21 days.
If the costs bill is large, then the difference between standard and indemnity costs can be highly significant. Indemnity costs are the exception and not the norm.
However, a litigant should be mindful of their conduct throughout the litigation, as it could determine whether costs are awarded on the standard or the indemnity basis. There are many factors that can influence this, such as an unreasonable refusal to enter into Alternative Dispute Resolution, failing to comply with Court Orders and failing to beat an offer made by the other side. Making unfounded allegations of dishonesty can also lead to an indemnity based costs order.
This occurred in a recent case in the Competition and Appeals Tribunal, involving Master Card - see https://www.legalfutures.co.uk/latest-news/merricks-hit-by-indemnity-costs-for-completely-inappropriate-allegations.
I do not know the amount of costs sought in this case, but I would not be surprised if the difference between the two was in the hundreds of thousands.
It is important to get advice on costs and how one's conduct could affect a costs order, early in the litigation. At JSC Chambers we are experts in this area and will offer pragmatic and useful advice, based on our considerable experience.
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