Claiming legal costs – General rules

Costs in any legal case can be substantial and are likely to consist of solicitors fees, counsel fees, court fees and expert witness fees. The basic principle is that “costs follow the event,” which means that the losing party will usually be ordered to pay the other sides’ costs incurred. However, the court has discretion to order otherwise based on the circumstances of the case.

Courts have broad discretion to decide who should bear the costs. This decision can be influenced by factors such as the if a party behaved unreasonably during court proceedings, whether a party has succeeded on particular issues even if not winning overall, and any offers to settle that may have been made (like those under Part 36 of the Civil Procedure Rules).

Legal costs tracks

In England and Wales, the process for claiming legal costs will depend on which “track” the case falls into. These tracks are designed to match the complexity and value of a case with an appropriate procedural framework. There are three main tracks:

Small Claims Track

Claims will usually be allocated to the small claims track if they are valued under £10,000 and are handled in the Small Claims Court. The track is designed to be a simple, more informal procedure.

Costs recovery is very limited. Generally, only fixed costs, such as court fees and expenses for witnesses, are recoverable. Legal fees are usually not recoverable, meaning each party bears their own legal costs regardless of the outcome.

Hearings tend to be less formal, with parties often representing themselves (Litigants in Person).

Fast Track

The Fast Track is generally used for claims valued between £10,000 and £25,000. This track provides a quicker resolution to cases than the multi-track, with stricter timelines and procedures.

Costs in fast track cases are more recoverable compared to the small claims track. The rules allow for a broader range of costs to be claimed. These include legal representative fees, although there are caps and fixed recoverable costs in the majority of proceedings since 1 October 2023. There are exclusions for specific cases including as housing disrepair claims, actions against Police, etc.

Intermediate Track

The Intermediate Track was introduced in October 2023 for cases valued between £25,000 and £100,000. It is aimed at cases that can be tried within three days and require no more than two expert witnesses per side giving oral evidence.

The Intermediate Track includes a fixed recoverable costs regime. This means that the amount of costs recoverable by the winning party are predetermined. This provides clarity and predictability for both sides regarding potential legal expenses.

Multi-Track

The Multi Track is generally for cases over £100,000, or for complex cases that involve substantial points of law or evidence, regardless of the monetary value.

This track is tailored to accommodate the need for a more detailed handling of complex cases.

There is potential for full recovery of costs, subject to the court’s assessment of whether costs are proportionate and reasonably incurred. Costs Budgets are likely to be needed to proactively manage costs in Multi Track type proceedings. The input of a Costs Lawyer from the outset will benefit any parties to such litigation.

Types of Costs Orders in Multi Track Cases

Standard Basis and Indemnity Basis:

Standard Basis:

If costs are awarded on the standard basis, they must be proportionate to the matters in issue and were reasonably incurred. Only reasonable costs will be allowed. This is the typical costs order made and if an order or agreement is silent as to the basis of assessment, it is assumed to be on a standard basis.

Indemnity Basis:

In some circumstances, the paying party may be ordered to pay the costs of the receiving party on an indemnity basis. In there circumstances, there is a higher chance of recovering a greater proportion of costs. This is because there is no requirement to prove that the costs were proportionate, only that they were not unreasonable. 

Indemnity basis costs only arise in specific circumstances, such as when Court ordered due to unreasonable conduct, on beating a Part 36 Offer on judgment, or if contracted to do so as part of any legal dispute (this can often form part of a clause in tenancy or credit hire contracts).

 It should be noted that any order for “costs in the case” made during the proceedings indicate that costs relating to that order or hearing are recoverable by the successful party on the conclusion of proceedings.

Costs budgeting

For multi track cases (typically more complex or higher value), courts require detailed costs budgets that must be approved early in the proceedings, at the Costs and Case Management stage. This process is designed to control the legal expenses incurred by each party.

Recovery and negotiation of costs

On conclusion of any multi track case, the successful party will be required to recover their costs from the losing party. In multi track cases, claiming legal costs requires the winning party to submit a Bill of Costs alongside a Notice of Commencement to the losing party. this will initiate the process of detailed assessment.

The losing party, also known as the Paying Party can negotiate the costs listed within the Bill of Costs, and may raise Points of Dispute to set out their legal arguments as to why the costs claimed are considered unreasonable or disproportionate. Further negotiations can proceed at any point, and the Receiving Party may utilise Replies to Points of Dispute to counter any legal arguments made.

if costs cannot be negotiated and agreed between the parties, a detailed assessment of costs by the Court will be required.

Assessment of costs

There are different types of costs assessments, including Detailed Assessment and Summary Assessment.

Summary Assessment:

Costs are assessed by the judge at the end of the hearing if the case is short, typically a day or less. This most happens at application hearings, and can also take place at the end of Fast Track trials, especially when fixed costs are involved.

Detailed Assessment:

For longer and more complex cases, especially in Multi Track matters where cost are likely to be considerable, costs will generally be directed to be assessed by a costs judge or a costs officer, which involves a more thorough review. 

An interim payment on account may be ordered if the substantive matter concludes at a final hearing or if agreement is reached for such a payment on account.

How can ARC Costs assist with Claiming Legal Costs

ARC Costs are highly experienced and have been regularly successful when instructed in matters of costs recovery. The majority of matters resolve through negotiation or alternative dispute resolution (ADR) however, some cases may proceed to assessment if parties cannot reach an agreement.

We can assist in claiming legal costs by drafting your bill of costs, as well as settling points of reply and negotiating your bill of costs with the other side before advising on whether the claim should proceed to a Detailed Assessment Hearing.

We can also provide legal advice and assist in the negotiation of a bill of costs, irrespective of whether you are a receiving or paying party.

We can be contacted via email at info@arccosts.co.uk, or by telephone on 01204 397302. For more information on legal costs, please find out more about our speciality areas of expertise and our services on our legal costs page.