The conclusion of litigation is not solely determined by the judgement on liability or damages, and CPR 44.2 is commonly taken into account when considering the consequentials of concluding litigation. An equally significant consideration is the awarding and quantification of legal costs, which can have substantial financial consequences for both parties.

What is CPR 44.2?

CPR 44.2 sets out the framework for the court’s discretion as to costs. It provides that the general rule is for the unsuccessful party to be ordered to pay the costs of the successful party, while also giving the court wide scope to deviate from the general to reach a fair decision in light of all of the case circumstances.

CPR 44.2 states the following:

“44.2

(1) The court has discretion as to –

(a) whether costs are payable by one party to another;

(b) the amount of those costs; and

(c) when they are to be paid.

(2) If the court decides to make an order about costs –

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(b) the court may make a different order.”

By combining predictability with flexibility, CPR 44.2 ensures that costs orders serve both compensatory and regulatory functions: they reimburse parties for reasonable expenses, while also incentivising responsible conduct and proportional use of court resources.

The General Rules and the Court’s Discretion

Under CPR 44.2, the starting point for any assessment of costs is the general rule: the unsuccessful party will normally be ordered to pay the costs of the successful party. This principle, often summarised as “costs follow the event”, is intended to compensate the winning party for the expenses reasonably incurred in pursuing or defending the claim. It provides clarity and predictability, allowing parties to understand the potential financial implications of litigation from the outset.

However, the rule is not absolute. The court’s discretion as to costs is deliberately wide to allow discretion, enabling judges to tailor an order for costs to reflect the circumstances of the case. In exercising this discretion, the court considers a variety of factors, including:

• The conduct of each party throughout the proceedings, including whether it was reasonable to raise, pursue or contest particular allegations or issues;
• Whether a party has achieved success only in part of the proceedings, recognising that a partially successful party may not recover all of its costs.  Potentially costs may only be awarded in respect of certain issues (issue based costs orders);
• Any settlement entered into by the parties and whether it was reasonable to accept or reject it;
• The manner in which steps were taken in the proceedings, and whether those steps were proportionate or necessary.  Failure to follow pre-action protocols or Court rules in order to gain a litigation advantage, or to increase costs, will be looked upon unfavourably.

The court also considers whether parties have engaged with alternative dispute resolution mechanisms throughout litigation, and in line with pre-action protocols. Failure to do so may be seen as unreasonable conduct and can influence the final costs award. Conversely, parties who act reasonably and proportionately, respond appropriately to offers, and focus their claims and defences efficiently are more likely to be fully compensated for the costs if they are the successful party.

By recognising the importance of conduct and proportionality, CPR 44.2 ensures that costs orders promote fairness. Understanding the interplay between the general rule and the court’s discretion is therefore essential for parties seeking to manage risk and strategy effectively throughout the course of proceedings.

It is important to note however, that a party rarely recovers 100% of their costs, and that even if successful in litigation and in obtaining a costs order, a Receiving Party is never likely to be fully financially compensated for engaging in litigation.

Types of Orders the Court May Make Under CPR 44.2

The court decides the appropriate form of order by considering various factors. As a result, the costs the court awards can vary widely depending on the circumstances.

Some of the common types of orders the court may make include:

• Requiring the party to pay a stated amount of another party’s costs, rather than the full costs claimed.  This is generally when costs are summarily assessed i.e. on the day after a hearing, and negates the requirement for a detailed costs assessment to take place.  Summary assessment is very “broad brush” and is only suitable for modest costs claims;
• Ordering that costs are recoverable only for certain steps taken in the proceedings, such as specific applications, hearings, or motions.  Such orders are often made after application hearings, when a party may have been successful in relation to a specific issue, but the overall litigation remains ongoing;
• Limiting costs to a particular part of the proceedings, for instance where a claim includes multiple claims or issues, but the party is successful on only some.  This would be an issues-based costs order;
• Directing that a party bear costs incurred before proceedings began, such as reasonable pre-action costs or steps taken in attempts to settle the dispute.
• Ordering interest on costs from a particular date, ensuring that the party’s costs are fairly compensated over time.  The general rule for interest is that it runs from the date the entitlement to costs arose (i.e. the final order or acceptance of a Part 36 Offer) however, there has been debate around whether interest can be sought from an earlier date, and to account for any litigation funding.

What is the Importance of Costs Draftsmen & Costs Lawyers?

Costs Draftsmen and Costs Lawyers play a crucial role in quantifying and negotiating legal costs, implementing the court’s decisions pursuant to CPR 44.2, and conducting detailed assessment proceedings. At ARC Costs, our team of specialists are trained in the assessment, preparation, and negotiation of costs, including drafting bills of costs for submission to the Court. Our work ensures that costs claims are structured correctly in an ever-growing complexity of costs rules and common law, and ensures that your costs claim is compliant and allows for maximum recovery.

As independent experts, we can assist either Paying or Receiving Parties, to either reduce or maximise the other side’s costs claim respectively.

Key areas where Costs Draftsmen and Costs Lawyers interact with CPR 44 include:

• Preparing Bills of Costs – After the Court decides that a party’s costs are recoverable, costs draftsmen prepare detailed bills in accordance with the Civil Procedure Rules. This can include identifying which costs relate to specific parts of the proceedings or particular allegations or issues.
• Detailed Assessment – If the costs are subject to detailed assessment, costs draftsmen provide a clear, itemised account of fees, disbursements, and work performed, ensuring that the party is properly compensated under the stated amount or proportion of costs the court may award.  The Bill must be served with a Notice of Commencement to initiate the costs assessment procedure, in response to which Points of Dispute and Reply may be exchanged with regards to the parties’ formal legal positions.
• Interim Payments and Settlements – They advise on reasonable payments on account of costs, helping parties manage cash flow and comply with any directions from the court while maintaining clarity on what party will be ordered to pay.
• Strategic Input – Our experienced costs draftsmen advise on conduct and settle made by a party, highlighting how actions taken in litigation could affect potential costs recovery. Our input helps align legal strategy with the financial implications of the case.
• Challenging or Negotiating Costs – Costs draftsmen can also assist in challenging disproportionate costs claimed by the opposing party or negotiating agreements to limit exposure, ensuring that the costs of the successful party are fair and proportionate.

Strategic engagement with costs experts ensures that financial considerations are fully integrated with legal strategy from the outset of litigation. By involving costs draftsmen or costs lawyers early, parties gain a clear understanding of the potential costs exposure and recovery prospects, allowing them to make informed decisions about how to proceed.

This integration helps identify areas where litigation could become disproportionately expensive, enabling the party to focus resources efficiently on the strongest claims or defences.

How can ARC Costs Assist?

ARC Costs regularly assist in Detailed Assessment of Costs. We are an experienced and independent team of specialised Costs Draftsmen and Costs Lawyers. As independent experts, we can assist either Paying or Receiving parties in resolving costs disputes.

For Receiving Parties we are adept at preparing Costs Budgets and Bill of Costs, as well as providing legal costs negotiations services and preparing Points of Reply. Ultimately, we can ensure your legal costs are recovered to the maximum degree possible, and we will always advise on appropriate settlement parameters from the outset for you to determine to what degree you can expect recovery of your legal costs.

Similarly if instructed by the Paying Party, we are experts at settling legal points of concern within Points of Dispute, and conducting negotiations to reduce your exposure to legal costs.

If you would like more information on any of our services or wish to speak to a member of our expert costs team about your legal costs, then please do not hesitate to contact us. Please call one of our independent experts at 01204 397302, or email one of our costs experts direct on info@arccosts.co.uk.