What are Indemnity Basis Costs?

Costs orders will be assessed in the majority of cases on the standard basis however, for unreasonable conduct an indemnity basis assessment may be ordered. An assessment of costs on the indemnity basis by the Court means that any decision as to reasonableness will be in favour of the receiving party, and will assume that the costs were proportionate in amount and reasonably incurred by the receiving party. Costs assessed on the standard basis is more favourable to paying parties, and will mean that the Court will be in favour of the paying party on issues of reasonableness and proportionality.

The benefit of obtaining indemnity basis costs for the receiving party is that cost orders allow for a higher proportion of costs to be recovered than if they were assessed on the standard basis, and there is also no requirement for proportionality, and costs budgeting is disapplied.

Fixed Costs

The rules regarding fixed costs are outlined in Part 45 of the Civil Procedure Rules. Fixed costs regimes apply to cases starting out in the Pre-Action Protocol for low value personal injury claims in Road Traffic Accidents, as well as employer’s liability and public liability claims. Fixed costs apply if a claim has begun on the MOJ Portal and is not allocated to the Multi-Track, and are for cases that generally settle below £25,000.

Fixed costs rules were introduced to place a cap on recoverable costs in these types of claims. For receiving parties, this means that the recoverable amount of costs will be much lower than if their costs were recoverable on the standard or indemnity basis.

Both the High Court and Court of Appeal have determined that late acceptance of a Part 36 Offer does not constitute a good reason to recover indemnity costs, and therefore in order to be successful, you would need to demonstrate either unreasonable conduct pursuant to CPR 44, or to beat your own offer at Trial.

Indemnity Basis Costs and Part 36 Offers

In fixed costs cases, an order for indemnity costs may be made by the Court if the receiving party beats their own Part 36 Offer at Trial pursuant to CPR 36.17. Indemnity costs will be recoverable from the date on which the Part 36 offer expired, which means costs can be recovered on an hourly rate basis.

Quite often, receiving parties in a fixed costs case don’t consider previous Part 36 Offers made, or in some cases, they forget to apply for indemnity basis of costs at Trial.

The benefit of recovering indemnity costs is that they override fixed costs and they are usually much higher in amount.

We would always recommend that in any case in which the Claimant has made a Part 36 Offer, that the Claimant’s Solicitors prepare an N260 Schedule of Costs of all costs incurred post-expiry of the Part 36 Offer, as well as any usual fixed costs schedule.  This allows for any indemnity basis order to be made on the day of Trial, and also permits a summary assessment to take place.

Recovering Indemnity Basis Costs after Beating Your Own Part 36 Offer

In order to recover indemnity costs, you will be required to make an application for the same pursuant to CPR 36.17. It is likely that you will require a costs schedule for Trial, showing what your indemnity costs are. 

You will be able to recover your fees at an hourly rate for the affected period. You can claim the full rate listed in your Conditional Fee Agreement, rather than being restricted to guideline hourly rates as is commonplace, and you may be able to recover around 90% of the costs claimed.  For the avoidance of doubt, if any costs are found to remain to be unreasonably incurred, they remain unrecoverable on an indemnity basis.

How Can ARC Costs Assist?

ARC Costs are a team of highly skilled and experienced Costs Lawyers and Costs Draftsmen. We have provided assistance in Fixed Recoverable Costs disputes in many types of cases involving Part 36 Offers. Our highly experienced staff can assist in handling and recovering your legal costs in disputes concerning the fixed costs regime.

We understand the importance of cashflow, and this why we consistently secure an interim payment on account. We can also provide assistance in the preparation of Costs Budgets and Bills of Costs. We have a high success rate and regularly demonstrate our ability to succeed on CPR 45 Fixed Costs Disputes.

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.

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