I’ve Been Ordered to Pay Legal Costs, What Should I Do?

If you have been ordered to pay another party’s legal costs, the first thing to establish is exactly what the court has ordered. A costs order does not always mean that you have to pay everything the other party has spent on solicitors, barristers and experts. The amount may already have been fixed by the court, but in many cases it will still need to be agreed or assessed.

The wording of the order, the basis on which costs have been awarded and any deadlines can all affect what happens next. If you have recently received an order requiring you to pay legal costs, here are the key things you should consider.

1. Read the costs order carefully

Start with the exact wording of the judgment or order. There are several different types of costs order and they do not all have the same effect.

For example, an order might state that you must pay:

• a fixed amount of costs;
• costs that have been summarily assessed by the court;
• costs “subject to detailed assessment if not agreed”;
• costs on the standard basis;
• costs on the indemnity basis; or
• the costs of a particular application rather than the whole proceedings.

You may also encounter wording such as “costs in any event“, “costs in the case” or “costs reserved”. Before deciding what to do, you need to understand what the court has actually ordered you to pay.

2. Has the court already decided how much you owe?

Being ordered to pay costs and being ordered to pay a particular amount are not necessarily the same thing.

Sometimes the court will carry out a summary assessment and specify a figure in the order. For example, you might be ordered to pay £8,000 towards the other party’s costs. In that situation, the amount has already been determined, subject to any available challenge to the order itself.

In other cases, the order might state:

“The defendant shall pay the claimant’s costs, to be subject to detailed assessment if not agreed.”

This establishes liability for costs but does not determine the final amount. The other party may have spent £100,000, but that does not automatically mean you owe £100,000.

3. Check when payment is due

Do not assume that you can wait until the end of the wider case before dealing with a costs order. Where an order specifies an amount to be paid, it should also be checked for any deadline. There may also be an order for a payment on account of costs, particularly where the final costs will be dealt with through detailed assessment.

Missing a payment deadline can create further problems, including potential enforcement action. If you are unsure when payment is required, obtain advice promptly rather than simply waiting for the other side to contact you.

4. Have you received a Bill of Costs?

If costs have been ordered but not quantified, the receiving party may seek to agree the amount with you. In higher-value cases, you may receive a formal Bill of Costs setting out the legal costs being claimed. This can include solicitors’ time, hourly rates, counsel’s fees, expert fees and other disbursements.

The important point is that a Bill of Costs is a claim for costs. It is not necessarily the amount you will ultimately have to pay. The bill should be reviewed carefully before any offer or payment is made.

5. Can I challenge the amount of legal costs?

Potentially, yes. The arguments available will depend on the order and the circumstances of the case, but costs can be challenged for a number of reasons.

For example, there may be questions about excessive time, duplication of work, hourly rates, counsel’s fees, expert costs, unnecessary work or whether particular expenditure relates to the proceedings covered by the costs order.

Where costs are assessed on the standard basis, the court considers whether they were reasonably incurred, reasonable in amount and proportionate.

If costs have been awarded on the indemnity basis, the receiving party is in a stronger position. However, this still does not mean that every cost claimed must be paid. Costs that were unreasonably incurred or unreasonable in amount can still be challenged.

6. What if I receive a Notice of Commencement?

A Notice of Commencement is particularly important. It formally starts detailed assessment proceedings and will usually be accompanied by the Bill of Costs. Once it has been served, the paying party normally has 21 days to serve Points of Dispute.

Points of Dispute set out the challenges being made to the receiving party’s bill. This is a deadline you should not ignore.

If Points of Dispute are not served within the required period, the receiving party may be able to request a default costs certificate for the amount claimed.

If you receive a Notice of Commencement, obtaining specialist costs advice quickly can therefore be important.

7. Can legal costs be negotiated?

Yes, and many costs disputes are resolved through negotiation rather than proceeding to a detailed assessment hearing. The fact that you have been ordered to pay the other party’s costs does not prevent you from negotiating the amount. The parties might exchange offers after considering the strengths and weaknesses of the Bill of Costs.

Part 36 offers can also be used in detailed assessment proceedings and can have significant consequences for the costs of the assessment itself. A realistic early offer can sometimes avoid further costs being incurred arguing over costs.

8. What happens at detailed assessment?

If the parties cannot agree how much should be paid, the court may need to determine the figure through detailed assessment. The receiving party presents its Bill of Costs and the paying party identifies the items it disputes through Points of Dispute.

The remaining disputed items can then be considered by a costs judge or other appropriate judicial officer. The court may allow some items in full, reduce others or disallow them entirely.

The final amount can therefore be different from the original amount claimed.

9. Can I challenge the costs order itself?

There is an important difference between challenging the costs order and challenging the amount of costs claimed under it. Detailed assessment generally concerns how much is recoverable. It is not an opportunity to re-argue whether the original judge should have made the costs order.

If you believe the order itself was wrong, different procedural steps may be required, potentially including an appeal or an application relating to the order. Time limits can be short, so legal advice should be obtained promptly if your concern is with the costs order itself rather than the amount claimed.

10. Don’t ignore correspondence about costs

One of the worst approaches is simply to ignore the issue because the main litigation has finished. Costs proceedings have their own rules and deadlines. If you receive a Bill of Costs, Notice of Commencement, settlement offer, application or default costs certificate, deal with it promptly.

Delay can reduce your options and may lead to additional costs.

How ARC Costs can help if you have been ordered to pay legal costs

ARC Costs regularly acts for paying parties who have been ordered to pay another party’s legal costs.

We can review the costs order and Bill of Costs, advise on the amount being claimed, identify potentially unreasonable or disproportionate costs and prepare Points of Dispute where detailed assessment proceedings have commenced.

We can also negotiate directly over the costs claimed, advise on Part 36 offers and assist throughout detailed assessment proceedings.

Being ordered to pay legal costs does not necessarily mean accepting whatever figure the other side requests.

The first step is to understand the costs order, identify whether the amount has already been determined and, where it has not, obtain a proper assessment of the costs being claimed before deciding what should be paid.

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