This is the third and final instalment of our legal jargon buster series. This article will be looking to explain ‘costs terminology’, and the key phrases used in the context of costs.
Our commercial dispute resolution team tends to deal with claims which have a value of over £10,000 and have been allocated to the Fast Track or Multi Track. On these tracks, the general rule is that the successful party recovers a proportion of their costs from the unsuccessful party. It is therefore very important that parties to proceedings understand costs terminology.
Costs Terminology
Assessment of costs
The Assessment of costs is the process by which the Court determines who and how much should be paid by the parties for legal costs.
Cost budget/ Precedent H
A cost budget is a document used by the Court to manage the costs of parties during proceedings. For multi track cases, each party will have to file a cost budget which summarises (i) their costs incurred to date and (ii) their estimated costs to trial. If the claim is for more than £50,000 then the Precedent H will need to be more detailed than if the claim is for a lesser amount.
Summary assessment
Summary assessment of costs normally takes place at the end of an interim hearing or a trial which is less than 1 day. The parties will have filed a statement of costs which is a concise summary of the costs they have incurred for that hearing or the whole proceedings. The Court has a wide discretion and often will take a very broad brush approach on costs.
Detailed assessment
Detailed assessment tends to take place at the end of a case where the trial is more than 1 day. The party who is entitled to recover their costs will be required to prepare a detailed bill of costs and share this with the paying party. The paying party then has an opportunity to serve “points of dispute” where they can challenge the costs included within the bill of costs.
Standard basis
The default position is that costs will be awarded on a standard basis. This is where the court will only allow costs which are:-
- Reasonable in amount; and
- Reasonably incurred; and
- Proportionate
The court will resolve any doubt which it may have in respect of these criteria in favour of the paying party.
Normally you would expect to recover around 60 – 75% of your costs on the standard basis.
Indemnity basis
When the Court is awarding costs on the indemnity basis, there is no requirement for the costs to be proportionate. The onus is therefore on the paying party to show that the costs claimed are unreasonable. This normally results in a much higher recovery for the receiving party, say 85%-90%
Costs will be awarded on an indemnity basis in certain circumstances, for example, if a party has failed to better a Part 36 offer and/ or their conduct has been particularly unreasonable.
You can read the first instalment of our legal jargon buster series here, and the second instalment here.
If you have any enquiries regarding dispute resolution please feel free to contact us.