Litigation, first and foremost, can be extremely expensive. It is common knowledge that most cases settle before ever reaching court. However, for those that do go to the courtroom what expenditure is recoverable? Before embarking on litigation in the English courts it is well worth considering whether your legal fees will be repaid if you win and what could happen if you lose. The rules are not straightforward but the overall cost of litigation can vary substantially depending upon whether your legal fees will be repaid. Below we have provided insight into some of the legal costs involved in UK litigation in the English courts that may so be recovered.
The Court’s discretion on costs
The underlying principle of the English and Welsh courts is that “costs follow the event” i.e. the loser will be liable for the winner’s costs. However, the court has an unfettered discretion on determining costs. It is a common scenario for a claimant to succeed on some but not all of his claim and in those circumstances the court may order the costs to be split. Further, the court will take into consideration the conduct of the parties both before and after proceedings have been issued. A claimant that persists in unreasonably pursuing a particular issue or has clearly exaggerated his claim risks having his claim for costs disallowed or even having costs ordered against him.
A further consideration following the Jackson reforms introduced last year is whether the costs of a case are proportionate, putting an additional onus on the claimant to show that not only were his costs reasonably incurred but that such costs are proportionate to his claim.
Additionally, the indemnity principle provides that the losing party should not have to pay costs as a punishment nor pay the successful party a bonus. The amount payable is to merely resolve the cost paid by or that the successful party is obliged to pay and no more. Therefore, if the successful party received a particular service for free, no costs should be awarded for such a service.
Litigant’s own costs
In determining costs the court usually only refers to legal cost and unfortunately a litigant cannot generally recover costs for lost time caused by the dispute with the other party. However, there are exceptions to this general rule. f a litigant decides to employ experts then the litigant may be able to recover those costs. Typically this would cover for example, specialist survey reports or forensic accountant’s fees etc. A litigant may have to divert valuable staff time and management away from their normal cause of duties. If this is so, then a litigant may recover costs for wasted time.The fact that a litigant chooses to instruct a solicitor will not prevent the litigant, necessarily, from being prevented in recovering his or her own fees.
Companies with in-house lawyers
As long as the indemnity principle is satisfied i.e costs are provided to those who are entitled to them, but no more than is owed and the costs are reasonable and proportionate to the claim then it is possible for companies with in-house legal staff to be reimbursed for the costs of in-house counsel and support staff.
Litigants in Person
Litigants in person are companies or individuals who are not legally represented. Being a litigant in person can be extremely difficult and in complex cases it is wise to take legal representation. However, for those litigants that choose to go it alone they can often claim a nominal hourly rate. If they can prove however that they have incurred a financial loss in preparing the case they may well be entitled to that amount as opposed to the nominal figure. It should however be contemplated as to whether or not a litigant in person – stands the best chance, alone, of winning a case in unfamiliar ‘territory’?
Entitlement by Contract
If costs are payable under a contract, then there will be a heavy burden to rebut to show that they are not recoverable costs. Getting around this may be as simple however as inserting a clause in the contract that expenses incurred under it are not recoverable in the event of litigation. Courts have been willing to enforce terms in a contract that seek to indemnify the defending party if the claimant loses in a claim in respect of the contract.
What should you do?
In summary, when it comes to disputes in respect of a contract terms need to be well drafted at the start to ensure that if a dispute does arise that money can be recovered. Whether money can be recovered at all will ultimately be down to the court and showing that you were the successful party may in certain circumstances be a tricky task.
Litigants may favour bringing a claim themselves but this comes with difficult hurdles and they may only be entitled to a nominal amount for their time. Often the best advice is to settle the dispute by mediation or negotiation before the matter gets to court and the court will penalise a party that fails to mediate without good reason. Whilst you may feel short changed when costs are taken into account you could be better off in the long term.
Jonathan Cass is a partner specialising in litigation and dispute resolution within the commercial team and regularly helps both businesses and individuals settle disputes effectively. Please call 0207 438 1060 to speak to Jonathan.