At BarnsChapel, having a diverse client portfolio is the backbone of our legal practice, ranging from receiving to paying parties. Our ethos is centred around offering bespoke solutions to meet the unique requirements of each client. This week, we're placing the spotlight on a question that frequently resonates in our discussions with paying party clients:
"How can we reduce the costs that our client might have to pay the successful party in litigation?"
There are a number of steps which can be taken in order to minimise your clients’ costs liability, both during and after the claim, and these are outlined below:
Early settlement of the claim
Consider, early on, whether the evidence supports the claim against you (if you are a Defendant). If it does, make realistic settlement offers as soon as possible. If the parties can agree settlement early on, they might avoid the need to issue proceedings, obtain expert evidence, go through the disclosure process or any other steps up to and including trial. There is absolutely no point in denying liability and forcing a claimant to issue court proceedings if your client knows it is liable and is in a position to make an acceptable offer. Of course, if there is no case to answer, this is less straightforward because other factors may come into play, such as reputational damage.
Costs budgeting
Be careful, when preparing your client’s costs budget, not to underestimate your own costs. To do so might make them look unrealistically low in comparison with the other parties’ costs, and if that occurs, your opponent might succeed in arguing that you produced a low budget to try and obtain a tactical advantage. That, in turn, could result in your opponent’s budget being approved by the court as drawn, rather than reduced to a more reasonable and proportionate level.
Enter into discussions with your opponent in relation to each party’s budget. If your opponent is claiming proportionate and reasonable future costs in any phase, try and reach agreement on those phases before the costs management conference. If their future costs are disproportionate to the value, complexity, and importance of the issues, try and agree reductions to a more proportionate level. If you can’t agree, send your costs lawyer to the costs management conference. Don’t leave it to Counsel to deal with budgets because they will be busy dealing with directions and may also not have a detailed knowledge of costs.
Agreeing costs post-settlement
If details of your opponent’s costs are served informally, i.e., as an outline statement of costs or as a bill of costs without a Notice of Commencement of Assessment Proceedings (N252) attached, if you have sufficient information to do so, try and agree settlement at that stage. Make realistic offers and don’t try and “horse trade”. This will only annoy your opponent and probably encourage them to start formal assessment proceedings early on. If costs can be agreed without service of a formal bill of costs, your opponent cannot charge you for time spent in costs negotiations. If, however, a bill of costs is served with the N252, costs of the assessment process start to run as soon as that bill is served on you/your client, thereby increasing your client’s costs liability straight away. It is best to make one, or no more than two, decent offers which you think your opponent is unlikely to beat at assessment rather than trying to increase your offer by small increments from an unrealistically low starting point.
Points of Dispute
If you cannot reach early settlement even after service of a formal bill of costs, it will become necessary to serve points of dispute. It is important that this document highlights, in detail (but taking into account that CPR Practice Direction 47.9 paragraph 8.2 sets out the requirement that they should be “short and to the point”) which items in the bill of costs are challenged and why. If you do not include sufficient detail, the court is likely to find for the receiving party, based on the judgment in the case of Ainsworth v Stewarts Law LLP [2020] EWCA Civ 178 in which challenges which provided insufficient detail were dismissed.
If you take issue with a particular general issue – for example hourly rates claimed, proportionality or Counsel’s fees, you should include a preliminary point explaining the reasons for your challenge so that, if the court takes the point, it can be applied to all relevant costs claimed without having to be regularly repeated.
Proportionality
CPR 44.3 sets out the basis of assessment.
In short: Costs claimed on the standard basis will only be allowed if they are reasonably incurred and proportionate to the matters in issue, and any doubt will be resolved in favour of the paying party. If you consider the costs to be disproportionate, make offers based on what you think the court would consider to be reasonable and proportionate costs.
Costs payable on the indemnity basis only need to be reasonable and any doubt as to reasonableness is resolved in favour of the receiving party. Costs recovery in these cases is likely to be much higher than in standard-basis assessments.
Hourly rates
Guideline hourly rates are decided by the Senior Court Costs Office and were updated in October 2021. There are numerous cases relating to hourly rates, but in essence, there has to be a “clear and compelling justification” for exceeding the Guideline rates, therefore if the rates claimed are higher than those, your offers of settlement should factor in a reduction unless you think there is justification for exceeding them.
Costs claimed which exceed the last approved costs budget
It is worth remembering that, when it comes to agreeing costs post-settlement, any costs which were incurred at the time the budget was prepared remain subject to detailed assessment, whereas costs incurred after the budget was approved by the court at the costs management hearing are almost always capped at the level of the approved post-budget costs. If costs in excess of the approved amount for any phase have been claimed, offers of settlement should limit recovery to the amounts approved by the court at the costs management stage unless the receiving party can provide a good reason for departing from the last approved budget.
Non-recoverable costs
Often, whether by accident, design, or simply a difference of opinion, a receiving party will seek to recover costs which you or your client consider to be non-recoverable from the paying party in the litigation. If this is the case, bring those items to the attention of your opponent when making offers of settlement. In order to do this, it is worth checking CPR Practice Direction 47 paragraph 5.12 which sets out some of those costs. The following items are not recoverable and should therefore not be included in any costs claim.
- Time spent dealing with funding or costs issues
- Costs which have already been summarily assessed and paid, or which have been awarded against your client by order of the court
- Perusal of routine incoming written correspondence
- Work done after settlement of the claim, except for drafting and checking the bill of costs
- Local travel expenses – usually within a ten-mile radius of the court dealing with the claim
- The cost of postage and couriers other than in exceptional circumstances
- The cost of making photocopies of documents save in unusual circumstances or where the documents are unusually numerous
- Research, unless it relates to a novel point of law
- Most inter-fee earner communications and discussions
- Photocopying and assembling bundles – not fee earner work
- Administrative tasks – not fee earner work
- Any work which fails to progress the claim, such as solicitor/client updates and non-progressive file reviews
Excessive time claimed
Costs claimed must be both reasonable and proportionate to the claim, taking into account a number of factors including the value, complexity, importance of the matter to the claimant and the conduct of the parties. If time on individual items appears to be excessive, unreasonable and/or disproportionate, it is likely to be reduced at a court assessment if the costs claim proceeds that far and should therefore be offered at a reduced level in your offers of settlement.
So, there you have it. Some tips on minimising your client’s costs liability to the receiving party in litigation .
As ever, if you have any burning questions about law costs, just send me a message or leave a comment.