Part 38

General Rules about costs

Definitions and application

38.1     In this Part, unless the context otherwise requires –

(1)     ‘receiving party’ means a party entitled to be paid costs;

(2)     ‘paying party’ means a party liable to pay costs;

(3)     ‘fixed costs’ means the amounts which are to be allowed in respect of legal representatives’ charges in the circumstances set out in Part 39.

38.2     The costs to which Parts 38 and 39 apply include the following costs where those costs may be assessed by the Tribunal –

(1)     costs of proceedings before an arbitrator or umpire; and

(2)     costs which are payable by one party to another party under the terms of a contract, where the Tribunal makes an order for an assessment of those costs.

Meaning of immediate assessment

38.3     ‘Immediate assessment’ means the procedure by which the Tribunal, when making an order about costs, orders payment of a sum of money instead of fixed costs or ‘detailed assessment’.

Meaning of detailed assessment

38.4     ‘Detailed assessment’ means the procedure by which the amount of costs is decided by the Tribunal in accordance with Part 39.

Legal representative’s duty to notify client

38.5     Where –

(1)     the Tribunal makes a costs order against a legally represented party; and

(2)     the party is not present when the order is made,

the party’s legal representative must notify his client in writing of the costs order no later than 7 days after the legal representative receives notice of the order.

Tribunal’s discretion and circumstances to be taken into account when exercising its discretion as to costs

38.6     Subject to Rules 38.15 to 38.16 the Tribunal has discretion as to –

(1)     whether costs are payable by one party to another;

(2)     the amount of those costs; and

(3)     when they are to be paid.

38.7     If the Tribunal decides to make an order about costs –

(1)     the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but

(2)     the Tribunal may make a different order.

38.8     In deciding what order (if any) to make about costs, the Tribunal must have regard to all the circumstances, including –

(1)     the conduct of all the parties;

(2)     whether a party has succeeded on part of his case, even if he has not been wholly successful; and

(3)     any payment into the Tribunal Registry or admissible offer to settle made by a party which is drawn to the Tribunal’s attention and which is not a Part 32 offer.

38.9     The conduct of the parties includes –

(1)     conduct before, as well as during, the proceedings;

(2)     whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(3)     the manner in which a party has pursued or defended his case or a particular allegation or issue; and

(4)     whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.

38.10     The orders which the Tribunal may make include an order that a party must pay –

(1)     a proportion of another party’s costs;

(2)     a stated amount in respect of another party’s costs;

(3)     costs from or until a certain date only;

(4)     costs incurred before proceedings have begun;

(5)     costs relating to particular steps taken in the proceedings;

(6)     costs relating only to a distinct part of the proceedings; and

(7)     interest on costs from or until a certain date, including a date before judgment.

38.11    Where the Tribunal would otherwise consider making an order under Rule 38.10(6), it must instead, if practicable, make an order under paragraph 38.10(1) or 38.10(3).

38.12     There are certain costs orders which the Tribunal will commonly make in proceedings before trial. The following table sets out the general effect of these orders. The table is not an exhaustive list of the orders which the Tribunal may make.

38.13     Where the Tribunal has ordered a party to pay costs, it may order an amount to be paid on account before the costs are assessed.

38.14     Where a party entitled to costs is also liable to pay costs the Tribunal may assess the costs which that party is liable to pay and either –

(1)     set off the amount assessed against the amount the party is entitled to be paid and direct him to pay any balance; or

(2)     delay the issue of a certificate for the costs to which the party is entitled until he has paid the amount which he is liable to pay.

Claims allocated to the Small Claims Panel

38.15     In claims allocated to the Small Claims Panel, the Tribunal may not order a party to pay a sum to another party in respect of that other party’s costs except

    –

(1)     such part of any Court or Tribunal fees paid by that other party as the Tribunal may consider appropriate;

(2)     such further costs as the Tribunal may assess by immediate assessment and order to be paid by a party who has behaved unreasonably.

38.16     A party’s rejection of an offer in settlement will not of itself constitute unreasonable behaviour under Rule 38.15(2) but the Tribunal may take it into consideration when it is applying the unreasonableness test.

Basis of assessment

38.17     Where the Tribunal is to assess the amount of costs (whether by immediate or detailed assessment) it will assess those costs –

(1)     on the standard basis; or

(2)     on the indemnity basis,

but the Tribunal will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.

38.18     Where the amount of costs is to be assessed on the standard basis, the Tribunal will –

(1)     only allow costs which are proportionate to the matters in issue; and

(2)     resolve any doubt which it may have as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party.

38.19     Where the amount of costs is to be assessed on the indemnity basis, the Tribunal will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party.

38.20     Where –

(1)     the Tribunal makes an order about costs without indicating the basis on which the costs are to be assessed; or

(2)     the Tribunal makes an order for costs to be assessed on a basis other than the standard basis or the indemnity basis,

the costs will be assessed on the standard basis.

Factors to be taken into account in deciding the amount of costs

38.21     The Tribunal is to have regard to all the circumstances in deciding whether costs were –

(1)     if it is assessing costs on the standard basis –

(a)     proportionately and reasonably incurred; and

(b)     were proportionate and reasonable in amount, or

(2)     if it is assessing costs on the indemnity basis –

(a)     unreasonably incurred; or

(b)     unreasonable in amount.

38.22     In particular the Tribunal must give effect to any orders which have already been made.

38.23     The Tribunal must also have regard to –

(1)     the conduct of all the parties, including in particular –

(a)     conduct before, as well as during, the proceedings; and

(b)     the efforts made, if any, before and during the proceedings in order to try to resolve the dispute;

(2)     the amount or value of any money or property involved;

(3)     the importance of the matter to all the parties;

(4)     the particular complexity of the matter or the difficulty or novelty of the questions raised;

(5)    the skill, effort, specialised knowledge and responsibility involved;

(6)     the time spent on the case; and

(7)     the place where and the circumstances in which work or any part of it was done.

38.24    In applying the test of proportionality the Tribunal will have regard to Rule 1.5(3). The relationship between the total of the costs incurred and the financial value of the claim may not be a reliable guide. A fixed percentage cannot be applied in all cases to the value of the claim in order to ascertain whether or not the costs are proportionate.

38.25     In any proceedings there will be costs which will inevitably be incurred and which are necessary for the successful conduct of the case. Legal representatives are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim, and may even equal or possibly exceed the amount in dispute.

38.26     Where a trial takes place, the time taken by the Tribunal in dealing with a particular issue may not be an accurate guide to the amount of time properly spent by the legal or other representatives in preparation for the trial of that issue.

38.27     [REMOVED]

Procedure for assessing costs

38.28     Where the Tribunal orders a party to pay costs to another party (other than fixed costs) it may either –

(1)     make an immediate assessment of the costs; or

(2)     order detailed assessment of the costs,

unless any Rule, Practice Direction or other enactment provides otherwise.

38.29     Whenever a Tribunal makes an order about costs which does not provide for fixed costs to be paid the Tribunal should consider whether to make an immediate assessment of costs.

38.30     The general rule is that the Tribunal should make an immediate assessment of the costsat the conclusion of any hearing, which has lasted no more than one day, in which case the order will deal with the costs of the application or matter to which the hearing related. If this hearing disposes of the claim, the order may deal with the costs of the whole claim unless there is good reason not to do so e.g. where the paying party shows substantial grounds for disputing the sum claimed for costs that cannot be dealt with on the material available or there is insufficient time to carry out an immediate assessment.

38.31     If an immediate assessment of costs is appropriate but the Tribunal awarding costs is unable to do so on the day, the Tribunal will give directions as to a further hearing.

38.32     Where the parties agree an order without the need for any party to attend, the parties must agree a figure for costs to be inserted in the agreed order or agree that there should be no order for costs.

38.33     It is the duty of the parties and their legal representatives to assist the Tribunal in making an immediate assessment of costs in any case to which Rule 38.30 applies, in accordance with Rules 38.34 to 38.36.

38.34     Each party who intends to claim costs must prepare a written statement of the costs he intends to claim showing separately in the form of a schedule:

(1)     the number of hours to be claimed;

(2)     the hourly rate to be claimed;

(3)     the qualifications and seniority of fee earner;

(4)     the amount and nature of any disbursement to be claimed;

(5)     the amount of the legal representative’s costs to be claimed for attending or appearing at the hearing; and

(6)     any tax to be claimed on these amounts.

38.35     The statement of costs should follow as closely as possible Form P38/01 and must be signed by the party or his legal representative.

38.36     The statement of costs must be filed at the Tribunal and copies of it must be served on any party against whom an order for payment of those costs is intended to be sought. The statement of costs should be filed and the copies of it should be served as soon as possible and in any event not less than 24 hours before the date fixed for the hearing.

38.37     The failure by a party, without reasonable excuse, to comply with Rules 38.33 to 38.36 will be taken into account by the Tribunal in deciding what order to make about the costs of the claim, hearing or application, and about the costs of any further hearing or detailed assessment hearing that may be necessary as a result of that failure.

38.38     The Tribunal will not make an immediate assessment of the costs of a receiving party who is a child or patient unless the legal representative acting for the child or patient has waived the right to further costs.

38.39     The Tribunal may make an immediate assessment of costs payable by a child or patient.

Time for complying with an order for costs

38.40     A party must comply with an order for the payment of costs within 14 days of

    –

(1)     the date of the judgment or order if it states the amount of those costs;

(2)     if the amount of those costs (or part of them) is decided later in accordance with Part 39, the date of the certificate which states the amount;

or in either case, such later date as the Tribunal may specify.

Cases where costs orders deemed to have been made

38.41     Where a right to costs arises under –

(1)     Rule 4.31 (defendant’s right to costs where claim struck out for non-payment of fees);

(2)     Rules 32.27 and 32.28 (claimant’s entitlement to costs where a Part 32 offer is accepted); or

(3)     Rules 34.15 and 34.16 (defendant’s right to costs where claimant discontinues),

a costs order will be deemed to have been made on the standard basis.
38.42     Interest on the costs deemed to have been ordered under Rule 38.41 shall begin to run from the date on which the event which gave rise to the entitlement to costs occurred.

Costs-only proceedings

38.43     Rules 38.44 to 38.53 set out a procedure which may be followed where –

(1)     the parties to a dispute have reached an agreement on all issues (including which party is to pay the costs) which is made or confirmed in writing; but

(2)     they have failed to agree the amount of those costs; and

(3)     no proceedings have been started.

38.44    Either party to the agreement may start proceedings under Rules 38.45 to 38.53 by issuing a claim form in accordance with Part 8.

38.45     The claim form must:

(1)     identify the claim or dispute to which the agreement to pay costs relates;

(2)     state the date and terms of the agreement on which the claimant relies;

(3)     set out or have attached to it a draft of the order which the claimant seeks;

(4)     state the amount of the costs claimed; and,

(5)     state whether the costs are claimed on the standard or indemnity basis. If no basis is specified the costs will be treated as being claimed on the standard basis.

38.46     In proceedings to which Rules 38.44 to 38.53 apply the Tribunal –

(1)     may

(a)     make an order for costs to be determined by detailed assessment; or

(b)     dismiss the claim; and

(2)     must dismiss the claim if it is opposed.

38.47     For the purposes of Rule 38.46(2) –

(1)     a claim will be treated as opposed if the defendant files an acknowledgment of service stating that he intends to contest the making of an order for costs or to seek a different remedy; and

(2)     a claim will not be treated as opposed if the defendant files an acknowledgment of service stating that he disputes the amount of the claim for costs.

38.48     An order dismissing the claim will be made as soon as an acknowledgment of

service opposing the claim is filed. The dismissal of a claim under Rule 38.46(2) does not prevent the claimant from issuing another claim form under Part 7 or Part 8 based on the agreement or alleged agreement to which the proceedings under this rule related.

38.49     The evidence to be filed and served with the claim form under Rule 8.23 must include copies of the documents on which the claimant relies to prove the defendant’s agreement to pay costs.

38.50     The Registrar has jurisdiction to hear and decide any issue which may arise in a claim issued under Rules 38.44 to 38.53 irrespective of the amount of the costs claimed or of the value of the claim to which the agreement to pay costs relates.

38.51     When the time for filing the defendant’s acknowledgement of service has expired, the claimant may by letter request the Tribunal to make an order in the terms of his claim, unless the defendant has filed an acknowledgement of service stating that he intends to contest the claim or to seek a different order.

38.52     An order for costs made under Rule 38.50 will be treated as an order for the amount of costs to be decided by a detailed assessment.

38.53     In cases in which an additional liability is claimed, regard should be had to the time when and the extent to which the claim has been settled and to the fact that the claim has been settled without the need to commence proceedings.

38.54     Nothing in Rules 38.44 to 38.53 prevents a person from issuing a claim form under Part 7 or Part 8 to sue on an agreement made in settlement of a dispute where that agreement makes provision for costs, nor from claiming in that case an order for costs or a specified sum in respect of costs.

Special situations

38.55     Where the Tribunal makes an order which does not mention costs –

(1)     subject to Rules 38.56 and 38.57, the general rule is that no party is entitled to costs in relation to that order; but

(2)     this does not affect any entitlement of a party to recover costs out of a fund held by him as trustee or personal representative, or pursuant to any lease, mortgage or other security.

38.56     Where the Tribunal makes an order or direction sought by a party on an application without notice, and its order does not mention costs, it will be deemed to include an order for applicant’s costs in the case.

38.57     Any party affected by a deemed order for costs under Rule 38.56 may apply at any time to vary the order.

Tribunal’s powers in relation to misconduct

38.58     The Tribunal may, in connection with an immediate or detailed assessment, make an order under Rule 38.59 where –

(1)     a party or his legal representative fails to comply with a Rule, Practice Direction or Tribunal order; or

(2)     it appears to the Tribunal that the conduct of a party or his legal representative, before or during the proceedings which gave rise to the assessment proceedings, was unreasonable or improper.

38.59     Where Rule 38.58 applies, the Tribunal may –

(1)     disallow all or part of the costs which are being assessed; or

(2)     order the party at fault or his legal representative to pay costs which he has caused any other party to incur.

38.60     Where –

(1)     the Tribunal makes an order under Rule 38.59 against a legally represented party; and
(2)    the party is not present when the order is made,

the party’s legal representative must notify his client in writing of the order no later than 7 days after the legal representative receives notice of the order and the Tribunal may, either in the order under Rule 38.59 or in a subsequent order, require the legal representative to produce to the Tribunal evidence that he took reasonable steps to do so.

38.61     Before making an order under Rule 38.59 the Tribunal must give the party or legal representative in question a reasonable opportunity to attend a hearing to give reasons why it should not make such an order.

38.62     Conduct before or during the proceedings which gave rise to the assessment which is unreasonable or improper includes steps which are calculated to prevent or inhibit the Tribunal from furthering the Overriding Objective.

Production of documents and inspection of property before commencement or against a non-party

38.63     Rule 38.64 applies where a person applies –

(1)     for an order under –

(a)     Rule 25.1(9); or

(b)     Rules 28.28 to 28.31,

(which give the Tribunal powers exercisable before commencement of proceedings); or

(2)    for an order under –

(a)     Rule 25.1 (10); or

(b)     Rules 28.32 to 28.35,

(which give the Tribunal power to make an order against a non-party for disclosure of documents, inspection of property etc.).

38.64     The general rule is that the Tribunal will award the person against whom the order is sought his costs –

(1)     of the application; and

(2)     of complying with any order made on the application.

38.65     The Tribunal may however make a different order, having regard to all the circumstances, including the extent to which it was reasonable for the person against whom the order was sought to oppose the application.

Costs orders in favour of or against non-parties

38.66     Where the Tribunal is considering whether to exercise any power to make a costs order in favour of or against a person who is not a party to proceedings –

(1)     that person must be added as a party to the proceedings for the purposes of costs only; and

(2)     he must be given a reasonable opportunity to attend a hearing at which the Tribunal will consider the matter further.

38.67     Rule 38.66 does not apply –

(1)     where the Tribunal is considering whether to make a wasted costs order; and

(2)     in proceedings to which Rule 38.64 applies.

Amount of costs where costs are payable pursuant to a contract

38.68     Where the Tribunal assesses (whether by the immediate or detailed procedure) costs which are payable by the paying party to the receiving party under the terms of a contract, the costs payable under those terms are, unless the contract expressly provides otherwise, to be presumed to be costs which –

(1)     have been reasonably incurred; and

(2)     are reasonable in amount, and the Tribunal will assess them accordingly.

38.69     Rule 38.68 does not apply where the contract is between a legal representative and his client.

Limitations on Tribunal’s power to award costs in favour of trustee or personal representative

38.70     Rules 38.71 and 38.72 apply where –

(1)     a person is or has been a party to any proceedings in the capacity of trustee or personal representative; and

(2)     Rule 38.68 does not apply.

38.71     The general rule is that he is entitled to be paid the costs of those proceedings, insofar as they are not recovered from or paid by any other person, out of the relevant trust fund or estate.

38.72     Where he is entitled to be paid any of those costs out of the fund or estate, those costs will be assessed on the indemnity basis.

Costs where money is payable by or to a child or patient

38.73     Rule 38.74 applies to any proceedings where a party is a child or patient and –

(1)     money is ordered or agreed to be paid to, or for the benefit of, that party; or

(2)     money is ordered to be paid by him or on his behalf.

38.74     The general rule is that –

(1)     the Tribunal must order a detailed assessment of the costs payable by, or out of money belonging to, any party who is a child or patient; and

(2)     on an assessment under (1), the Tribunal must also assess any costs payable to that party in the proceedings, unless the Tribunal has issued a default costs certificate in relation to those costs under Part 39.

(3)     The Tribunal need not order detailed assessment of costs –

(a)     where there is no need to do so to protect the interests of the child or patient or his estate;

(b)     where another party has agreed to pay a specified sum in respect of the costs of the child or patient and the legal representative acting for the child or patient has waived the right to claim further costs;
(c)     where the Tribunal has decided the costs payable to the child or patient by way of immediate assessment and the legal representative acting for the child or patient has waived the right to claim further costs;

(d)     where an insurer or other person is liable to discharge the costs which the child or patient would otherwise be liable to pay to his legal representative and the Tribunal is satisfied that the insurer or other person is financially able to discharge those costs.

(4)    Where –

(a)     a claimant is a child or patient; and

(b)     a detailed assessment has taken place under this Rule the only amount payable by the child or patient is the amount which the Tribunal certifies as payable.

Costs where the Tribunal has made a Group Litigation Order

38.75     Rules 38.76 to 38.81 apply where the Tribunal has made a Group Litigation Order (‘GLO’).

38.76     In Rules 38.77 to 38.81 –

(1)     ‘individual costs’ means costs incurred in relation to an individual claim on the group register;

(2)     ‘common costs’ means –

(a)     costs incurred in relation to the GLO issues;

(b)     individual costs incurred in a claim while it is proceeding as a test claim, and

(c)     costs incurred by the lead legal representative in administering the group litigation; and

(3)     ‘group litigant’ means a claimant or defendant, as the case may be, whose claim is entered on the group register.

38.77     Unless the Tribunal orders otherwise, any order for common costs against group litigants imposes on each group litigant several liability

38.78     The general rule is that where a group litigant is the paying party, he will, in addition to any costs he is liable to pay to the receiving party, be liable for –

(1)     the individual costs of his claim; and

(2)     an equal proportion, together with all the other group litigants, of the common costs.

38.79     Where the Tribunal makes an order about costs in relation to any application or hearing which involved –

(1)     one or more GLO issues; and

(2)     issues relevant only to individual claims,

the Tribunal will direct the proportion of the costs that is to relate to common costs and the proportion that is to relate to individual costs.

38.80     Where common costs have been incurred before a claim is entered on the group register, the Tribunal may order the group litigant to be liable for a proportion of those costs.

38.81     Where a claim is removed from the group register, the Tribunal may make an order for costs in that claim which includes a proportion of the common costs incurred up to the date on which the claim is removed from the group register.

Personal liability of legal representative for costs – Wasted costs orders

38.82     The Tribunal shall have power to disallow or, (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined.

38.83     The Tribunal must give the legal representative a reasonable opportunity to attend a hearing to give reasons why it should not make such an order.

38.84     When the Tribunal makes a wasted costs order, it must –

(1)     specify the amount to be disallowed or paid; or

(2)     direct the Registrar to decide

38.85     The Tribunal may direct that notice must be given to the legal representative’s client, in such manner as the Tribunal may direct –

(1)     of any hearing under Rule 38.83; or

(2)     of any order made against his legal representative.

38.86     The Tribunal may refer the question of wasted costs to the Registrar instead of making a wasted costs order.