By : Charles Bagot
What is meant by ‘unusual costs orders’?
We are referring to the court’s discretion to depart from the usual order that ‘costs follow the event’ (i.e. when the unsuccessful party to a trial or application pays all of the successful party’s costs).
Hasn’t the court always had this discretion?
Yes, but pre-CPR it was reserved for very exceptional circumstances.
One of the main intentions of the Woolf reforms was to make parties more aware of the costs consequences of their actions, which would, it was hoped, encourage a responsible approach to litigation. While it was possible, under the old rules, to ask the court to order a successful party to pay part or all of an unsuccessful party’s costs, such an order was restricted to circumstances where the successful party had acted improperly or unreasonably (Re Elgindata Ltd (no.2)  1 WLR 1207, CA).
Who says that “unusual” costs orders should be made more routinely now?
This is Lord Woolf’s view. He said: ‘I draw attention to the new rules because, while they make clear that the general rule remains, that the successful party will normally be entitled to costs, they at the same time indicate the wide range of considerations which will result in the court making different orders as to costs… the ‘follow the event’ principle will still play a significant role, but it will be a starting point from which a court can readily depart.’ He made these comments when the CPR were about to come into force (Phonographic Performance Ltd v. AEI Rediffusion Music Ltd  2 All ER 299, CA).
Our experience suggests that judges are not making these orders as readily as Lord Woolf envisaged. Some recent Court of Appeal decisions provide examples of robust orders that could be used to encourage judges to grant these more imaginative costs orders.
Where do I find the relevant rules in the CPR?
CPR 44.3(2): ‘If the court decides to make an order about costs-
(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
(b) the court may make a different order.’
The above extract shows that these ‘unusual’ orders are permitted.
What types of orders do we mean?
CPR 44.3(6): ‘The orders which the court may make under this rule include an order that a party must pay-
(a) a proportion of another party’s costs;
(b) a stated amount in respect of another party’s costs;
(c) costs from or until a certain date only;
(d) costs incurred before proceedings have begun;
(e) costs relating to particular steps taken in the proceedings;
(f) costs relating only to a distinct part of the proceedings; and
(g) interest on costs from or until a certain date, including a date before judgment.’
The court will look at the successful party and decide if it deserves all its costs, or look at an unsuccessful party and ask whether it should pay for everything.
But in order to simplify this kind of ‘value’ assessment, the court will make an order relating to a proportion of the costs, reducing the bill by a percentage, rather than trying to carry out a complicated mathematical calculation to strip out the costs relating to a particular issue. Otherwise summary assessment, or even the judges ruling in a case set for detailed assessment, can become a ‘hair-splitting’ exercise. For example, a particular letter may mention 3 different issues and a skeleton may refer to 5 heads of claim. It will be difficult to apportion costs relating to just one issue, in those circumstances.
Therefore, the court will decide that the claimant won 3 out of 4 arguments, and so be entitled to 75% of costs.
What if this apportionment argument means detailed assessment instead of summary assessment. Doesn’t that mean that we will have a long wait before receiving any costs?
If it is clear that you will be the ‘receiving party’ overall, so far as costs are concerned, you need not wait for all the costs to be subject to detailed assessment. You should ask for a sum on account (CPR 44.3(8)). This is an underused procedure. It bridges the gap between the main hearing and the detailed assessment as the sum ‘on account’ will normally be payable within 14 days. An order for the interim payment on account of 40% of the total costs claimed was made in Mars UK Ltd. v. Teknowledge Ltd (no.2) [(1999) The Times, 8 July]. This case gave useful guidance on obtaining orders for costs on account.
When is it appropriate to seek one of the more unusual costs orders?
(a) Where there are issues of conduct
(b) Where the unsuccessful party ‘won’ the hearing or trial (for example by reducing damages paid by 80%)
(c) Where there are relevant offers of settlement (don’t forget to make tactical use of offers on specific issues; global offers; and offers on costs).
Conduct of the parties or their advisors is the main issue. It is no coincidence that this appears first in the CPR’s list of relevant considerations:
CPR Part 44.3(4): ‘In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including-
(a) the conduct of the all the parties;
(b) whether a party has succeeded on part of his case, even if he has not been wholly successful; and
(c) any payment into court or admissible offer to settle made by a party which is drawn to the court’s attention (whether or not made in accordance with Part 36).
CPR Part 44.3(5): states that “The conduct of the parties” includes-
(a) conduct before, as well as during, the proceedings, and in particular the extent to which the parties followed any relevant pre-action protocol;
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended his case or a particular allegation or issue; and
(d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.
No one likes a claimant who is dishonest (least of all his own solicitor). The Court of Appeal has recently suggested that where a claimant dishonestly exaggerates an otherwise legitimate claim, the court should wonder whether the claimant’s claim should be considered at all (i.e. should he lose the legitimate part of his award too as the whole claim is tainted?): Molloy v. Shell UK Ltd  EWCA Civ 1272, CA.
In circumstances of dishonesty, the Court of Appeal in Molloy made it clear that, at the very least, such a claimant should pay all the defendant’s costs, even though the claimant had been awarded some damages and may have beaten a payment in. Such an order could obviously have a devastating effect on the amount of damages finally recovered.
Even an honest claimant who beats a payment in by a small margin, but has claimed a much larger sum, may have to pay the defendant’s costs post Part 36 payment in. That was the fate of 3 claimants who had honestly but unrealistically made substantial claims for future loss of earnings, which largely failed: Bajwa v. British Airways  PIQR Q152.
Therefore, as advisors, it is important to bear in mind how likely a claim is to be supported by evidence and sustainable at trial: a high exaggerated claim could lead to the claimant’s damages being significantly reduced.
Isn’t applying for these orders just a defendant’s tactic?
No, these orders can, on the whole, be sought by and against both claimants and defendants. They are not just appropriate where an ultimately successful claimant has pursued a number of costly and time-consuming points which have failed. During the course of proceedings, a defendant who has failed to conduct itself within the spirit of the rules, for example, in providing late disclosure, may well recover none or only part of its costs even if a payment in was not bettered by the claimant.
A claimant can also apply tactical pressure to a dilatory defendant at interim stages by the use of payment on account or payment of all the sums arising from an interim application.
In Ford v. GKR Construction Ltd  1 All ER 802, the Court of Appeal upheld the judge’s order awarding the claimant all her costs, despite the fact that she failed to beat the payment in. This was due to the defendant obtaining and disclosing surveillance evidence during the trial and fresh evidence on life expectancy all of which could and should have been obtained and disclosed sooner. If the evidence had been provided sooner the claimant may well have accepted the payment in, so the defendant was not entitled to withhold evidence that would help the claimant make a realistic decision, but then seek the benefit of the claimant’s failure to beat the payment in.
What if the unreasonable conduct was pre-action?
This is equally relevant and the rules oblige the court to take account of all conduct and not just a specific part of the history of the claim.
The Court of Appeal has indicated that the use of pre-action offers should be encouraged. Unreasonable conduct in issuing proceedings without negotiating or rejecting a reasonable offer (albeit not one immediately translated into a Part 36 payment) may result in costs orders unfavourable to the successful party: Amber v. Stacey  2 All ER 88, CA.
What can I do to prepare the groundwork for seeking this type of costs order?
Tactical letters are important. This follows the logic of Part 36, i.e. setting out what you will be saying or alleging on costs and making it clear that this will be referred to at the end of the case. Letters like this will mean the court cannot refuse to make an order on the grounds that the other side has been taken by surprise.
It will also provide a useful negotiating tool. A party will know that fighting on could result in a hollow victory if the costs consequences are adverse.
Make flexible use of Part 36 offers. This can be useful in disposing of a weak discrete issue (the claim for psychiatric harm brought by a claimant in the absence of cogent evidence, or the defence on liability where a defendant’s only real case is as to quantum). You will need a bundle of relevant documents at the ready (often largely correspondence containing these letters and offers). This may seem like onerous extra preparation. But a few (chargeable) hours will be well spent if they result in the recovery of, or saving of, £1000s in costs.
If you are not conducting the hearing, add a section to your file note or brief. The advocate who has not had day-to-day conduct will put the point more cogently if he/she has your views and has discussed the point with you more than a quick whispered conversation in court at the conclusion of a claim.
Charlie Bagot was the Appellant/Defendant’s Counsel in the Court of Appeal in Molloy v. Shell UK Ltd.