Legal Costs Advice
Legal costs are a critical part of any litigation. From the costs consequences of Part 36 offers to the protection afforded by QOCS, understanding the costs landscape is essential for making informed decisions about your case. A costs lawyer can provide specialist guidance at every stage of proceedings.
Part 36 Offers and Costs Consequences
Part 36 of the Civil Procedure Rules provides a formal mechanism for making settlement offers that carry automatic costs consequences. A properly made Part 36 offer creates powerful incentives for settlement, because failing to beat the offer at trial results in significant costs penalties.
If a claimant makes a Part 36 offer and then obtains a judgment at least as advantageous as the offer, the defendant faces enhanced consequences: the claimant will be entitled to costs on the indemnity basis from the date on which the relevant period expired, interest on those costs at up to 10% above base rate, enhanced interest on any damages awarded, and an additional amount calculated as a percentage of damages (up to a cap of 75,000 pounds).
If a defendant makes a Part 36 offer and the claimant fails to obtain a judgment more advantageous than the offer, the claimant will generally be ordered to pay the defendant's costs from the date the relevant period expired. In a QOCS case, the claimant's exposure is limited, but the costs order still reduces the net recovery.
The timing, wording, and amount of Part 36 offers require careful consideration. A costs lawyer can advise on the optimal offer strategy, ensuring that offers are validly made and that the costs consequences are properly understood before any decision is taken.
QOCS Protection in Personal Injury Claims
Qualified one-way costs shifting (QOCS) applies to proceedings that include a claim for damages for personal injury. Under the QOCS regime (CPR 44.13 to 44.17), a defendant who wins the case can only enforce a costs order against the claimant up to the amount of any damages and interest awarded. If the claimant receives no damages, the defendant effectively cannot recover any costs.
This protection is not absolute. QOCS can be lost or limited in several circumstances:
- Fundamental dishonesty: If the court finds that the claim or part of it is fundamentally dishonest, the claimant loses QOCS protection entirely
- Strike out: If the claim is struck out as disclosing no reasonable grounds or as an abuse of process, QOCS does not apply
- Mixed claims: Where a claim includes both personal injury and non-personal injury elements, QOCS applies only to the personal injury component
- Part 36 offers: Where a claimant fails to beat a defendant's Part 36 offer, costs can be set off against any damages awarded
Understanding the boundaries of QOCS protection is vital for both claimants and defendants. For claimants, it provides valuable costs protection that should inform litigation strategy. For defendants, understanding when QOCS can be disapplied creates opportunities to shift costs risk back to the claimant.
Costs Orders: Who Pays
The court's power to make costs orders is found in CPR Part 44. The general rule is that the unsuccessful party pays the successful party's costs (CPR 44.2(2)(a)), but the court has a wide discretion to make different orders. Common types of costs order include:
- Costs in the case: The party who ultimately wins the case will be entitled to the costs of the particular application or hearing
- Costs reserved: The court will decide later who should pay the costs
- No order as to costs: Each party bears their own costs
- Costs thrown away: One party pays the costs wasted by an adjournment or amendment
- Costs of and caused by: One party pays costs arising from a particular event, such as an amendment to a statement of case
The basis of assessment also matters. On the standard basis, the court allows costs that are proportionate and resolves doubts in favour of the paying party. On the indemnity basis, the proportionality test does not apply and doubts are resolved in favour of the receiving party. Indemnity costs are awarded where a party's conduct justifies a higher level of recovery.
Wasted Costs Orders
A wasted costs order is made against a legal representative personally, rather than against a party. Under section 51(7) of the Senior Courts Act 1981 and CPR 46.8, the court can order a solicitor or barrister to pay costs that have been incurred as a result of any improper, unreasonable, or negligent act or omission. This is a serious sanction that is intended to deter poor conduct by legal representatives.
Applications for wasted costs orders are relatively unusual in practice, partly because the threshold is high and partly because the procedural requirements are demanding. The court must be satisfied that the legal representative's conduct was improper, unreasonable, or negligent, and that this conduct caused the other party to incur unnecessary costs. If you are facing a wasted costs application, or considering making one, specialist advice is essential.
Non-Party Costs Orders
In exceptional cases, the court can make a costs order against a person who is not a party to the proceedings. Under section 51(3) of the Senior Courts Act 1981, the court has jurisdiction to order a non-party to pay costs where it is just to do so. Common examples include directors who have funded a company's litigation, litigation funders, and insurers who have controlled the defence of a claim.
The principles governing non-party costs orders were established in Aiden Shipping v Interbulk and developed in subsequent cases including Dymocks Franchise Systems v Todd. The court must give the non-party a fair opportunity to be heard before making an order, and must be satisfied that it is just to impose costs liability on someone who was not formally a party to the proceedings.
When to Seek Specialist Advice
The best time to seek costs advice is at the beginning of litigation, not the end. Early involvement of a costs lawyer can help with:
- Assessing the potential costs exposure before proceedings are issued
- Advising on after-the-event insurance and litigation funding
- Preparing and reviewing costs budgets
- Formulating Part 36 offer strategy
- Understanding the application of QOCS and FRC
- Advising on costs consequences at each stage of proceedings
Costs issues arise throughout the lifecycle of a case, not just at the end when a bill is to be assessed. A costs lawyer who is involved from an early stage can ensure that costs considerations are factored into every significant litigation decision, from the choice of proceedings to issue, through interlocutory applications, to settlement negotiations and trial preparation.
Frequently Asked Questions
What is a Part 36 offer?
A Part 36 offer is a formal settlement offer made under CPR Part 36 that carries specific costs consequences. If a claimant makes a Part 36 offer and then achieves a result at trial that is at least as advantageous as their offer, they are entitled to enhanced costs consequences: indemnity costs from the expiry of the relevant period, interest on costs at up to 10% above base rate, interest on damages at up to 10% above base rate, and an additional amount of up to 75,000 pounds. If a defendant makes a Part 36 offer and the claimant fails to beat it at trial, the claimant will usually have to pay the defendant's costs from the expiry of the relevant period. The costs consequences of Part 36 offers are significant and specialist advice is important before making or responding to one.
What is QOCS?
Qualified one-way costs shifting (QOCS) is a costs protection regime that applies to personal injury claims. Under QOCS, a claimant in a personal injury case is generally protected from having to pay the defendant's costs, even if they lose. The defendant can only enforce a costs order against the claimant up to the value of any damages and interest awarded. QOCS protection can be lost in certain circumstances, including where the claim is struck out as disclosing no reasonable grounds, where the claim is found to be fundamentally dishonest, or where the claimant fails to beat a Part 36 offer (though even then the exposure is limited to damages received). Understanding when QOCS applies and when it can be lost is essential in personal injury litigation.
Who pays costs if I lose?
The general rule in civil litigation in England and Wales is that the losing party pays the winning party's costs. This is known as the "loser pays" principle or the "English rule," and is set out in CPR 44.2. However, the court has a broad discretion to depart from this general rule and can make various different costs orders depending on the circumstances. The court can order costs on the standard or indemnity basis, can make issue-based costs orders, can order costs up to or from a particular date, or can make no order as to costs. QOCS provides an important exception for personal injury claimants. A costs lawyer can advise on the likely costs consequences of winning or losing at any stage of proceedings.
When should I get costs advice?
Ideally, costs advice should be sought at the earliest stage of litigation, not after the event when a costs order has already been made. Early advice can help with understanding the potential costs exposure before commencing or defending proceedings, advising on litigation funding and costs insurance, making or responding to Part 36 offers, preparing costs budgets, and planning costs strategy. Many solicitors find it helpful to involve a costs lawyer at the outset of significant litigation, so that costs considerations inform the litigation strategy from the beginning rather than being an afterthought.
Related Services
Need specialist costs advice?
Get quotes from qualified costs lawyers who can advise on Part 36, QOCS, costs orders, and litigation strategy.