Legal costs in civil cases: who pays?

Where a dispute cannot be resolved outside of court, the case will probably be decided by a judge. However, court action can be very costly for both sides, and a common question for the parties is: who pays for the costs of the case?

What’s the general rule?

The general rule is that the loser pays the winner’s costs. In practice, the court has flexibility as to when one party may be responsible in whole or in part for the other party’s costs.

There are also exceptions to the general rule. These include cases where a successful claimant recovers no more than nominal damages; or where the winner acted improperly or unreasonably during proceedings. In exercising its discretion on costs, the court is required to have regard to all the circumstances and particularly to the following matters:

  • The extent to which the parties followed the applicable pre-action protocol;
  • The extent to which it was reasonable for the parties to raise, pursue or contest each of the allegations or issues;
  • The manner in which the parties pursued or defended the action or particular allegations or issues;
  • Whether the successful party exaggerated the value of the claim;
  • Whether a party was only partly successful;
  • Any admissible offer to settle.

Interim costs orders

An interim application for an order or court directions can be made between the commencement of the proceedings and the final hearing. If there is no order as to costs, none are payable in respect of the proceedings to which the order relates. Usually, however, the court will make some form of order saying who will pay the costs of any interim applications. The choice of order depends on who won the interim application.

Case management hearings usually result in costs orders, as there is no ‘winner’. An adversarial application won by the claimant will usually result in an order for the claimant’s costs to be paid by the other party. Applications made without notice, and interim injunctions granted on the basis of the balance of convenience, usually result in ‘costs reserved’ and a decision as to costs will be made at a later date.

Final costs orders

Final costs orders can take a variety of forms, much depending on the conduct of proceedings by the parties. Different costs orders include:

  1. A party must pay a proportion of another party’s costs.
  2. A party must pay a specified amount in respect of the other side’s costs.

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For more information on:

  • Order for costs in cases involving multiple parties
  • Bullock order
  • Sanderson order
  • Quantification of costs
  • Summary assessment
  • Detailed assessment