The two main principles when it comes to deciding which party should pay the costs of an application or of the whole proceedings are:
- The costs payable by one party to another are in the discretion of the court; and
- The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party.
A successful party in normal circumstances is entitled to have an order for costs against the loser, with limited exceptions. Exceptions include cases where a successful claimant recovers no more than nominal damages, or where the successful party acted improperly or unreasonably or where the issue on which a party succeeded is raised for the first time by amendment at a very late stage. In exercising its discretion on costs the court is required to have regard to all the circumstances, and in particular to the following matters:
- The extent to which the parties followed any 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; and
- Any admissible offer to settle.
Interim costs orders
If an order makes no reference 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 the court’s view of who won the interim application. Case management hearings usually result in orders for costs in the case, as there is no ‘winner.’ An adversarial application won by the claimant will usually result in an order for ‘claimant’s costs.’ Applications made without notice, and interim injunctions granted on the basis of the balance of convenience, usually result in ‘costs reserved.
Final costs orders
There are seven possible variations from the main rule that the unsuccessful party should pay the whole of the successful party’s costs. These variations are:
- That a party mast pay only a proportion of another party’s costs;
- That a party must pay a specified amount in respect of the other side’s costs;
- That a party must pay costs from or until a certain day only;
- That a party must pay costs incurred before proceedings have begun;
- That a party must pay costs relating only to certain steps taken in the proceedings;
- That a party must pay costs relating only to a certain distinct part of the proceedings, although an order of this type can only be made if an order in either of the forms set out at bullets points 1 and 3 above would not be practicable; and
- That a party must pay interest on costs from or until a certain date, including a date before judgment.
Order for costs in cases involving multiple parties
Where the claimant sues two defendants and is successful against one defendant but not the other, if costs were to follow the event, the unsuccessful defendant would have to pay the claimant’s costs in respect of the claim against the unsuccessful defendant and the claimant would have to pay the costs incurred in respect of the claim against the successful defendant. However, if it was reasonable to join both defendants to the action, the court in its discretion may make a special order enabling the claimant to recover the costs paid to the successful defendant or for them to be paid by the unsuccessful defendant direct to the successful defendant
This is derived from Bullock v London General Omnibus Co  1 KB 264, CA. The claimant is ordered to pay the costs of the successful defendant and once paid the claimant is then allowed to recover these costs from the unsuccessful defendant in addition to the claimant’s costs incurred in respect of the claim against the unsuccessful defendant.
This is derived from Sanderson v Blyth Theatre Co  2 KB 533, CA. The unsuccessful defendant is ordered to pay the successful defendant’s costs direct to the successful defendant. Also, the unsuccessful defendant will have to pay the claimant’s costs incurred in respect of the claim against the unsuccessful defendant. This order is appropriate where the claimant is publicly funded or insolvent as the order will ensure that the successful defendant is able to recover his or her costs.
Quantification of costs
This can be done in a number of ways:
Agreement between the parties
Agreement between the parties, as to the costs payable by one party to another, avoids the time and expense involved in the assessment of costs. It is not possible to agree costs in proceedings brought on behalf of a person under disability without the direction of the court.
Some items of expenditure, particularly solicitor’s charges in certain proceedings and on entering default judgments, are recoverable only as fixed costs.
This involves the court determining the amount payable by way of costs immediately at the end of a hearing, usually on a relatively rough and ready basis.
A detailed assessment of costs involves leaving the quantification of costs to a costs officer, who will consider the amount to be allowed at an assessment hearing at some stage in the future after the parties have been given the opportunity of setting out the amount claimed and points of dispute in writing.