Litigation costs: the hidden truth

By Erica Simpson

Legal costs are coming under close scrutiny by the court. A party to a dispute must put itself in the best possible position to maximise costs recovery. An indemnity may be included in a contract but this doesn’t always result in full costs recovery.

Managing costs is an increasingly important aspect of any dispute. For multi-track cases, with a value of less than £10m, parties are now required to submit a costs budget detailing estimated costs for each step in the litigation process and, where possible, to agree that budget with the other side prior to attending the first Case Management Conference. It is therefore imperative that parties work with the other side, and the court, to actively manage cases in a way that deals with costs effectively.

While the court will usually order the loser to pay the winner’s costs, the amount of costs awarded cannot be guaranteed. The court has the power to assess the proportionality and reasonableness of costs incurred. The Jackson Reforms implemented in April 2013 changed the overriding objective of the Civil Procedure Rules to require parties to conduct litigation ‘at proportionate cost’. As a result, we have seen an increasing trend where judges do not allow disproportionate and unreasonable costs to be recovered…

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