Apportioning Costs by Sponsor bSquared

Apportioning Costs by Sponsor bSquared

Apportioning Costs
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The general rule for civil litigation costs is “the loser pays”. That is to say, the losing party is liable for all of the winning party’s costs, subject to the usual test of reasonableness and proportionality. However, there are certain circumstances in which the costs award does not follow the general rule and issues can arise as to what costs are recoverable. Specific examples include: 

 

Counter Claim

 

If a party succeeds with a counter claim, irrespective of the outcome of the original claim, they will more than likely be awarded their costs in respect of that counter claim. But what costs can be recovered?

 

The leading case is Medway Oil & Storage v Continental Contractors [1929] AC 88 in which it was held that the costs of a counter claim should be treated as if the claim stood alone and that there should be no apportionment of common costs. The practical effect of this is that when a party receives the costs of a counter claim, they are likely to be minimal as the vast majority of costs would have been incurred in the main action in any event, irrespective of whether there was a counter claim or not. 

 

However, Medway Oil did state that the Court has the power to order that common costs be apportioned but, in the absence of such an order, the scope for recovering costs of a counter claim are greatly reduced. 

 

Claimant successful against some, but not all Defendants

 

There are two leading cases which deal with what costs may be recovered when the Claimant is not successful against all Defendants. 

 

In Hay v Szterbin [2010] EWHC 1967 the Claimant was successful against the third of three Defendants. The parties agreed that costs relating specifically to the third Defendant could be recovered whereas costs relating specifically to the first and second Defendants could not. However, no agreement could be reached over common costs. The Court held that non-specific common costs could not be recovered as they did not relate solely to the third Defendant. However, in terms of specific common costs, the amount which related to the third Defendant could be divided from the amount relating to the first and second Defendants and therefore such costs were recoverable. 

 

In Jean Mary Doris Haynes v Department for Business Innovation and Skills [2014] EWHC 643 the Claimant was successful against one of eight Defendants and the Claimant recovered a sum that was approximately 10% of the overall value of the claim. The Court held that as well as the costs that specifically related to the eight Defendant, the Defendant was also liable to pay 10% of the common costs. 

 

Only some Claimants successful

 

When some Claimants are successful and others are not, the individual costs are recoverable for the successful Claimants but not recoverable for the unsuccessful ones. However, where on solicitor has acted on behalf of all Claimants what happens to common costs? This will largely be determined by the nature of the retainer between the solicitor and the Claimants. 

 

For example, in Walker v Burton [2013] EWHC 811 six Claimants instructed a firm of solicitors, with three of the Claimants paying the bills that were submitted to them. These three Claimants subsequently signed up to a CFA but other three did not. However, the Court held that the Claimants were jointly and severally liable for the whole of the solicitor’s fees and therefore the three successful Claimants were entitled to recover the entirety of the solicitor’s fees. 

 

Things to consider

 

When you are dealing with the liability for costs in scenarios such as the above, it is important to try and reach an agreement with the opposing party in respect of the precise liability for costs. For example, there may be an agreement as to what percentage of the common costs the paying party should be liable for. This can be embodied in to a consent order and will ultimately make the costs recovery process much smoother for both parties.   

 

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