Are Business Legal Costs Recoverable?

Legal disputes are an unfortunate reality of business and there are many factors to think about when considering legal action. A significant consideration for any business are the costs that you are likely incur when embroiled in business litigation. Therefore, it's important to understand how legal costs work, what you may have to pay and what you may recover.

When engaging in litigation, legal costs can quickly and significantly amount. Costs can be charged at a fixed or hourly rate. There are further court fees and disbursements that may arise throughout the progression of your case. Therefore, it's possible for large legal costs to quickly surmount, particularly in complex or high value cases.

The General Rule

The rules on costs are set out under the Civil Procedural Rules, which govern civil disputes in England & Wales. The general rule follows that an unsuccessful party will be ordered to pay the costs of a successful party. However, where the court deem it appropriate they may make another order. In practice, this is unlikely to be 100% of your costs but closer to 60-80%.

The value of your claim dictates which track your case is assigned:

• Small claims, for cases valued up to £5,000
• Fast track, for claims valued between £5,000 and £25,000
• Multi-track, for claims valued beyond £25,000

Where your claim is assigned to the small claims track, it's unlikely for parties to recover their costs. For fast track and multi-track cases, the general rule usually applies.

The factors the courts consider when making an order

The Court will have regard to all the circumstances of proceedings including but not limited to:-

• The conduct of each party – The Court may determine a party has acted reasonably or unreasonably and subsequently adjust a costs order as they see fit.
• The merits of a party’s case – Whether a party has succeeded on part of its cases, even if it has not been wholly successful.
• Any offers of settlement – Parties may propose settlement offers to conclude matters at any time and the Court may penalise a party for unreasonably rejecting a settlement offer or advancing a settlement offer which has no real prospect of success.

Therefore, even where you are successful, you may not recover your costs in full, as the Court have discretion to reduce an order for costs according to a party’s conduct.

The basis of the assessment

The court may assess costs on the standard basis or on the indemnity basis. The standard basis allows for costs that are proportionate but not disproportionate whereas for costs calculated on an indemnity, proportionality is not a factor, instead the court considers whether costs were reasonably incurred. An indemnity basis calculation is often used by the Court where they are seeking to punish a party for their conduct in proceedings.

Summary

Should you be successful in your case, the other party may be ordered to pay your legal costs. In practice this is unlikely to be your costs in full and payment will depend on the circumstances of the losing party, in particular whether they are solvent and have the funds available. You may be required to pay the other side's legal costs if you're unsuccessful in your case. If you are unsuccessful in your case, you may be required to pay the other side’s legal costs.

If you are considering legal action and require advice or guidance on legal costs, please contact our commercial team at Aticus Law who are readily available and equipped to deal with your needs.