How to prevent defendants from being surprised by high costs liabilities

Offering comprehensive and objective costs advice can prevent defendants being surprised by high costs liabilities, says Murray Heining in his latest article in the New Law Journal.

The amounts of costs claimed after a successful claim often come as a surprise to defendants because the opponent’s bill is significantly higher than they expected it would be. Sometimes they are the authors of their own misfortune and are the cause. This is particularly so where they have little knowledge of the law and litigation procedures. Even where the defendant is experienced in litigation processes reasons for high levels of costs are often not understood.

Costs lawyers are rarely instructed on their behalf before the damage has been done. Not infrequently, defendants are absolutely right to be shocked at the costs claims delivered—sadly, all too often claims are overstated with little or no regard as to what may reasonably be claimed.

Expect the unexpected

It is open to any litigant to bring or defend litigation. When the case or defence is reasonably arguable, they should not be criticised for so doing. However, if the claim or defence is weak (and assuming proper legal advice on merits), defendants should not be disappointed if they face a large bill because of the costs generated in fighting them. Mostly defendants are given robust legal advice that enables them to make informed decisions as to whether to bring or defend claims. Sometimes that advice could be more robust, particularly where defendants have strongly held opinions.

Defendants do themselves no favour when they fail to restrict the claims and defences to areas where there are real merits. Heads of claim and defences that fail all add to the expense of litigation. Failures to comply with protocols, rules and directions increase costs significantly, as do delays.

Time for a challenge?

I do wonder how long it will be before defendants challenge these failings. The expense to a defendant of the litigation itself is often as important, if not more important, than the substance of the litigation. Costs should not, but do frequently, exceed the value of a claim. This is a subject that needs to be addressed more effectively by solicitors.

Many fee earners are not competent to advise on costs. Fee-earners often say “I hate costs” or “I know nothing about costs”. Costs are a specialist subject requiring specialist advice from costs lawyers, who should be brought into litigation as part of the litigation team at an early stage and not when a case has concluded as a damage limitation exercise.

They are skilled at assessing own client and opponent costs. Their input can ensure that clients are given quality costs-based risk advice enabling clients to make informed decisions. The client who ignores such advice then has no one else to blame but himself if his eventual costs exposure is high.

Part 36 offers and the costs implications of rejecting them is another area where advice to defendants could be better. Whilst clients receive general advice mentioning the risk of an order for indemnity basis costs, it rarely spells out the implications of costs being payable on the indemnity basis, particularly the significance of being unable to challenge costs on the basis of proportionality.

While defendants are often right to be shocked at the levels of costs they face, there are occasions when they have only themselves to blame. Their solicitors could, in my view, often ensure that costs advice is more comprehensive and objective.

See the New Law Journal for the full article including working example.

 

Murray Heining is chairman of the Association of Costs Lawyers. This article was first published in full in the New Law Journal on 15 November 2013.

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