Costs - Inter-partes costs orders (interim and final)

Learning Outcomes

After reading this article, you will be able to explain the purpose and operation of inter-partes costs orders in civil litigation, distinguish between interim and final costs orders, and apply the principles governing the standard and indemnity bases of assessment. You will also be able to identify the main types of interim costs orders, understand the factors influencing costs decisions, and recognise how costs orders affect litigation strategy for SQE1.

SQE1 Syllabus

For SQE1, you are required to understand the rules and practical implications of inter-partes costs orders in civil litigation. Focus your revision on:

• the distinction between interim and final inter-partes costs orders
• the standard and indemnity bases for assessment of costs
• the types of interim costs orders and their effect
• the factors the court considers when making costs orders under CPR 44
• the impact of costs orders on litigation conduct and settlement

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the general rule regarding which party pays costs at the conclusion of civil proceedings?
2. Name two types of interim costs orders a court may make during litigation.
3. What is the main difference between the standard and indemnity bases of assessment?
4. How can a party’s conduct before and during proceedings affect the court’s decision on costs?

Introduction

Inter-partes costs orders are court decisions that determine which party must pay legal costs in civil litigation. These orders are central to the financial consequences of litigation and can be made at various stages, including both interim applications and at the final conclusion of a case. Understanding how these orders work, and the principles guiding them, is essential for effective litigation strategy and for SQE1.

Inter-partes Costs Orders: Overview

Inter-partes costs orders allocate legal costs between the parties to a dispute. The court has wide discretion under the Civil Procedure Rules (CPR), particularly Part 44, to decide who should pay, how much, and on what basis. Costs orders can be made at interim stages (before trial) or as final orders (after judgment).

Key Term: inter-partes costs order
An order by the court requiring one party to pay all or part of another party’s legal costs in civil proceedings.

Interim Inter-partes Costs Orders

Interim costs orders are made during the course of litigation, usually following interim applications (such as for summary judgment, extensions of time, or disclosure). The court decides who should pay the costs of the application, often immediately after the hearing.

Types of Interim Costs Orders

The main types of interim costs orders are:

• Costs in the case: The costs of the application are reserved until the end of the case. The party who ultimately wins the case will usually recover these costs.
• Costs in any event: The successful party on the application is awarded their costs of the application, regardless of the final outcome of the case.
• No order as to costs: Each party bears their own costs for the application.
• Costs reserved: The decision on costs is postponed for later determination.

Key Term: costs in the case
An order that postpones the decision on who pays the costs of an interim application until the conclusion of the proceedings.

Key Term: costs in any event
An order that the successful party on an interim application is awarded their costs of that application, regardless of the final outcome.

Key Term: costs reserved
An order that defers the decision on costs to a later stage, often to be decided with the final costs order.

Key Term: no order as to costs
An order that each party must bear their own costs for the interim application, with no reimbursement from the other side.

Factors Affecting Interim Costs Orders

When deciding interim costs, the court considers:

• The merits of the application
• The conduct of the parties (including cooperation and compliance)
• Whether reasonable attempts were made to settle the issue
• The interests of justice and proportionality

Worked Example 1.1

A claimant applies for specific disclosure, and the defendant opposes the application without good reason. The court grants the application. What interim costs order is likely?

Answer: The court is likely to order "costs in any event" in favour of the claimant, as the defendant unreasonably opposed the application.

Final Inter-partes Costs Orders

At the end of proceedings, the court makes a final costs order deciding who pays the overall legal costs. The general rule is that the unsuccessful party pays the successful party’s costs, but the court has discretion to make a different order if appropriate.

Key Term: final costs order
An order made at the conclusion of proceedings determining which party is responsible for the legal costs of the case as a whole.

Standard and Indemnity Bases of Assessment

Costs can be assessed on either the standard or indemnity basis:

Key Term: standard basis
Costs are allowed only if they are reasonable and proportionate to the matters in issue. Any doubt is resolved in favour of the paying party.

Key Term: indemnity basis
Costs are allowed if they are reasonable, with no requirement for proportionality. Any doubt is resolved in favour of the receiving party.

Factors Affecting Final Costs Orders

The court considers several factors under CPR 44.2(4)-(5):

• The conduct of the parties before and during proceedings (including compliance with pre-action protocols)
• Whether a party has succeeded on part of their case, even if not overall
• Any admissible offer to settle (including Part 36 offers)
• The value and importance of the claim
• The complexity of the issues
• The skill, effort, and time involved

Worked Example 1.2

The defendant makes a reasonable Part 36 offer to settle for £20,000, but the claimant rejects it and is awarded £18,000 at trial. What is the likely costs consequence?

Answer: The claimant will likely be ordered to pay the defendant’s costs from the date the relevant period for accepting the Part 36 offer expired, as the claimant failed to obtain a better result at trial.

Impact of Conduct and Settlement Offers

The court may depart from the general rule on costs if a party has acted unreasonably, failed to comply with rules, or refused to engage in settlement or ADR without good reason. Part 36 offers have specific costs consequences and must be considered when advising clients.

Exam Warning

If a party refuses to mediate or ignores reasonable settlement offers, the court may penalise them in costs, even if they win on the main issues. Always advise clients to act reasonably and keep records of settlement discussions.

Summary Table: Main Types of Costs Orders

Key Point Checklist

This article has covered the following key knowledge points:

• Inter-partes costs orders allocate legal costs between parties in civil litigation.
• Interim costs orders are made during proceedings, often after applications, and include "costs in the case," "costs in any event," "costs reserved," and "no order as to costs."
• Final costs orders are made at the end of proceedings and usually require the losing party to pay the winner’s costs, subject to the court’s discretion.
• Costs are assessed on the standard or indemnity basis, with different rules for proportionality and resolving doubt.
• The court considers conduct, settlement offers, and compliance with rules when making costs orders.
• Part 36 offers can have significant costs consequences if not accepted.
• Acting reasonably and complying with procedural rules reduces the risk of adverse costs orders.

Key Terms and Concepts

• inter-partes costs order
• costs in the case
• costs in any event
• costs reserved
• no order as to costs
• final costs order
• standard basis
• indemnity basis