To the Victor go the Spoils – But How Soon Can Legal Costs be Paid?

In the course of the COVID-19 pandemic, as well as generally, litigants can experience significant delays between being awarded legal costs, and actually having any of the costs paid.

In this article, we look at the most recent legislation and rules relating to costs-awards in the Superior Courts, as well as options in those Courts to seek expedited or ‘up front’ payments of costs to mitigate the effects of such delays.

The normal rule - costs follow the event

Litigants and litigators are familiar with the principle that, generally, legal costs ‘follow the event’ - the ‘event’ being success in the whole, or part of, the proceedings^[1].

Power to award costs

Since October 2019, section 168(1)(a) of the Legal Services Regulation Act 2015 (the 2015 Act) has stated that the courts may order the payment by one party of the costs of another party to proceedings “…at any stage in, and from time to time during, those proceedings …”

In the case of the Superior Courts, Order 99, rule 2, of the Rules of the Superior Courts 1986 (RSC), as amended^[2], reflects this discretionary power.

Costs of interlocutory applications

The RSC also particularly provide for when the courts determine interlocutory applications (being trials of issues within proceedings, such as motions for discovery). In such cases, the Superior Courts must “…make an award of costs save where it is not possible justly to adjudicate upon liability for costs on the basis of the interlocutory application”^[3].

Reserved costs and costs in the cause

For interlocutory applications, the courts will often order that the costs of these be ‘reserved’ or made ‘costs in the cause’. The former means that the trial court will later decide who should bear the costs of the earlier interlocutory application. The latter means that whoever wins the overall proceedings will also be awarded the costs of the interlocutory application concerned. In both cases, therefore, there is something of a ‘lottery’ in having costs reserved or made costs in the cause, rather than being awarded one way or the other upon determination of the application.

Costs on conclusion of the proceedings, and ensuing steps

What normally happens is that, at the end of proceedings, the parties address the court on who should be ordered to pay the legal costs of the winning party, and the court then makes an order. The order usually provides that Party A pay Party B his or her costs, and that the costs should be independently adjudicated upon when the parties fail to agree them.

What follows is usually quite a drawn-out process of sending a bill of costs, and attempting to review and agree it with the other side, whether through solicitors and/or legal costs accountants. Where agreement cannot be reached, the parties must then prepare for and proceed to an adjudication hearing before the Office of the Legal Costs Adjudicators. Following the hearing, a payment of the adjudicated-upon and certified bill will then be made by Party A.

Can payment or part-payment of costs be expedited or required ‘up front’?

Given the potential for delay in the process of costs-recovery, it may well be attractive to apply for court orders requiring the immediate payment of costs, or an amount in respect of the costs, at an earlier juncture.

Legislation

In that regard, RSC Order 99, rules 7(1) and 2(5) respectively provide that the court may additionally make orders requiring:

“ … the costs to be paid forthwith”

or

“… payment of an amount in respect of costs forthwith” (emphasis added).

In summary, therefore, the court can:

1. Make orders for costs in, or during, proceedings, and in particular upon determining any interlocutory application, as well as upon their conclusion.

2. Require an immediate payment of the costs, or an immediate payment in respect of the costs, it has ordered to be paid.

So if interlocutory or substantive proceedings are heard and determined in a court, it is open to the winning party not only to apply for his or her costs, but also to apply for an order requiring that the costs, or a payment in respect of the costs, be paid forthwith. This has been done successfully in practice.

If the winning party does not wish to go that far, it is also open to him or her following judgment-delivery at the conclusion of proceedings to apply for his or her costs, and simply to ask for ‘liberty to apply’ to the court to make further orders in relation to costs at a later date, should that be necessary.

The Complementary High Court Practice Direction

Additionally, in the High Court, Practice Direction HC71 has been in operation since April 2017. This complements the RSC provisions in relation to payments being made on account of costs.

In Practice Direction HC71, the President of the High Court has stated as follows:

“In view of long delays in the taxation of costs, the attention of practitioners is drawn to the provisions of Order 99, rule 1B (5).

I direct that in all cases where there is no dispute as to the liability for the payment of costs and in any other case which a judge thinks appropriate, an order may be made directing payment of a reasonable sum on account of costs within such period as may be specified by the judge pending the taxation of such costs. Such orders may be made on an undertaking being given by the solicitor for the successful party that, in the event of taxation realising a smaller sum than that directed to be paid on account, such overpayment will be repaid.”

In addition to RSC Order 99, rule 2(5), therefore, Practice Direction HC71 has also been relied on by litigants in the High Court who seek early payments on account of costs, leaving over the remainder to be agreed or adjudicated upon in due course.

The case law

Prior to the coming into operation in late 2019 of section 168 of the 2015 Act and the amended provisions of Order 99 referred to above, the High Court considered the former provisions of the RSC dealing with ‘up front’ payments of, or in respect of, costs, and also those of Practice Direction HC71.

That case law^[4] established the following:

1. ‘Up front’ payments can indeed be ordered by the Court under the RSC and Practice Direction HC71.

2. It is not the function, and it would be wrong of, the court to indicate what fee or what individual elements of a bill might be allowable at the end of the day. The court will instead order payment of a reasonably substantial global sum in respect of costs, while at the same time avoiding the risk of a serious overpayment.

3. Presenting evidence of delays generally, or a particular delay, in the adjudication of costs process, may not be a pre-requisite to the Court ordering an ‘up front’ payment in respect of costs. (Particular judges may take a different view, and evidence of some delay and/or lack of culpability for same is therefore desirable).

4. A payment on account of a costs-award can be ordered at any stage of the proceedings.

5. An application for a payment on account of a costs award cannot be made after a court has made all final orders in the proceedings, and therefore become functus officio – unless one of the final orders originally made was one granting future ‘liberty to apply’.

In practice

Accordingly, a litigant might prudently be advised to apply for an order for costs, together also with an order requiring an immediate payment on account of those costs at the same time, or be advised at least to seek future liberty to apply for further orders in relation to costs.