What is a Costs Order and How Can It Affect You?
Costs orders play a critical role in litigation, ensuring that the successful party is compensated for their legal expenses. However, enforcing these orders can often be challenging, especially when the losing party fails to comply. In this article, our lawyers will explore the strategies for enforcing cost orders, the types of cost orders, and the legal consequences of non-payment within the jurisdiction of England and Wales.
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Different Types of Cost Orders in Litigation
A costs order is a court decision requiring one party to pay the legal costs of another party. These orders are common in civil litigation, and their primary purpose is to reimburse the successful party for their legal expenses.
- Standard Costs Orders: Cover costs that are reasonable and proportionate to the issues in the claim. Typically, this can mean recovering between 50-70% of the actual legal costs incurred. For example, if your legal costs amount to £10,000, you might recover £5,000 to £7,000 on a standard basis.
- Indemnity Costs Orders: Cover all costs except those that are unreasonably incurred, often resulting in a higher recovery rate, usually 70% or more. For instance, if your legal costs are £10,000, you might recover £7,000 or more under an indemnity costs order.
- Interim Costs Orders: Require payment of costs before the final resolution of the case. These are often used to cover costs up to a certain point in the litigation process.
- Wasted Costs Orders: Imposed on legal representatives for costs incurred due to their improper conduct. For example, if a solicitor’s negligence causes unnecessary costs, the court can order them to pay those costs.
- Fixed Costs Orders: Specify a fixed amount of costs to be paid. These are commonly used in simpler or lower-value cases, such as those on the small claims track (claims under £10,000) and the fast track (claims up to £25,000). From October 2023, fixed costs rules have been extended to claims under £100,000, covering intermediate track cases as well. You can read one of our recent articles on the extension of the fixed costs regime here. For a small claims track case for example, the court may order fixed costs of £300 for a successful claim.
Steps to Enforce a Costs Order
Enforcing a cost order involves several steps to ensure compliance and recovery of the awarded costs.
Obtain a Final Costs Certificate
A Final Costs Certificate is essential for enforcement and is obtained through one of two processes:
- Summary Assessment: In simpler cases or interim hearings, the judge may assess the costs immediately at the end of the hearing. This is typically done for shorter hearings and where the costs are not excessively high.
- Detailed Assessment: For more complex cases or when costs are disputed, the court will order a detailed assessment. This involves the winning party preparing a detailed Bill of Costs, which is then reviewed by a costs judge at a separate hearing. The judge will scrutinise the costs and determine the appropriate amount to be awarded.
Process for Detailed Assessment
If your costs are not summarily assessed at the hearing or agreed, then you will need to start detailed assessment so that the Court can assess the amount of costs you are entitled to. The requires additional steps to obtain a costs certificate which you can enforce. You cannot enforce a costs order until the Court has assessed the costs and provided a final costs certificate.
The steps involved in an application for detailed assessment include:
- Prepare a Bill of Costs: The winning party itemises all costs incurred in a detailed document. You must use this Bill of Costs Template to set out the costs you are claiming, and it must be served within 3 months of the order granting costs in your favour to be assessed.
- Serve the Bill of Costs: The Bill is served on the losing party, who may dispute certain items within 21 days by filing Points of Dispute (using Costs Precedent G).
- Applying for a Detailed Assessment Hearing: You will need to apply to the Court to request a Court hearing using Form N252 and pay the Court fee.
- Detailed Assessment Hearing: A costs judge reviews the Bill and objections, then determines the final amount. If the costs claimed are less than £75,000 the costs will be assessed by the judge on paper but if they are more than £75,000 it will be assessed at a hearing.
- Obtain the Final Costs Certificate: Once the judge approves the costs, the court issues a Final Costs Certificate, formalising the amount to be paid. This is done through the Senior Courts Costs Office (SCCO).
Determining the Debtor’s Assets for Cost Recovery
It is important to assess the debtor’s assets at the earliest stage to determine the best enforcement method. This will involve checking whether they possess sufficient assets to satisfy the costs order. An asset tracer report can help identify hidden or unknown assets.
Effective Methods to Enforce a Costs Order
Depending on the debtor’s financial circumstances and asset position, you can apply for various enforcement proceedings:
- Writ of Control: Authorises enforcement agents to take control of the debtor’s goods. You can apply for a writ of control using Form N323.
- Charging Order: Secures the debt against the debtor’s property. Apply using Form N379.
- Third Party Debt Order: Redirects funds from the debtor’s bank accounts to satisfy the debt. You can apply using Form N349.
- Attachment of Earnings Order: Deductions from the debtor’s salary to pay the debt. Apply using Form N337.
- Unless Order: Compels the debtor to comply with the costs order by a certain date or face severe consequences such as dismissal of their claim. For example, if a defendant fails to pay costs by the specified date, the court may strike out their defence.
- Debarring Order: Prevents the debtor from taking further steps in the litigation until the costs order is satisfied. This can mean the debtor is barred from presenting further evidence or making further claims until they comply with the costs order. You can apply for a debarring order in ongoing Court proceedings using Form N244.
For more information or assistance with enforcing a costs order, contact our experienced team at Go Legal for a Free Consultation at 0207 459 4037 or via our online booking form.
Using Insolvency Proceedings to Enforce a Costs Order
If the debtor lacks sufficient assets or repeatedly fails to comply, you can also initiate insolvency proceedings such as bankruptcy (for individuals) or winding-up (for companies). Note that bankruptcy is only an option if the costs order obtained exceeds £5,000. You should only seek to enforce the debt once a final cost certificate has been obtained (see further above).
Bankruptcy Petition (for individuals):
- Apply for Bankruptcy: If the debtor owes more than £5,000, you can file a bankruptcy petition using Form 6.27.
- Serve the Petition: Serve the petition on the debtor.
- Bankruptcy Hearing: The court will hold a hearing to determine if a bankruptcy order should be made. If granted, the debtor’s assets will be distributed to satisfy the debts, including the costs order.
Winding-Up Petition (for companies):
- Apply for Winding-Up: If the debtor is a company and owes more than £750, you can file a winding-up petition using Form 4.2.
- Serve the Petition: Serve the petition on the company.
- Winding-Up Hearing: The court will hold a hearing to decide whether to wind up the company. If granted, the company’s assets will be liquidated to pay off its debts, including the costs order.
Consequences of Ignoring a Costs Order
Non-compliance with a costs order can lead to severe legal consequences, including:
- Stay of Proceedings: Courts can stay ongoing proceedings until previous costs orders are satisfied. For example, in Changizi v Mayes (see below), the High Court stayed further litigation until previous costs were paid.
- Contempt of Court: Persistent non-payment can be treated as contempt of court, potentially leading to fines or imprisonment.
- Interest on Unpaid Costs: Interest accrues on unpaid costs from the date of the order, increasing the debtor’s financial liability.
- Additional Costs: Debtors may incur additional costs for enforcement actions taken against them.
How Courts Handle Non-Payment of Costs Orders
Understanding relevant case law is essential for enforcing costs orders but each case will be determined on its own merits and facts, and the Court has wide discretion when it comes to cost orders, and the debtor’s financial circumstances and assets will assist to guide which enforcement method would be the most suitable.
| Case | Facts | Outcome & Key Takeaways |
| Changizi v Mayes [2024] EWHC Ch 6 | Sharas Changizi repeatedly failed to pay costs orders in litigation regarding his late father’s estate. He attempted further litigation without settling previous costs. | The court stayed Sharas’ proceedings until all outstanding costs were paid, emphasising the court’s power to prevent abuse of process and ensure fairness. “It would be unjust and unfair for his claim to proceed without those costs being paid.” |
| Dymocks Franchise Systems v Todd [2004] UKPC 39 | The franchisor sought costs on an indemnity basis after succeeding in litigation against the franchisee. | The Privy Council awarded indemnity costs, setting out principles for awarding such costs when the opponent’s conduct was unreasonable. “Indemnity costs are appropriate where the conduct of the losing party is unreasonable to a high degree.“ |
| Re Elgindata Ltd [1993] BCLC 1326 | The minority shareholder sought indemnity costs after prolonged litigation. | The court awarded indemnity costs, emphasising that such costs can be awarded when the opposing party’s behaviour justifies it. “The behaviour of the defendant was such that only an indemnity costs order would be appropriate.“ |
| Michael Wilson & Partners Ltd v Sinclair [2017] EWHC 2424 (QB) | The defendant failed to pay costs awarded by the court, leading the claimant to seek enforcement through an unless order. | The court issued an unless order, warning that the defendant’s defence would be struck out if the costs were not paid by a specified date. “The court stressed the seriousness of the matter and the need for parties to adhere to their financial obligations.” |
FAQs – Enforcing Costs Orders
Q: What happens if I ignore a costs order? Ignoring a costs order can result in enforcement actions, additional costs, and potentially being held in contempt of court.
Q: Can costs orders be appealed? Yes, costs orders can be appealed, but the appeal must usually be made within 21 days of the order being issued.
Q: How long do I have to enforce a costs order? The limitation period for enforcing a costs order is generally six years from the date of the order.
Q: Can I enforce a costs order against a company in liquidation? Enforcement against a company in liquidation is possible but requires navigating insolvency laws. Consulting a legal expert is recommended.
Q: What is a detailed assessment of costs? A detailed assessment is a court process to determine the amount of legal costs payable by one party to another. It involves preparing a detailed Bill of Costs, serving it to the other party, and potentially a hearing before a costs judge.
Q: What forms are needed for a Bill of Costs? To prepare a Bill of Costs, you need to use Form N260 for summary assessment or prepare a detailed Bill for detailed assessment (see further above).
Q: What if the debtor hides their assets? An asset tracer report can be used to identify hidden or unknown assets, helping in the enforcement of a costs order.
Q: What are the steps to file a bankruptcy petition? To file a bankruptcy petition, you need to apply using Form 6.27, serve the petition on the debtor, and attend a bankruptcy hearing where the court will decide if a bankruptcy order should be made.
Q: How can I apply for a winding-up petition against a company? To apply for a winding-up petition, you need to file Form 4.2, serve the petition on the company, and attend a winding-up hearing where the court will decide if the company should be wound up.
Winning Approach to Enforcement of Cost Orders
Enforcing a costs order requires strategic planning and a thorough understanding of the legal mechanisms available. Failure to comply with costs orders can have serious legal repercussions, including additional costs, interest, and enforcement actions.
Our lawyers have an excellent track record for enforcing court orders and obtaining payment from £50,000 to claims of up to £15m. We pride ourselves on our client-centric and results-driven approach, tailoring our litigation strategies and funding solutions to meet the unique commercial needs of each client.
Our enforcement lawyers are recognised among the best lawyers in England & Wales, and have regularly been asked and featured to write authoritative articles in the Financial Times, Law Society and LexisNexis and have been quoted in City AM, the New Law Journal, Law Society Gazette and Litigation Futures.
Our specialist lawyers are Partner-led and provide straightforward, honest and strategic advice. We also have a strong legal network of solicitors, barristers and forensic accountant experts to call upon and advise you throughout to ensure you get compensation for the loss suffered.
Our unique approach to the enforcement of cost orders means that we will:
- Arrange a Free Consultation with you & a qualified lawyer to discuss your claim
- Arrange a WhatsApp group with you & your legal team
- Investigate the merits of your claim & create a strategy for success
- Send documents easily through our secure client portal, Go Transfer
- Advise you on any judgments & tactics that have proved successful
- Assess the amount you may be able to recover
- 24/7 chat feature with a qualified lawyer
- Fixed fees and “no win no fee” arrangements so that you have peace of mind
- Work hard to pursue and defend your interests.
Our enforcement solicitors offer regulated, independent & confidential legal advice and are dedicated members of the Professional Negligence Lawyers Association, the London Solicitors’ Litigation Association, the Association of Cost Lawyers, the Insolvency Lawyers Association and the Commercial Litigation Association.
Fixed Fees & Flexible Funding Options
We provide flexible funding options including fixed fees and ‘no win no fee’ arrangements to pursue your enforcement claim.
For expert legal advice and assistance, contact our expert lawyers on 0207 459 4037 or through our online booking form for a Free Consultation today. Our team is ready to help you navigate the complexities of enforcing costs orders and loss you have suffered.
