After the Lawsuit: Who Has to Pay Whom, and How Much?
Potential parties to a lawsuit are often concerned with the process and outcome of litigation. However, one important aspect to litigation that should not be overlooked is the cost of the lawsuit itself. This article will inform you of the payment of costs after the outcome of litigation.
What Constitutes Costs?
According to Order 59 rule 1 of the Rules of Court, “costs” include fees, charges, disbursements, expenses and remuneration. This includes a wide range of monies payable such as:
- Hearing fees
- Filing fees for court papers
- Professional fees charged by your lawyer
- Disbursements for miscellaneous expenses such as photocopying charges
What are the Different Types of Costs?
The costs to be paid after a lawsuit can first be distinguished by the recipient of the costs. When costs are paid from one litigant to the other, these costs are known as party-and-party (“P&P”) costs. As clients must also pay costs to their own solicitors for engaging their legal services, these costs are known as solicitor-and-client (“S&C”) costs.
Party-and-Party Costs: Who Will Have to Pay Whom?
The cost order that the court issues determines which party should pay P&P costs. There are several costs orders that can be made, including:
- Costs in the cause
- Plaintiff’s costs or defendant’s costs
- Costs in any event
- Costs thrown away
- No orders as to costs
Costs in the cause
The general principle in litigation is “costs follow the event”, which means that the losing party is generally made to pay P&P costs. If the court intends for costs to follow the event, the court will then issue a “costs in the cause” cost order, which requires the losing party to pay P&P costs to the winning party.
The winning party will be able to use this amount of P&P costs received to offset (either partially or fully) the S&C costs it has incurred from engaging its lawyer. As a whole, the losing party will be liable for the P&P costs, on top of the S&C costs owing to its own lawyer.
However, this does not always mean that as the winning party, you need not pay any legal fees to your lawyer out of your own pocket. Traditionally, the losing party is commonly ordered to pay only a fraction (commonly two-thirds) of the actual costs incurred by the winning party. Therefore, although you are the winning party, you will still be likely to have to make up the difference owed in costs to your lawyer.
As any award of costs is at the discretion of the court, there are exceptions where the winning party is not awarded costs. This could happen where, for instance, where the winning party has acted improperly or unreasonably, or where the court only awards the winning party nominal damages.
Plaintiff’s costs / Defendant’s costs
Another cost order that is commonly made is plaintiff’s costs or defendant’s costs. These costs are only awarded to the named party only if it succeeds in the proceedings. Conversely, if the named party is the losing party, it need not pay the costs of the other party.
For example, if the court has ordered defendant’s costs, the plaintiff must pay P&P costs to the defendant if the defendant wins the case. However, if the defendant loses the case, the defendant need not pay P&P costs to the plaintiff.
Costs in any event
Where the court awards costs in any event to any party, this means that the costs for an interlocutory matter will be awarded to that party regardless of the outcome of the action.
Costs thrown away
The court may also issue costs thrown away to compensate the party whose time, effort and expenses properly incurred in doing a certain action(s) were “wasted” because of something the other party did later.
For example, if the amendment of your pleading causes the other party to amend its pleading and this leads to the wastage of that party’s costs in preparing its pleading, the court may award that party costs thrown away.
Costs thrown away may also be awarded to the party which had to unnecessarily incur costs as a result of the other party not following proper court procedure.
No orders as to costs
The court may also make no orders as to costs.
This means that P&P costs are not payable from one party to the other and each party should bear their own S&C costs.
How Do the Courts Decide on the Amount of Party-and-Party Costs to be Paid?
There are 2 main ways of calculating P&P costs: fixed costs and scaled costs. Interest is also payable on costs.
Fixed costs are a defined sum of money that the court may order one party to pay to the other. The court will order fixed costs when, in the court’s opinion, it is appropriate to do so. Some examples of this include:
- Where fixed costs would assist in avoiding the expense, delay and aggravation involved in a protracted litigation arising out of taxation; or
- Where a taxing registrar would not be in a better position to assess the costs.
To help the court decide how much fixed costs to award, the parties will present arguments on the amount of fixed costs they think should be awarded. Some factors that they may use to back up their figures include the seniority of the lawyer(s) involved in the matter, the nature of the work done, and whether certain work done was necessary to further a party’s position in the trial.
Parties also have to follow the costs stated in Appendix 2 to Order 59 of the Rules of Court when calculating their figures. If Appendix 2 provides the amount of costs to be awarded in a particular situation, parties cannot come up with their own figures but have to rely on those in Appendix 2.
On the other hand, taxed costs are ordered so that the payable costs may be determined by a taxing registrar in a taxation hearing. The taxation of costs may be based on the standard basis or the indemnity basis. Fixed costs can also be taxed if the party paying P&P costs thinks the amount it has to pay to the other party is too high.
Finally, interest is payable on costs. The current interest rate is 5.33% and interest will commence from the following dates until the party that has to pay P&P costs has made payment:
|Type of costs||Date of commencement of interest|
|Taxed costs||Date of taxation|
|Costs fixed by the court||Date of order|
|Costs agreed between the parties||Date of agreement|
|Costs under Appendix 2 to Order 59 of the Rules of Court||Date of judgment|
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