The indemnity principle (Costs management and budgeting - Costs)- FS

Question 1

What is the Indemnity Principle in civil litigation?

Answer 1

It is the rule that the unsuccessful party pays the successful party’s legal costs, but only to the extent that the successful party has actually incurred them—no profit can be made from cost recovery.

Question 2

What is the general rule for costs under the Civil Procedure Rules?

Answer 2

The unsuccessful party is generally ordered to pay the costs of the successful party.

Question 3

What are the two bases for assessing costs in litigation?

Answer 3

1. Standard basis
2. Indemnity basis

Question 4

What proportion of costs is usually recovered under the standard basis of assessment?

Answer 4

Approximately 60% of the actual costs incurred.

Question 5

What proportion of costs is usually recovered under the indemnity basis of assessment?

Answer 5

Approximately 80% of the actual costs incurred.

Question 6

What should a solicitor advise their claimant client regarding litigation costs and risk?

Answer 6

That even if they win, they will likely recover only 60–80% of their legal fees, and if they lose, they may be liable to pay a substantial portion of the opponent’s costs.

Question 7

Can a successful party recover more than the costs they actually incurred?

Answer 7

No. Under the Indemnity Principle, a party cannot recover more than what was actually spent on legal costs.