UNIT 7: COSTS Flashcards
1
Q
When might the court produce a non-party costs order?
A
- Court has discretionary power to make an order that a non-party meets the costs (Part 46)
- Requirement: This order is exceptional; could needs to be satisfied that the non-party was a real party interested in the litigation or that they were responsible for bringing the proceedings
o EG no interest: external litigations eg family, friends, or people who have given to a fund-raising campaign and who have no interest in the outcome
o EG interest: third party funders in a more formal context may be
2
Q
What must happen before an order is made?
A
- Before an order can be made, the third party must be added as a party to the proceedings and may attend the hearing when the court determines the issue of costs. Note there is no requirement to make a finding that the non-party acted improperly before making an order.
3
Q
Who can rely on security for costs?
A
defendant, or claimant in counterclaim
who is concerned abt
* not being repaid all costs even if they successfully defend the claim
* claimants being unable or unwilling to pay costs order
4
Q
When may the court make an order for security of costs
A
- it is satisfied, having regard to all the circumstances of the case, it is just to make such an order; and
- one or more of the conditions in Part 25 applies
5
Q
What are the relevant p25 conditions?
A
- Claimant resident outside a 2005 Hague Convention State
- Claimant is an impecunious company (unable to pay)
- Claimant has taken steps to make enforcement difficult
6
Q
- Claimant resident outside a 2005 Hague Convention State
elements?
A
o D can apply for an order for security for costs where C - either individual or company - is resident outside of the jurisdiction and is not resident in a State bound by the Hague convention
o For individuals: this is where they normally and habitually live
o For companies: it is where their central control and management are located
o This condition recognises the difficulties D may experience in enforcing a costs order outside
7
Q
- Claimant is an impecunious company (unable to pay) elements?
A
o Requirement: D must establish there is reason to believe C will be unable to pay D’s costs if ordered to do so
o Evidence of the company’s financial assets and likely total costs of the litigation
8
Q
- Claimant has taken steps to make enforcement difficult elements?
A
o Requirement: D must demonstrate that C has taken steps in relation to their assets that make enforcement of a security for costs order difficult
o The court will consider the effect of any such action and not the motivation
EG an order can be made even if C is relocating to take up a new employment opportunity
failure to disclose assets may be sufficient to establish this requirement
o NB. In these circumstances, a freezing injunction may also be appropriate
9
Q
Justness factors for a security costs order
A
The court must also be satisfied that it is just to make the order and the following factors are considered important
1. The strength of the claim and the defence: the less likely the defendant is to win at trial, the less justified they are in seeking security.
2. The claimant’s ability to provide security: where the claimant has a reasonable prospect of success, the courts will be reluctant to make an order for security with which they cannot comply as the effect will be to stifle the claim.
3. The causes of the claimant’s impecuniosity: the claimant may be able to persuade the court that their poor finances are caused by or contributed to by D’s behaviour.
4. Property within the jurisdiction: where the application is made against a claimant resident outside the EU, the court is unlikely to grant security if they have sufficient assets within the jurisdiction that would be available to meet the defendant’s costs.
5. The timing of the application: the order should be applied for as soon as practicable.
10
Q
Security costs order - procedure
A
- As will all interim applications, D should write to C first and ask for security to be provided voluntarily
- If C does not provide, D should submit a notice of application to the court with a witness statement in support
o Evidence must
1. establish that a condition exists,
2. persuade the court it is just to exercise its discretion in favour of D, and
3. justify the amount sought
11
Q
What will the security costs order specify if granted?
A
o the amount of security,
o the date by which C must provide it, and
o the form it will take
* Common: C is required to make a payment to the court
12
Q
Are parties encouraged to settle?
A
The parties are encouraged to negotiate to settle the claim before the litigation starts and, if unsuccessful, to continue to review the case throughout to seek agreement.
13
Q
What is the claimant entitled to o where a settlement is reached prior to the issue of proceedings?
A
C is not entitled to recover their legal costs unless this has been agreed.
14
Q
If settlements are reached after litigation has commenced?
A
the terms should be recorded in a consent order or a Tomlin order to ensure that enforcement proceedings may be issued to recover any monies due under the agreement, including costs.
15
Q
Who can make a part 36 offer and when?
A
- Can be made by either side
- Can be made at any point in the proceedings
- A party may make an offer to settle in any way they choose and the court will take this into account when deciding the issue of costs
16
Q
What if a relevant party makes a wrong decision?
A
- BUT if an offer is made under Part 36, there are significant penalties attached if the relevant party makes a ‘wrong’ decision and rejects an offer that the court subsequently deems suitable
o So, pressure on opponent to accept an offer made in accordance with Part 36
17
Q
What are the formalities of a part 36 offer?
A
- be in writing;
- make clear it is made pursuant to Part 36;
- specify a period of not less than 21 days during which, if the offer is accepted, the defendant will pay the claimant’s costs (known as ‘the relevant period’); and
- state whether it relates to the whole of the claim or to part of it, and whether it takes into account any counterclaim.
* Practice: most offers will state that acceptance is required within 21 days
o NB. a longer period may be specified
18
Q
Part 36 - when is delivery deemed served?
A
- Deemed delivery: offer is made when it is served on the other party; rules of deemed service apply here
o It is inclusive of interest until the relevant period expires
19
Q
Are Part 36 offers without prejudice?
A
A Part 36 offer is treated as ‘without prejudice save as to costs’. As a consequence, the trial
judge will not be made aware of the offer until the case has been decided, both liability
and quantum. Only when the issue of costs fails to be dealt with will any relevant offer be
produced to the judge.
20
Q
How long does the offeree have to request clarification of the offer?
A
- Once a Part 36 offer has been made, the offeree has 7 days in which to request clarification of the offer
21
Q
What is the effect of acceptance?
A
- May be accepted at any time in the relevant period unless notice is given of withdrawal
- Late acceptance: may be adverse costs consequences
22
Q
If D makes the offer during the relevant period?
A
- If D made the offer, the sum must be paid to C within 14 days and, if not, C can enter judgment
o C is also entitled to their costs up to the date of acceptance
23
Q
If parties cannot agree costs?
A
o If the parties cannot agree costs, a judge will assess them on the standard basis in multi-track cases, but those on the fast and intermediate tracks will be subject to fixed recoverable costs.
24
Q
If C makes the offer?
A
o C will also be entitled to costs up to the date of acceptance on a standard basis
25
What if the claimant accepts D’s offer after the relevant period has expired and the parties cannot agree costs?
1. D pays the claimant’s costs up to the date on which the relevant period expired; and
2. the claimant pays the defendant’s costs thereafter until the date of acceptance.
26
What if if D accepts C’s offer late?
D will usually be ordered to pay C’s costs up to date of acceptance
27
What happens with proceedings in all these scenarios ^
* In all these scenarios, proceedings will be stayed (paused) to allow for the sum offered and the costs to be paid
28
Effect of non-acceptance?
* Proceedings will continue
* Depending on who made the offer and whether it is beaten at trial, there may be significant consequences: damages, interest, and costs awarded
* Penalties will be imposed from the day after [expiry] the relevant 21 day period for acceptance expires (namely, from Day 22) and will apply unless the court rules that it would be unjust to do so
29
In considering imposing penalties for non-acceptance, the judge will take into account all circumstances including....?
o the terms of the Part 36 offer,
o when it was made and in particular how close to the trial,
o what information was available to the parties at the time,
o their conduct, and
o whether it was a genuine attempt to settle
30
When will an offer be unjust?
✅ An order will be made in most cases and it will be the exception not to do so. It is irrelevant how small an amount the offer is beaten
❌ It may be unjust where the offeror has not provided sufficient disclosure to allow the offeree to make an informed decision
* EG the Part 36 offer expired only days before the trial and crucial allegations that had not been pleaded were raised in the opening of the case
31
Fixed recoverable costs?
The introduction of fixed recoverable costs to the fast and intermediate tracks has affected the rules which apply to successful Part 36 offers made on those tracks.
Instead of costs being assessed on the standard basis, the costs are fixed in accordance with Parts 45 and 46 of the CPR. The provision for indemnity costs for a claimant’s Part 36 offer is replaced with a 35% uplift on the claimant’s fixed recoverable costs. The stage in which the relevant period of a Part 36 offer expires is the equivalent of Day 22.
32
1. The claimant wins at trial and equals or beats their own offer
* This is where C obtains judgment which is at least as advantageous as their Part 36 offer
* Severe penalties will be enforced on D, unless it is unjust to do so
33
What is the additional amount of damages?
* As D lost at trial, they will be ordered to pay damages and interest due under contract or statute as typical
* D will ALSO be required to pay ‘extra’ damages
1. For damages of up to £500,000, the defendant must pay an additional amount of 10% of the sum awarded.
2. For damages in excess of £500,000 and up to £1 million, 10% of the first £500,000 is payable and thereafter, 5% up to a maximum of £75,000.
* Where the remedy awarded is non-monetary, the term ‘sum awarded’ refers to the costs.
34
Enhanced interest?
* From Day 22 onwards, the percentage rate of interest charged on the damages awarded increased to a rate not exceeding 10% above the base rate
35
Multi-track: costs on an indemnity basis?
* Normally: D pays C’s costs on a standard basis from the date they were incurred up to and including trial and judgment
* BUT Part 36: D is ordered to pay costs on an indemnity basis from Day 22 onwards
o ie, C is able to recover more costs
36
Fast and intermediate tracks: enhanced fixed costs
in recognition that indemnity costs are paid at a higher rate, the claimant is entitled to an amount equivalent to 35% of the difference between the fixed costs for the stage applicable when the relevant period of their Part 36 offer expired and the stage applicable at the date of judgment. It is important to be aware that this is not a straight uplift on all the costs.
37
Interest on costs?
The final penalty imposed is that interest is awarded on those indemnity or enhanced fixed costs and this may be as high as 10% above the base rate. This is in contrast with the general
rule that interest is not payable on costs incurred before judgment. Again, the sanction runs
from Day 22.
38
2. The claimant wins at trial but does not beat their own offer
In this
instance, no extra penalty is imposed on either party. This is because neither did anything
‘wrong’. The claimant was right to make an offer but pitched it too high whereas the
defendant was correct to turn it down for the same reason.
39
3. The claimant loses at trial
Claimant will not be awarded damages at all and will be ordered to pay the defendant’s costs on a standard basis (multi-track) or fixed costs (fast and intermediate tracks) in the usual way. Once again, Part 36 has no effect.
o If C makes a Part 36 offer that later is deemed ill-judged, no penalties
BUT if the offer is either equalled or beaten sanctions for D are severe
40
1. The claimant wins at trial and beats the defendant’s Part 36 offer
o If the claimant obtains a judgment that is more advantageous than D’s Part 36 offer, it is clear they were justified in their refusal because it was too low
o D will be ordered to pay:
the amount of the judgment plus interest as claimed in the particulars of claim; and
the claimant’s costs on the standard basis (multi) or fixed (fast + intermedi)
o Part 36 has no effect
41
2. The claimant wins at trial but fails to beat the defendant’s Part 36 offer
o Court will, unless it is unjust to do so, make an order that punishes C financial for continuing with the claim
o Court takes a different approach, where the effect of Part 36 is:
1. Defendant: D pays C’s costs on the standard basis (multi) or fixed costs (fasts/intermedi) from when those costs were incurred until the relevant period expired (Day 21);
2. Claimant: thereafter, C pays D’s costs on the standard basis (multi) or fixed (fast/intermedi) from the date of the expiry of the relevant period (Day 22) until judgment; plus
3. Claimant: interest on those costs (a commercial rate of 1% or 2% above base rate has generally been adopted)
o This is commonly called a ‘split costs’ order because the costs are divided between the parties with the split occurring at the expiry of thee relevant period of 21 days.
42
3. The claimant loses at trial
o General rule applies: C, as the losing party, would be ordered to [C] pay D’s costs
ALSO, C is penalised for failing to accept D’s Part 36 offer: C is ordered to pay interest on costs from Day 22 until judgment, usually at 1% or 2% above base rate
o NB. although a penalty is imposed on C for their error in failing to accept the offer, this is not as significant as those which D could face
43
How to determine best method of enforcement?
* To determine the best method of enforcement, may need to obtain more information about the judgment debtor’s financial circumstances
* Two possibilities:
1. instruct an enquiry agent; and
2. apply to the court for an order to obtain information from the debtor.
* Enquiry agent may succeed in locating assets and may be quicker, but incurs expense
* Court order is covered by Part 71
44
What is an order to obtain information?
* This is a court order requiring the debtor to attend before an officer of the court to be questioned about their finances or those of a company on which they are an officer
45
Procedure for order to obtain information?
Judgment creditor files an application at court setting out details of the name and address of the debtor, the judgment the creditor is seeking to enforce, and the amount owed
o Specific documents that the creditor wants produced at the hearing should be listed
46
2. Travel expenses:
The order is normally personally served on the debtor who can, within seven days, request payment of their reasonable travelling expenses to and from the court
47
Where will the hearing take place for an order to obtain information
The hearing will usually take place in the County Court hearing centre for the area where the debtor resides or carries on business.
48
Who conducts the examination
The examination is conducted by an officer of the court, or a judge if requested by the creditor.
49
What happens in the hearing
Standard questions are asked, although the creditor may also request additional ones. The officer will make a written record of the responses given by the debtor, who will be invited to read and sign it at the end of the hearing
50
Failure to attend?
: If the debtor fails to attend court, the judge may make a committal order against them, which is usually suspended provided the debtor complies with the order.
51
Methods of enforcement for judgement creditor?
The judgment creditor can, if they wish and can afford to do so, use one or more of several different means of enforcement.
Taking control of goods: seizure + sale of debtor’s goods
Charging order: charge on debtor’s land or securities
3p debt order: order requiring a 3p who owes money to debtor to pay it directly to creditor
Attachment of earnings order: order requiring debtor’s employer to make deductions from their earnings + pay them to creditor
52
How to decide which method of enforcement is best?
* Solicitor must decide which method is most suitable, based on info received on the judgment debtor
* Some restrictions limit the choice
o EG when an attachment of earnings order is in force, permission of the court is required to take control of the debtor’s goods
53
When is taking control of goods enforcement method used?
* Used where the amount owed may be recovered by seizing the debtor’s possession of an equivalent value → the items are sold at public auction
54
Who can take control of goods?
o In HC, carried out by a High Court Enforcement Officer (HCEO) and
o In CC, by enforcement officers (aka bailiffs)
55
Powers of enforcement officers?
EOs cannot force entry into a debtor’s home, but can use reasonable force to enter business premises if they believe the debtor’s goods are inside
56
What may be seized?
Usual contents, eg motor cars, computers, banknotes, but also less common ones eg boats and securities (like share certificates)
o If property is subject to a mortgage, the difference in value between the property and the mortgage (where the property is worth more), is known as the ‘equity’
57
What is the necessary items exemption?
‘necessary items exemption’ only applies to individual – not to judgement debtor that is partnership, company, limited company etc
o If applicable, items such as clothes, bedding, furniture and household equipment, which are reasonably required for the basic needs of the debtor and their family, cannot be taken
o Neither can work tools, computers, vehicles and other equipment that are necessary to the debtor personally for work or study, subject to a maximum aggregate value of £1,350
o Goods that belong solely to another, such as a spouse or other family member, or those subject to hire or hire-purchase agreements may not be removed
o Any disputes concerning a co-owner’s entitlement to a share of the proceeds of sale will be resolved by the court
58
Which court to enforce judgement sum of less than £600?
Less than £600 = county court, warrant of control, bailiff EO
59
Which court to enforce judgement sum of £600 or more but less than £5,000?
CC or HC. If HC, judgement must be transferred from CC to HC. Warrant or writ as appropriate. EO applicable to court.
60
Which court to enforce judgement sum of £5,000 or more?
HC (except Consumer Credit), writ, HCEO.
61
High court procedure for judgement order?
1. The judgment creditor delivers a praecipe (request) and two copies of a writ of control to the court office, together with the judgment.
2. The court seals the writ and returns one copy to the creditor.
3. The creditor then forwards this to the HCEO for the county where the debtor resides or carries on business, for the writ to be executed.
62
County Court procedure?
1. The creditor files the form of request for a warrant of control at the County Court hearing centre that serves the address where the goods are to be seized.
2. The warrant is executed by the enforcement officer for the district where the debtor resides or carries on business.
63
How do EOs exercise a writ or warrant of control?
* When exercising a writ or warrant of control, EOs usually immediately remove goods or take control over them
64
What if the debtor needs time to pay?
* IF DEBTOR NEEDS TIME TO PAY, they may enter into a controlled goods agreement which acknowledges EOs taking control but that they will not be removed or disposed of before the debt is paid
o Effect: goods remain on premises for a few days to allow debtor a final opportunity to pay
o If payment is still not received, the goods seized will be sold at public auction and the amount required to pay the judgment, including costs, will be deducted from the proceeds, with surplus being returned to the debtor (and any co-owner)
65
Advantages and disadvantages of enforcement at HC?
* Advantages of enforcement at HC:
o HCEOs are usually paid on their results (amount collected) so perceived to be more effective
o In HC, interest continues to accrue on the debt
o Disadvantages:
logistical difficulties (eg cars hidden in garages)
costs of this method of enforcement
relatively low re-sale value of the goods seized
due to the 3 above^, creditor does not obtain all the monies due to them
66
Entry rules for EO?
* Disadvantage: General rule: they cannot force entry into a debtor’s home; a savvy debtor may simply refuse entry
* Advantage: BUT can use reasonable force to break into business premises if there is no living accommodation attached and debtor’s goods are believed to be inside
67
What is a charging order?
o Under Part 73, it is possible for a charging order to be made either on land or on securities, such as stocks and shares
Effect: the creditor is placed in a similar position to a mortgagee
Charging order sits on the asset until the creditor may apply for an order for sale
May involve a significant waiting period until, eg, the land has increased in value such that there is sufficient equity to cover the judgment debt
68
Charging order on jointly-owned land?
o In addition to being able to apply to the court for an order charging the debtor’s land with the amount due under a judgment, a charging order can also be made in respect of land the debtor owns jointly with another person
The charge is on the debtor’s beneficial interest, rather than the land itself
Once the charging order is made, it should be registered at the Land Registry or (if unregistered) at the Land Charges Department
o To obtain money, the creditor would have to apply to the court for an order for sale of the land charged and the judgment will then be satisfied out of the proceeds of sale
69
Which court for charging order?
o Where the debt is more than £5,000, the application for a charging order can be made either in the CC or HC
o If it is made to CC, the application must be submitted to the County Court Money Claims Centre
70
Stage 1: interim charging order - what is an application notice?
Creditor must file an application notice including
details of the judgment debt,
the land over which the charging order is sought, and
the names and addresses of any other person affected such as a party with a prior charge over the property.
71
Interim charging order - what to file as well as application notice?
The creditor must also file a draft interim charging order (ICO)
Application is usually dealt with by a court officer without a hearing, who will either make the ICO or refer the matter to a judge for further consideration.
72
When must the ICO/application notice/other docs be served?
The ICO, the application notice and any documents filed in support must be served by the creditor on the debtor within 21 days.
73
Can the debtor request the court officer's decision be reviewed by a judge?
The debtor then has 14 days to request that the court officer’s decision be reviewed by a judge.
74
Stage 2: final charging order
If any person objects to the making of a final charging order (FCO), they must file and serve written evidence stating the grounds of objection within 28 days of service of the ICO.
If an objection is received, the court will transfer the application to the debtor’s home court for a hearing.
At the hearing the court can make a FCO, discharge the ICO or direct a trial of any issues in dispute between the parties.
75
Stage 3: order for sale
If the interim order is made final, the creditor has a charge on the debtor’s land, which can be enforced by an order for sale of the property. However, in order to do so, fresh proceedings must be commenced
76
Advantages of a charging order?
Useful way to secure payment if debtor lacks liquid assets and/or other enforcement methods would not work
A charging order secures the judgment debt
Encourages the debtor to make efforts towards settling the debt, particularly as interest will accrue (unless it falls under the Consumer Credit Act 1974)
77
Disadvantages of charging order?
Not always effective
Not always appropriate where there are significant other prior charges or mortgages over the property → no sufficient equity available to enforce or the debtor has no beneficial interest
Even if granted, may be other factors affecting sale, eg children living at the property
o May be the only way forward if there are no other assets to enforce the debt; preferable to wait for monies rather than lose them entirely
78
How can a creditor seek a charging order on securities?
o A creditor may also obtain a charging order on a debtor’s beneficial interest in certain specified securities including UK government stock, shares and unit trusts.
o The order will normally provide for the charge to extend to any interest or dividend payable.
o Procedure: is similar to that for obtaining a charging order on land.
79
What is a third party debt order?
o The debtor may be owed money by a third party, for example:
bank or building accounts that are in credit; and
trade debts due to a business
o If this is the case, the court can make an order under Part 72 requiring the third party to pay the creditor sufficient monies to satisfy the judgment debt and costs
o The debt must belong to the judgment debtor solely and beneficially
80
Where must a third party order be enforced?
o Must be issued in the court that made the order being enforced, unless the proceedings have (subsequently) been transferred to a different court
81
Who applies to the court for a third party order?
The creditor applies to court without notice to the debtor, providing details such as the name and address of the branch where the money is held and the account number.
82
What will the judge do after the creditor applies?
The judge will make an interim order, which has the effect of freezing the bank account or funds held by the third party. At this point, no money is paid to the creditor but a hearing will be listed no less than 28 days later.
83
What happens at the hearing for a third party order?
At the hearing, the court will consider any objections and, unless there is a good reason not to do so, the order will be made final. This requires the third party to pay the money to the creditor.
84
Advantage of third party order?
o : element of surprise: debtor not aware of the application until after it is made - ie freezes assets to secure them
BUT an informed debtor is likely to be aware of this possibility so may have moved funds as soon as the judgment is made (or before)
If the account is not in credit on the day when the order is served, it is ineffective
85
What is an attachment of earnings?
o Order that compels the debtor’s employer to make regular deductions from the debtor’s earnings and pay them into court
o Requirement: The debtor must be employed, NB not self-employed
86
Where must an attachment of costs application be made?
MUST BE COUNTY COURT
o If judgment has been obtained in the HC, the proceedings will have to be transferred to the CC before enforcement of this method can be used
1. The creditor applies to the County Court Money Claims Centre.
87
What happens after the creditor applies to the CCMC?
The court informs the debtor of the application and requires them either to pay the sum due, or to file a statement of means giving details of their income and outgoings.
88
On receipt of the form, what will the court officer do?
a court officer will make an attachment of earnings order, fixing the repayment rate by applying certain guidelines.
Only if there is insufficient information to do so will the matter be referred to a judge.
89
What will the attachment order specify?
the normal deduction rate and the protected earnings rate (aka the amount that the court considers is reasonable for the debtor to live on, so if their earnings for a particular week are equal to or less than this figure, the creditor will receive nothing that week)
90
To whom will the order be sent to?
The order will be sent to the parties and to the debtor’s employer, with instructions to deduct the amount ordered from the debtor’s pay and forward it to the court. The employer is entitled to deduct a small additional sum in respect of their administrative costs.
91
What if either party objects to the attachment order?
5. If either party objects to the order that has been made, they can apply for the matter to be reconsidered by the district judge at a hearing.
92
Advantage of attachment order?
effective means of obtaining payment, provided debtor remains in work
93
Disadvantage of attachment order?
if debtor loses their job, the payments cease and if they move employment the creditor will have to repeat the process
The court may order a very low value instalment so the judgment will take a considerable time to satisfy
