Cost penalties are orders that determine how much money each party must pay in civil litigation cases. For instance, one party might have to cover some of their opponent’s expenses in addition to their own, while another party could be permitted to pay less than required due to their behaviour and handling of the legal proceedings.
The court has broad discretion to deviate from the standard rule where the losing party covers the winning party’s expenses. This departure can occur based on the parties’ behaviour, particularly their attention to court orders and rules, and whether they genuinely attempted to settle the matter prior to litigation being started.
Factors that may lead to cost penalties
- Courts may order parties to participate in alternative dispute resolution methods, like mediation, provided it doesn’t compromise the right to a fair trial. Refusing to engage with ADR without good reason might result in unfavourable cost consequences.
- To avoid litigation misconduct and ensure procedural compliance, parties are advised to consistently submit documents and forms promptly and address any amendments or applications without delay, facilitating smooth and efficient proceedings.
- A party refusing a Part 36 settlement order under the Civil Procedure Rules (CPR) risks a costs penalty if the proceedings result in a less favourable outcome than the rejected offer.
Minimising the risks of cost penalties
Parties must show they are willing to engage in ADR prior to issuing legal proceedings. Documenting the refusal reasons with evidence and offering alternatives can be adequate, even if ADR seems unfavourable at certain stages.
It is crucial to approach Part 36 applications strategically, including recognising the best time to agree to a settlement. It can also be shown as a sign of good faith to the other party. It should be noted that winning a case doesn’t always mean avoiding major financial repercussions, especially if a settlement was rejected. The main deciding factor for cost consequences is whether a party is strategic, sensible and considerate of the courts and the other parties in litigation.
For professional legal advice, Nath Solicitors can be contacted on 0203 983 8278 or at enquiries@nathsolicitors.co.uk.