FIXED COSTS AND NON-PARTY COSTS ORDERS

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Are applications for Wasted Costs Orders and/or Non-Party Costs Orders in Fixed Recoverable Costs cases themselves subject to the Fixed Costs for applications, or not?

If a Non-Party Costs Order or Wasted Costs Order is made, then are the costs made under any such order themselves to be assessed in the old-fashioned way, or limited to the recoverable Fixed Costs?

The short answer is that I do not know whether an order under Section 51 of the Senior Courts Act 1981, which deals with Non-Party Costs Orders and Wasted Costs Orders is subject to Fixed Recoverable Costs in a Fixed Recoverable Costs case, or not.

The reason I do not know is that the Rules are silent on the matter.

Section 51(1) reads:

“(1) Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in—

(a) the civil division of the Court of Appeal;

(b) the High Court; and

(ba) the family court;

(c) the county court,

shall be in the discretion of the court.”

That sub-section gives the court a very wide discretion indeed in relation to costs, but it is specifically:

“subject to the provisions of this or any other enactment and to rules of court…”

Section 51(2) specifically provides that such Rules may make provision for regulating matters relating to the costs of those proceedings including, in particular, prescribing scales of costs to be paid to legal or other representative.

Sub-section (3) is very wide indeed:

The court shall have full power to determine by whom and to what extent the costs are to be paid.

On balance, but only on balance, my view is that the Fixed Recoverable Costs scheme, and the Civil Procedure Rules governing that scheme, mean that any application in a Fixed Recoverable Costs case, including an application under Section 51 of the Senior Courts Act 1981 is subject to Fixed Recoverable Costs.

Following the same logic, my view is that if a Non-Party Costs Order is made, then in a Fixed Recoverable Costs case, it is for Fixed Recoverable Costs.

If there is unreasonable conduct in a Fixed Recoverable Costs, then the court must increase the total of fixed costs payable by 50%, and although a Non-Party Costs Order does not always mean that there has been unreasonable conduct by the non-party, it is likely to do so, and therefore, the award is likely to be for 150% of costs.

Wasted costs, which are a species of Non-Party Costs Orders in the sense that the lawyer, not a party to the action, is ordered to pay the costs are dealt with in sub-sections (6) and (7) which read:

“(6) In any proceedings mentioned in subsection (1), the court may disallow, or (as the case may be) order the legal or other representative concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with rules of court.

(7) In subsection (6), “wasted costs” means any costs incurred by a party—

(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or

(b) which, in the light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay.”

Taking the provisions together, again, but only on balance, my view is that a Wasted Costs Order is limited to Fixed Recoverable Costs as the maximum Wasted Costs must be the full Fixed Recoverable Costs sum, plus of course the 50% for unreasonable conduct.

In a Wasted Costs Order, it is hard to see how there would not be that 50% uplift for unreasonable conduct.

The purpose of a Non-Party Costs Order is generally to allow the recipient of costs to enforce the order against another party, generally where that party has controlled or funded the litigation. It is in a sense an indemnity to allow a receiving party to enforce against another party, often when the actual party is insolvent.

It would be a strange situation if the receiving party could obtain an order for costs in a much greater sum against a non-party as compared with the actual losing party.

The principle is the same in relation to a Wasted Costs Order, as it would mean that the winning party would be financially better off as a result of the misconduct of the losing party, over and above the 50% unreasonable conduct penalty.

All of this is predicated on the basis that the Civil Procedure Rules have modified Section 51 of the Senior Courts Act 1981, as specifically allowed by that Section itself.