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A Right Royal Expense: Why Litigation Costs Matter Just as Much as Winning
Mike Carter
The recent High Court decision requiring Prince Harry and six other claimants to make an interim payment of approximately £9.5 million towards the defendant’s legal costs has brought into sharp focus an important aspect of litigation: costs.
While media attention has focused on the headline figure, the case serves as a reminder that litigation is not simply about winning or losing. The way a party conducts itself throughout proceedings can have significant financial consequences.
What Happens to Legal Costs When a Case Ends?
The general rule in litigation is that the unsuccessful party will pay a proportion of the successful party’s legal costs. This may either be summarily assessed at the conclusion of the case, or the Court may order an interim payment on account of costs shortly after judgment, with the final figure to be determined through detailed assessment at a later date.
However, even a successful party will rarely recover every pound spent on legal fees.
What Are Indemnity Costs?
Most costs awards are made on the standard basis, meaning only costs that are reasonably incurred and proportionate to the matters in issue will be recoverable.
In certain circumstances, the Court may award costs on the indemnity basis, which is more favourable to the successful party. This generally results in a higher level of costs recovery because the receiving party benefits from a more favourable basis of assessment and the requirement of proportionality does not apply in the same way as it does on the standard basis.
When Will a Court Award Indemnity Costs?
Indemnity costs are not awarded simply because a party loses. They are usually reserved for cases where the Court considers a party’s conduct has fallen outside what is expected. .
Examples include:
- Pursuing claims or defences with little prospect of success.
- Making serious allegations without sufficient evidence.
- Refusing reasonable settlement opportunities.
- Failing to comply with Court orders or procedural requirements.
- Conduct that unnecessarily increases the time or expense of litigation.
The Courts increasingly expect parties to act reasonably and proportionately throughout the litigation process.
Why Should Businesses Pay Close Attention to Costs?
For businesses, litigation costs should form part of the strategy from the outset. A strong legal case can still become commercially unattractive once the likely costs recovery position is taken into account.
Seeking early legal advice, considering settlement opportunities and maintaining a pragmatic approach throughout proceedings can help reduce exposure to adverse costs orders and improve the overall outcome of a dispute.
Winning a Case Does Not Always Mean Winning Financially
The key takeaway is simple: litigation is about more than the final judgment. Costs can have a significant impact on the overall result, and parties that act unreasonably may face substantial financial consequences regardless of the strength of their case.
Speak to Bermans’ Litigation & Dispute Resolution Team
If you are involved in a commercial dispute and would like advice on the merits of your case, the potential costs risks or the best strategy for resolving the matter, Bermans’ Litigation & Dispute Resolution team can help. We provide practical, commercially focused advice to businesses and individuals at every stage of the litigation process.
Contact our Litigation team today to discuss your options.