Legal costs: court tracks, costs orders and recovery explained

Legal costs can include solicitors’ charges, counsel’s fees, court fees and disbursements such as expert reports. Liability to your own lawyers is governed by your retainer and funding arrangements; recovery from an opponent is a different question. An assessment or fixed-costs award may leave a shortfall between the two.

This guide concerns civil litigation in England and Wales. Family proceedings, tribunals and other specialist jurisdictions have different rules. Even within civil litigation, check the claim type, relevant dates and court orders before applying a general principle. A headline claim value alone cannot establish the costs regime.

The small claims track is normally used for claims worth no more than £10,000, but personal injury and housing claims have additional allocation rules. Under CPR 27.14, ordinary legal representation fees are generally not recoverable from the opponent. Instructing a solicitor does not transfer the entire bill to the losing party.

Permitted categories include fixed commencement costs, court fees, specified attendance expenses, capped loss of earnings or leave, and limited expert fees. Limited legal advice costs can also apply to injunction or specific-performance claims. The court can award further costs for unreasonable behaviour. Losing, or declining an offer, does not by itself establish that behaviour. Check the current limits and exceptions rather than assuming that small claims carry no costs exposure.

The fast track normally accommodates suitable claims up to £25,000, with limits concerning trial length and expert evidence. The intermediate track generally accommodates suitable claims up to £100,000 that can be managed within its procedural requirements. Allocation also considers complexity, parties and the nature of the dispute: value is not the sole criterion.

Many claims on these tracks fall within fixed recoverable costs under CPR Part 45. Complexity bands and procedural stages influence the prescribed amount. Transitional rules, exclusions and special provisions matter, particularly for personal injury, disease and clinical negligence claims. Do not infer applicability merely because proceedings were issued after October 2023 or the damages fall below a particular figure.

The multi-track handles claims unsuitable for the other tracks, including many higher-value or more complex disputes. Costs are commonly assessed rather than determined entirely by fixed tables, but the applicable rules must still be checked. Multiple parties, extensive disclosure and specialist experts can make costs planning particularly important.

Where costs management applies, costs budgets record estimated future expenditure by phase. On standard-basis assessment, CPR 3.18 generally requires good reason to depart from the last approved or agreed budget for budgeted costs. Incurred costs are treated differently. A budget is neither a promise of full recovery nor permission to incur unnecessary expense. Significant developments may require prompt consideration of a budget variation.

Under CPR 44.2, the court has discretion over whether costs are payable, their amount and when payment is due. The general rule is that the unsuccessful party pays the successful party’s costs, but the court may make a different order. Success does not remove that discretion.

Relevant circumstances include conduct before and during proceedings, partial success, and admissible settlement offers outside Part 36. The court may consider whether it was reasonable to pursue particular allegations and how the case was conducted. Part 36 has its own costs consequences. Where qualified one-way costs shifting applies, enforcement restrictions must also be considered separately from the making of an order.

An order can award a proportion of costs, costs from or until a specified date, costs of a particular step, or costs relating to a distinct issue. An interim application may therefore have a different costs outcome from the claim overall. Never assume that a later bill covers every entry in the file.

‘Costs in the case’ ordinarily follow the final costs outcome. ‘Costs reserved’ postpones the decision; if no later order is made, those costs become costs in the case. ‘No order as to costs’ generally leaves each party bearing its own costs of the relevant proceedings or application. ‘Costs thrown away’ may address work wasted by an event such as an amendment. The exact wording and context remain decisive.

On the standard basis, costs must be reasonably incurred, reasonable in amount and proportionate to the matters in issue. Under CPR 44.3, doubts about reasonableness and proportionality are resolved in favour of the paying party. A recorded and genuinely incurred expense is not automatically recoverable.

The court may reduce or disallow costs that are disproportionate even if reasonably or necessarily incurred. Receiving parties need evidence explaining the work and its context. Paying parties should connect objections to the actual bill, not rely on a general assertion that the total looks high. Standard assessment is not a routine fixed percentage deduction.

On the indemnity basis, costs must still be reasonably incurred and reasonable in amount, but the standard-basis proportionality requirement does not apply. Doubts about reasonableness are resolved in favour of the receiving party. Unreasonable work, duplication and excessive amounts can still be disallowed.

An indemnity order may arise from circumstances taking a case outside the ordinary course or from applicable Part 36 consequences. It is not an automatic penalty whenever an opponent loses. The order may apply only from a particular date, requiring the bill to separate different assessment bases. It also does not automatically displace an applicable fixed-costs regime; check the relevant rules.

The indemnity principle generally prevents a receiving party recovering more from an opponent than it is liable to pay its own lawyers. It concerns the underlying liability, not which assessment basis the judge selects. The similar terminology can obscure this important distinction.

Review the retainer, applicable rates and funding terms before presenting a claim. Conditional fees, capped fees and other arrangements can raise technical questions. Statutory and procedural exceptions exist, including relevant legal aid and fixed-costs provisions, so the principle should not be applied mechanically to every award. An indemnity-basis order does not itself create a missing liability under a retainer.

Reasonableness concerns both the decision to incur work and the amount charged. Consider the task, time, rate, appropriate level of fee earner and supporting records. Several lawyers attending does not necessarily prove duplication, but their separate contributions may need explaining. Expert expenditure requires a connection to the issues and the evidence needed.

For standard-basis proportionality, CPR 44.3 identifies the sums in issue, non-monetary relief, complexity, additional work generated by the paying party’s conduct, wider factors such as reputation or public importance, and vulnerability requiring additional work or expense. Damages are therefore not the only measure. A complex claim still needs a disciplined explanation of expenditure rather than a blanket appeal to complexity.

Costs may be agreed, summarily assessed by the judge, or determined through detailed assessment proceedings under CPR Part 47. Summary assessment generally uses a statement of costs. Detailed assessment involves a bill of costs, points of dispute and, where appropriate, replies to points of dispute. Some eligible matters proceed through provisional assessment on the papers.

For standard-basis recovery, prepare the reasonableness and proportionality case alongside any applicable budget. For indemnity recovery, identify the relevant period and explain reasonable expenditure; favourable treatment of doubt does not replace evidence. Reconcile interim orders and sums already assessed or paid to avoid duplication. Consider offers, assessment costs, any payment on account and the applicable timetable before choosing how far to pursue a dispute.

Fixed recoverable costs usually determine the recoverable legal charges through prescribed rules rather than an item-by-item assessment of actual time. Depending on the regime, the calculation may involve the stage reached, complexity band and damages. Court fees, disbursements, VAT and other additions require separate checks; not every expense can simply be added.

Disputes can concern scope, allocation, banding, settlement stage and permitted adjustments. Part 45 contains specific provisions addressing matters such as exceptional circumstances, vulnerability and unreasonable behaviour, subject to their respective tests. Do not assume that a costly file or an indemnity request permits escape from fixed costs. Our Costs Lawyers can examine the order, funding and procedural history to identify the correct recovery route before drafting or challenging a claim.