Section 169 The Legal Services Regulation Act 2015 – The New and The Old

The normal rule costs follow the event is familiar to both litigants and litigators and since October 2019 Section 169 of the Legal Services Regulation Act 2015 has explicitly recognised this principle.  It means, that the successful party will normally be entitled to the order for costs as against the unsuccessful party.

In determining whether to order that costs follow the event the Court will have regard to the non-exhaustive list of matters specified in s.169(1)(a)-(g) these are:

  1. a) conduct before and during the proceedings:
  2. b) whether it was reasonable for a party to raise, pursue or contest one or more issues in the proceedings:
  3. c) the manner in which the parties conducted all or any part of their cases:
  4. d) whether a successful party exaggerated his or her claim:
  5. e) whether a party made a payment into Court and the date of that payment:
  6. f) whether a party made an offer to settle the matter the subject of the proceedings, and if so, the date, terms and circumstances of that offer; and
  7. g) where the parties were invited by the Court to settle the claim (whether by mediation or otherwise) and the court considers that one or more than one of the parties was or were unreasonable in refusing to engage in the settlement discussions or in mediation.

Section 169 preserves the loser pays rule but it also provides for tailor-made costs decision where the Court orders that a party which is entirely successful in proceedings is not entitled to an award of costs against the unsuccessful party and the Court will advance reasons for its decision. The necessity for tailor made costs decisions is welcomed in circumstances where unreasonable conduct had been demonstrated, exaggeration provided, an otherwise successful party conducts itself in a manner which is sufficient to deprive itself of costs.

The modification of the costs to follow the event rule provided in Section 169 of the Act is a powerful tool for a Defendant to utilise.   The section expressly sets out principles known to both plaintiff and defendant which the Court might consider when making an order for costs such as lodgement/tender, serving a section 17 Notice or applying for a Cost Differential Order and in addition the Court might now consider “without prejudice” offer letter until after the Court has ruled on the case.  These subsections will enable the Court to carve out cost order that do justice between the parties.

This provision is of assistance to stakeholders regarding costs and it will require the Court in circumstances where it does not follow this general principle to outline the reasons why.  This provision is of benefit of insurers especially where they believe the claim is fraudulent or exaggerated, to challenge the claim, rather than settling early for fear of incurring significant legal costs. If the Court is to apply the section 169 of awarding costs to successful party, this would translate in significant reduction in costs for businesses over time. If the Court is to depart from the section 169 for example in the interest of justice, reasons stated in the order could overtime accumulate in valuable precedents.

Costs orders have the potential to impact upon parties just as much as the substantive outcome of proceedings. It is important when formulating and executing litigation strategy to give due consideration to how this will be viewed by the Court when determining liability for costs.

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