The usual rule in court proceedings is that the losing party pays the winner’s legal costs. As Court proceedings can be expensive, this rule is important. A shortfall in your cost recovery can be punishing. How do you avoid such a situation?
The extent to which you can recover your costs often depends on your behaviour both before and during court proceedings. Whilst you are entitled to pursue your claim vigorously, you remain obliged to act reasonably in sharing information and working towards any possible settlement. This overriding responsibility is enshrined in the court rules and is also set out in ‘preaction protocols’, which govern the parties’ behaviour prior to court proceedings.
Failure to comply with a pre-action protocol can result in ‘cost sanctions’ being made against the defaulting party. In a recent case where there had been a serious breach of a pre-action protocol, it was decided that, had it been followed, court proceedings would not have been necessary. Consequently, the court ordered that regardless of whether or not the Claimant won its case, the Defendant would be entitled to recover fifty per cent of its costs from the Claimant. Further, the Claimant was only allowed to recover fifty per cent of its own costs. The two effectively cancelled each other out leaving the Claimant out of pocket.
A key requirement of the protocols is to provide a detailed letter of claim. However, in debt matters, you may consider this inappropriate. Whilst in some cases you will be confident that there is no defence (and that payment will be made) when you send a simple letter of claim and/or commence standard debt proceedings, there will be other cases which you know will be defended. If they are, then a failure to provide a detailed letter of claim can provide ammunition to a Defendant to argue that you are in breach of the pre-action protocol (and the civil procedure rules). If they are successful in that argument, then you could be at risk of an adverse costs order. Clearly, this would place you in a poor tactical position, irrespective of the strength of your case.
Therefore, follow the protocols!