A frequent consideration for a party intending to commence litigation is the quantum of costs that he can likely recover assuming he is successful. In most cases, the Court will order that the losing party pays for the winning party’s costs. The amount recoverable is usually left to the parties to agree amongst themselves. If no agreement is reached, the quantum is to be decided by the Court by way of ‘taxation proceedings’. The quantum recoverable usually includes (i) legal fees, (ii) out-of- pocket disbursements (such as Court fees) and (iii) applicable GST.

If the quantum of the successful party’s costs that can be recovered from the unsuccessful party is to be assessed by the Court, the first question is what basis such costs are to be assessed on. In Singapore, there are 2 bases of assessment. Under the ‘standard’ basis, the Court shall allow all ‘reasonable’ costs incurred, and any doubts that the Court has as to whether any costs have been ‘reasonably’ incurred, shall be resolved in favour of the paying party. The standard basis is inclusionary in nature and it is this basis which is frequently ordered by the Court. However, on occasion, the Court will order that the assessment is to be carried out on the ‘indemnity’ basis. Here, all costs shall be allowed except if they have been unreasonably incurred and any doubts that the Court shall have is to be resolved in favour of the receiving party. The indemnity basis is thus exclusionary in nature (i.e. all costs are to be allowed unless they can be excluded because they were unreasonably incurred).

The Court has allowed costs to be recovered on an indemnity basis in cases where it has found that the unsuccessful party fabricated evidence and also where the unsuccessful party was ‘economical’ with the truth or relied on a legal position founded on facts which he knew to be untrue. The award of costs on an indemnity basis, thus, signifies the contempt that the Court has for such behaviour. However, these cases are few and far between and all potential litigants should proceed on the basis that a typical case will only result in an order that the losing party pays costs on a ‘standard’ basis only.

The recent case of Lin Jian Wei v Lim Eng Hock Peter [2011] SGCA 29 (“Lin Jian Wei”) was the first case in which the Singapore Court of Appeal was asked to determine the quantum of reasonable legal costs under the ‘indemnity’ basis. It arose in the wake of a defamation trial which lasted 6 days where the losing party was ordered to pay the victim S$210,000/- in damages for defamation as well as S$650,000/- in costs. The Court of Appeal in Lin Jian Wei however, reduced the costs element to S$250,000/-.

The Singapore Court of Appeal evaluated the principles that a Court had to consider before determining the quantum of costs to be paid under the indemnity basis and noted that an order for costs on an indemnity basis was not a charter to visit upon the paying party disproportionate costs, even if the receiving party was prepared to pay his own solicitors such amount. The Court highlighted that the costs to be paid by a client to his solicitor is a private agreement to be agreed between them and a Court still had to consider whether the costs sought to be recovered are proportional in the circumstances of the case. The Court further endorsed the view that there must be a sensible correlation between costs, on one hand and the value of the case, its complexity and importance on the other hand. It opined that costs that are plainly disproportionate to the value of the claim cannot be said to have been reasonably incurred.

Ultimately, the assessment of costs involves a consideration of myriad factors, including the seniority of the lawyers involved, the nature of the work being done (i.e. whether it is routine or creative) as well as whether the work done was strictly necessary to prosecute or defend a party’s position in Court. Potential litigants should therefore be mindful of the decision in Lin Jian Wei which would indicate that conducting the litigation with a “leaving no stone unturned” approach may result in a situation where their costs unnecessarily incurred cannot be recovered. The Court ultimately has to consider striking a balance between justly rewarding legal professionals and ensuring that access to justice is not progressively eroded by exorbitant legal costs.