Legal fees are expensive – there’s no getting away from that. The usual rule in family proceedings is that each person pays their own legal fees. This is different to other civil litigation, where generally if you lose you will be ordered to pay the other persons costs.
The reason is that in family proceedings it is difficult to tell who has won or lost. It’s rarely black and white, particularly when the law itself is discretionary and often there is no right or wrong answer – there are factors and principles that can be applied in different ways.
This can be unfair though, when one person is behaving unreasonably (i.e. making unrealistic offers). They are pushing up everyone’s legal fees and get away without any consequences. In theory the court has can make a costs order in this situation – to punish them – but in practice they are slow to do so.
In the old days we used to rely on Calderbank letters. This means making an offer, which is only shown to the Judge after the final decision has been made. If you beat the offer you would be awarded costs. The court scrapped these offers a few years ago because they sometimes lead to unfairness, if the court makes a finely balanced decision and someone just beats a Calderbank offer, which might means a costs order is made which undermines the purpose of the settlement (there may no longer be enough money to provide a home after the costs have been paid). Interestingly the court is now consulting on re-introducing Calderbanks. It seems to us that the answer has to be somewhere in the middle – costs orders need to be made to punish people who are being unreasonable, but the court needs discretion to achieve fairness.
The situation is very different for unmarried couples. They are not governed by the family courts, but instead, are governed by general civil rules. This means costs orders apply.
One way to address this is with Part 36 offers. The purpose of the part 36 offer is to give you costs protection. The offer is without prejudice, which means if you end up in court, the judge won’t be aware of the offer until the proceedings have ended. The offer would be shown to the judge when the case is over and would be taken into account when deciding whether a costs order should be made.
Regardless of whether or not you make a part 36 offer, if you apply to court and win, the court is likely to award you costs. A part 36 offer means you are likely to recover costs at a higher rate, so it focuses everyone’s mind and encourages early settlement.
By way of background, when the court makes a costs order, it is on either the “standard basis” or “indemnity basis”. Indemnity basis means you recover the majority of your fees on a pound for pound basis. The standard basis means you only recover approximately two thirds or so. Costs orders on an indemnity basis are intended to be punitive i.e. to punish someone for failing to accept a sensible offer and avoiding court proceedings.
Once proceedings have been issued and if you beat the offer, your opponent will be liable to pay your fees on the standard basis up to the end of date specified in the offer; and on the indemnity basis from that date onwards. This is where the costs consequences of part 36 have real impact – it would be very expensive for your opponent. The court may also order interest to be paid on the lump sum (at a rate not exceeding 10% over base rate – although this is very rare). Usually the costs consequences are automatic, however, they will not be applied in some circumstances if it is unjust to do so.
Costs can be a minefield! We here at bbl always make sure we are clear with you form the outset and throughout about the level of your fees and how they can be paid. We help you manage the fees as part of our advice. Please give us a call if you have any questions about legal fees or anything else.