Insolvency Act 1986 Section 423 Claims & Costs Recovery

In general, the losing party is responsible for paying the reasonable costs incurred by the winning party in Insolvency Act 1986 Section 423 claims.

The court has discretion, however, to make an order for costs that is different from the general rule. For example, the court may order that the costs be paid on an indemnity basis, which is a higher level of costs recovery, or it may order that the parties bear their own costs.

The court’s decision on costs will be based on various factors, including the conduct of the parties, the importance of the case, and the extent to which the winning party has succeeded.

If a costs order is awarded in your favor, you will become the receiving party and you will be required to serve a?bill of costs?on the paying party alongside a Notice of Commencement. Costs should be negotiated using?Points of Dispute?and replies, this is known as the process of detailed assessment.

If costs cannot be agreed between parties, the receiving party will be required to make an application to the court for a Detailed Assessment Hearing.

During the case management phase of you case, you will have been required to submit a?costs budget. A legal costs budget is an estimate of the costs that a party to a legal proceeding is likely to incur over the course of the case. The costs listed within the budget should be reasonable and proportionate.

If a party’s legal costs budget is found to be unreasonable, the court may disallow some or all of the budgeted costs.

The court will consider a range of factors when determining whether a legal costs budget is reasonable, including the complexity of the case, the number of parties involved, the time spent on the case, and the hourly rates of the legal representatives. If a budget is found to be unreasonable, the court may order the party to revise the budget or reduce the budgeted costs.

In the case of?Lemos and Ors v Church Bay Trust Company LTD, which was in relation to a Section 423 claim, issues were raised by the court in relation to both the claimant’s and the defendant’s costs budgets which were deemed disproportionate and unreasonable.

To prevent the costs from escalating further through arguments regarding the budgets, the judge decided that any comments related to both budgets could be considered during any assessment proceedings.

“… the court does not consider on the information currently available that the budgets are reasonable and proportionate. Reference can be made to this judgment (in final form) for the court’s comments upon the budgets for reference in any subsequent assessment proceedings.”

To find out more, read the full article on our website.

How can ARC Costs Assist?

ARC Costs have an experienced team of?costs draftsmen?and?costs lawyers?with the expertise to assist on costs matters in relation to Insolvency Act 1986 Section 423 Claims, whether you are the paying party or the receiving party.

We can provide assistance on drafting your costs budgets and bills of costs, ensuring they are reasonable and proportionate. We can also help you negotiate your costs with the other side by assisting in the drafting of points of disputes and replies.

We?can be contacted using our email address at?[email protected], or by telephone on?01204 397302. For more information on legal costs, visit?our services?or?legal costs page.