Escaping the abyss: How the court decides costs and the importance of making and accepting reasonable offers of settlement

A recent judgment has clarified that "winner takes all" no longer applies to recovery of costs in litigation. The formula to be used by trial judges in deciding the most appropriate costs order is now much more complicated. In the costs judgment in Multiplex v Cleveland Bridge [2008], the judge set out eight principles that should be considered when reaching a decision on who pays the costs and how much that party has to pay. The principles involve looking at the entirety of the parties' conduct, and that includes taking into account any failures to make settlement offers or negotiate with the other side at an appropriate time in the proceedings. Such conduct can lead to the guilty party being penalised in costs. The penalty is not just restricted to reducing a successful party's costs. The court can, as this case demonstrates, increase the percentage of the costs that are recoverable by a successful party.

Read our analysis of this case for an outline of the eight principles and for an insight into how these principles are applied in practice.