Costs – Indemnity basis and standard basis

Where costs are awarded on a standard basis the court will only allow costs which are proportionate (ie whether necessary) to the matters in issue and if the court has any doubt as to whether the costs are reasonably incurred or reasonable and proportionate in amount, it resolves the doubt in favour of the paying party. This can be seen in the case of Home Office v Lownds [2002] EWCA Civ 365.

Where costs are awarded on an indemnity basis the court resolves any doubt it may have as to whether the costs were reasonably incurred or were reasonable in amount in favour of the receiving party. There is no requirement for the costs to be proportionate. The court will not allow costs which have been unreasonably incurred or are unreasonable in amount.

According to CPR 44.5(1) where costs are assessed on the standard basis the payee can expect to recover costs “proportionately and reasonably incurred” or “proportionate and reasonable in amount”; and where costs are assessed on the indemnity basis the payee can expect to recover all his costs except those that were “unreasonably incurred” or were “unreasonable in amount”.

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