CPR 45.13 allows the court to penalise a party who is found to have behaved unreasonably by reducing their costs by 50% if the unreasonable party is the receiving party or increasing the other party’s costs by 50% if the unreasonable party is the paying party.
The rule does not, as it might, require the unreasonable behaviour to have caused additional costs to the other side. This is perhaps not surprising. The 50% sanction is clearly set at such a high level not so as to compensate the innocent party but, rather, to punish the party at fault (and hopefully thereby discourage bad behaviour by other litigants).
The two elements of CPR 45.13 are drafted as entirely standalone provisions:
“(1) Where, in a claim to which Section VI, Section VII or Section VIII of this Part applies, an order for costs is made in favour of a party whom the court considers has behaved unreasonably, the other party may apply for an order that those costs be reduced by an amount equivalent to 50% of the fixed recoverable costs which would otherwise be payable.
(2) Where, in a claim to which Section VI, Section VII or Section VIII of this Part applies, an order for costs is made against a party whom the court considers has behaved unreasonably, the other party may apply for an order that those costs be increased by an amount equivalent to 50% of the fixed recoverable costs which would otherwise be payable.”
I suspect that when the rule drafters were drafting this provision (to the extent to which they gave the matter any thought), they anticipated that there would only be one receiving party and one paying party in any given case, such that only CPR 45.13(1) or CPR 45.13(2) would be engaged, not both.
However, even ignoring the possibility of the court making an issue-based order, it will not be uncommon for both parties to have a costs order in their favour where the defendant succeeds on a Part 36 offer. The claimant will normally have their costs up until expiry of the relevant Part 36 period and the defendant will have their costs thereafter.
What if the claimant is also found to have behaved unreasonably during the claim? Given the wording of the rule, there appears to be nothing to prevent the defendant applying to have the claimant’s costs reduced by 50% and their own costs increased by 50%.
It might be thought more logical for the decision as to whether to apply CPR 45.13(1) or CPR 45.13(2) to be based on when the unreasonable behaviour occurred. If the unreasonable behaviour was during the period the claimant is entitled to costs, then just CPR 45.13(1) would apply. If the unreasonable behaviour was during the period the defendant is entitled to costs, then just CPR 45.13(2). However, this would introduce a causative requirement to the sanction. In other words, the sanction would operate to compensate (however crudely) the innocent party, with the sanction to apply for the costs period when the unreasonable behaviour occurred. Nevertheless, for the reasons given earlier, this seems doubtful. The rule does not require there to be any link between the unreasonable behaviour and the respective parties’ costs for the rule to be engaged.
Whether the courts will be minded to apply a double sanction is another matter.
