The impact of cost-capping orders

What are cost-capping orders?

Cost-capping orders give judges the power to limit the parties' recoverable costs at different stages of litigation. Cost-capping orders were introduced about five years ago when courts started to grant orders to limit parties' recoverable costs at different stages of their claims.

Why are they becoming more popular?

It does appear that cost-capping orders are gaining more momentum, especially with the way courts deal with changes to litigation costs. Initially, cost capping was only granted in group litigation, but is now becoming more widespread as courts are increasingly concerned about litigants generating excessive and unreasonable costs.

What will their impact be on the construction sector?

Quite probably a more significant one than in any other sector. It is predicted that cost-capping orders will have a noticeable effect on an industry that is notorious for disputes involving substantial legal costs. This is, of course, particularly due to the requirement to comply with the Pre-Action Protocol for Construction and Engineering Disputes. Primarily, cost capping will have a major impact on how parties approach dispute resolution.

So, is this a good thing?

Yes, if such orders are sought and granted, then they could assist in controlling the sums being expended in litigation by both claimants and defendants and reassure parties that litigation can be made cost-effective for cases that might not be suitable for adjudication.

Is there a tactical advantage in using a cost-capping order?

Well, this is the real crux of the matter. The answer is yes, especially if the court grants an order capping the expense relating to a particular expert witness or in relation to a particular issue. In this way there may be some tactical advantage to be gained by restricting an opponent's litigation costs.

What does this mean for the future?

First, it means that it will be possible to control the cost of litigation more carefully. Second, it means that a well-timed application for a cost cap might give the recipient the type of tactical advantage over the opposition outlined above. We can therefore probably expect to see more of these orders being used.

Any advice on using a cost-capping order?

Don't forget that cost capping can be a significant weapon for any party where there are genuine concerns that the other side's costs are being incurred disproportionately. It may be wise, particularly for the construction industry, to consider alternative forms of dispute resolution, such as adjudication or mediation.