The words “costs” , "legal costs" or "legal fees" denote the remuneration which a party pays to his own solicitor. It also means the sum of money which the court orders one litigant to pay (usually the "loser" in the litigation") to another to compensate the latter for the expense which he has incurred in litigation. Relevant costs rules in Hong Kong are found in Order 62 of the Rules of the High Court (Cap 4A), which applies to contentious proceedings.
Costs to follow the event - the costs indemnity rule
If in the exercise of its discretion the Court sees fit to make any order as to the costs of, or incidental to, any proceedings, the Court will order the costs “to follow the event”, except when it appears that some other order should be made as to the whole or any part of the costs. This means that the unsuccessful litigant will usually be ordered to pay the legal costs of the successful party, in addition to paying his own legal costs.
This rule is referred to as the “costs indemnity rule”, and is also the basic costs allocation rule for civil proceedings in Hong Kong.
Considerations which justify the costs indemnity rule are that it:
However, the amount of costs awarded by the court to the successful litigant seldom repays his full outlay.
- deters vexatious, frivolous or unmeritorious claims or defences;
- compensates successful litigants for at least some of the costs they incur in litigating;
- encourages settlement of disputes by adding to the amount at stake in the litigation.
Costs on a Party and Party Basis
Most often, the court orders costs to be paid on this basis which means that the party favoured by the cost order can only recover 60-70% of the legal costs he has to pay to his own lawyer. The unmet amount will be paid by himself personally.