Taxation of Legal Costs

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Beware – obtaining a costs order for a successful costs party doesn’t necessarily mean you will be reimbursed the full amount expended on costs.

Types of Costs Awarded 

The Guernsey Royal Court can award costs on two bases: recoverable and indemnity costs.

The first type of costs order is one awarded on a recoverable basis. 

Under this standard basis, the Court set a maximum hourly rate that a successful party can recover for their Advocates’ fees to £340 per hour (updated in 2024). Even if a party’s advocate charges a higher rate, the opposing party will only be liable for the capped amount. The successful party must prove that the costs incurred were reasonable and proportionate, with the final recoverable sum determined through the taxation process.

The second basis for awarding costs is the more adverse indemnity basis. 

Under this approach, the burden shifts to the paying party to prove that any specific cost claimed is unreasonable. Unlike recoverable costs, when an indemnity costs order is granted, there is no cap on the hourly rate, meaning awarded costs can fully reflect the actual legal fees incurred.

Courts grant indemnity costs orders only in cases where a party’s conduct is deemed excessively unreasonable—falling “outside the norm.” These orders act as a deterrent against improper litigation conduct.

The process for taxation of costs

When parties cannot agree on costs under a court order, the paying party can apply for “taxation” of costs. This process, conducted by the Guernsey Royal Court, ensures that the recoverable costs are fair, reasonable, and proportionate.

Governed by The Royal Court (Costs and Fees) (Amendment) Rules, 2024, the Court assesses whether costs were reasonably incurred and determines whether to award them on a full or partial indemnity basis. This ensures a fair resolution in cost disputes while maintaining judicial discretion.

An overview of the process

1. Costs order is made
2. Submission of a bill of costs
3. Lodging of costs, schedules and objections
4. Taxation hearing
5. Determination and final costs award

1. Costs order is made

After the conclusion of a case, the Court may issue a costs order specifying which party is liable to pay costs and on what basis—either the recoverable basis or the indemnity basis.

2. Submission of a bill of costs

The party awarded costs must prepare and submit a bill of costs detailing the legal fees and disbursements incurred. This document itemises:

Description of Work: Detailed entries of tasks performed.
Time Spent: Exact or reasonably estimated time allocated to each task.
Hourly Rates: Rates charged by legal professionals involved.
Disbursements: Any additional expenses, such as court fees or expert witness charges.

This is then submitted to the paying party and lodged with the Court.

3. Lodging of costs, schedules and objections 

The paying Party who is not satisfied with a bill of costs and wishes to challenge it, must apply for taxation within one month of receiving the bill. To dispute specific charges, the paying party can file Points of Dispute, challenging specific items in the bill outlining objections based on reasonableness or proportionality.  This document outlines each contested cost with reasons for the objection.

The receiving party—the one who submitted the bill—can then respond by filing Replies, defending the contested costs and justifying their necessity by providing justifications for their reasonableness and proportionality. This exchange ensures a fair assessment of legal expenses before the Court determines the final amount payable.

4. Taxation hearing 

If parties cannot reach an agreement on costs, the dispute proceeds to a taxation hearing before a taxing master of the Royal Court.

The receiving party must present their argument to justify the costs claimed.

• The paying party must demonstrate why specific costs should be reduced or disallowed, arguing they are excessive or unnecessary.
• The Bailiff or Deputy Bailiff must assess whether the costs incurred were reasonable and proportionate before determining the final amount payable.

5. Final costs awarded

After reviewing the submissions, a decision is issued, adjusting the bill where necessary. The final assessed costs are then payable by the losing party.

Fees associated with taxation proceedings

Specific fees are associated with taxation proceedings which are in addition to fees incurred by both parties in proceeding to taxation. Such as:

• The filing fee for a request for taxation (£91); and
• Fees for the determination of requests to appoint a judge (£173); and
• Filing points of dispute (paying party) £173; and
• Filing of response by receiving party (173); and
• Taxation hearing (£519 per hour)

How can we help?

ABT Advocates has extensive experience in the taxation of legal costs in Guernsey. If you require advice on any aspect of the process, our team is here to assist. For expert guidance, contact Advocates Clare Tee, Jeremy Le Tissier, or Senior Associate Nick Taitz.