Understanding a Bill of Costs in Legal Cases

Key Takeaways

• A bill of costs outlines legal expenses the winning party seeks to recover.
• It typically includes itemized court fees, disbursements, and attorney work.
• Bills must often be verified and submitted with supporting affidavits or evidence.
• Electronic filing is required in jurisdictions like England and Wales for certain cases.
• Disputes over a bill of costs may require judicial review or negotiations.
• Legal aid, cost estimates, and funding arrangements can impact the final bill.
• Accurate cost estimation and documentation are crucial for approval.

A bill of costs describes the legal costs of the case. The successful party gives the losing party the bill of costs so that their legal bills will be covered.

What is a Bill of Costs?

In most court cases, legal costs are not paid for until the case has been concluded. Once a court case has finished, the party that won the case will present a memorandum to the losing party that describes the winning party's court costs. This memorandum is known as a bill of costs. Many times, the losing party in the case, after receiving the bill of costs, will negotiate a lump-sum settlement with the winning party.

The benefit of negotiating a lump sum is that it ensures future costs will be covered and limits the possibility for additional litigation related to the costs. If the losing party decides to contest the bill of costs, however, they would need to file a Notice of Dispute.

The lawyer for the successful party is rarely motivated to negotiate a settlement, as a court battle related to a bill of costs means they will be able to earn additional hourly wages. If the attorneys of each party are not able to agree to a settlement, it often ends up costing the clients additional fees.

When a bill of costs is issued, it must have an itemized list of court costs. If necessary, the bill of costs will need to reference tables provided by the court to help with cost calculation. Should the losing party decide to dispute the bill of cost, they can have the bill examined by a judge.

A standard bill of costs form contains three parts:

• Work Done Not for Taxation.
• Work Done for Taxation.
• Disbursements.

A general rule states that solicitors are not allowed to substitute a bill of costs in order to receive a larger amount, unless the client has consented or there is a court order. The exception to this rule is that solicitors can substitute a normal invoice with a bill of costs if the bill of costs would result in higher fees. For example, a contract may exist between the two parties that specifically allows the solicitor to substitute a bill of costs.

In the United States, a bill of costs must be verified before it can be taxed. The person claiming a disbursement using a bill of costs will need to include an affidavit that verifies that the information in the bill is correct and that the fees and services listed in the bill were necessary and performed as described.

Common Components of a Bill of Costs

A typical bill of costs includes more than just legal fees. It is an itemized breakdown of expenses incurred during litigation, often comprising:

• Court filing fees
• Attorney time and hourly charges
• Expert witness fees
• Transcription and copying costs
• Travel and accommodation (if necessary for court appearances)
• Process server fees
• Costs of serving documents
• Legal research and electronic database usage

Each cost must be justifiable and usually corresponds with the rules of court or a scale of fees set by the jurisdiction.

Who Prepares the Bill of Costs?

The bill of costs is usually prepared by the winning party’s legal representative. In more complex matters, a specialized costs draftsman may be employed. Their task is to ensure the bill complies with procedural rules and includes all recoverable costs. The opposing party then has an opportunity to dispute specific items, which may result in a formal assessment by a costs officer or judge.

Cost Assessment and Dispute Process

When a bill of costs is challenged, the dispute enters a formal assessment phase. This can involve:

• Negotiation between the parties to settle out of court.
• Detailed assessment hearing, where a judge reviews each cost item.
• Written submissions, particularly when parties prefer not to attend hearings.

Courts will disallow costs that are unreasonable, excessive, or unnecessary. Both sides may provide evidence or argument for or against specific charges.

Legal Aid and Public Funding Considerations

Where legal aid or public funding is involved, a bill of costs may be subject to additional scrutiny. The state or funding body must ensure that taxpayer money is spent appropriately. This often requires:

• Prior approval for certain disbursements.
• Clear evidence that costs align with legal aid guidelines.
• More detailed narrative justifying each claim.

Electronic Bill of Cost

In England and Wales, a bill of costs must now be submitted electronically. This requirement has existed since April 6, 2018.

These rules are applicable to multi-track claims with certain exceptions:

• Scale or fixed costs apply to the proceedings.
• Cases involving an in-person litigant who is also the receiving party.
• Cases where the court has ordered something other than the electronic form.

The purpose of using an electronic bill of costs instead of a physical form is that it will hopefully allow the bill to be processed more quickly. The format of the electronic form is a spreadsheet, and you can find this form online.

A great deal of information will need to be included in the bill of costs spreadsheet:

• A narrative and chronology of the court case.
• The rates charged by the legal team.
• Information about any funding.
• A cost summary that is compared with the most recent approved budget.

In the spreadsheet, there also needs to be a summary of the activities and tasks engaged in by the legal team. The cost summary will need to be updated through each phase of the court case. If you decide not to use the available template, you can make your own electronic bill of costs by using a spreadsheet and including the required information.

The electronic bill of costs must be simultaneously sent to the opposing party and a dedicated court email address. A hard copy must also be filed. If the bill of costs includes legal work that was performed before the new rules took effect, the work done prior to April 5, 2018, can be submitted on a paper form, and work done after this date can be submitted on an electronic form.

Importance of Cost Estimates

Before legal proceedings begin, attorneys often provide clients with a cost estimate. While not legally binding, these estimates help manage expectations and can be useful during cost assessments. A good estimate includes:

• Forecasted legal fees for each litigation phase.
• Likely disbursements (e.g., court fees, expert reports).
• Contingencies for unexpected developments.
• Payment terms and billing intervals.

Accurate estimates protect against client dissatisfaction and provide a basis for dispute resolution if the actual bill significantly exceeds the expected amount.

Timekeeping and Recordkeeping Best Practices

Successful recovery of legal costs often depends on meticulous timekeeping and recordkeeping. Legal professionals should:

• Use billing software or detailed spreadsheets to log time by task.
• Maintain contemporaneous notes about work performed.
• Archive receipts and disbursement records.
• Document communication with clients and opposing counsel.

Judges assessing bills of costs often require supporting records to verify the reasonableness and necessity of the claimed expenses.

Frequently Asked Questions

1. What is the purpose of a bill of costs?
   It itemizes legal expenses the successful party seeks to recover from the losing party after litigation.
2. Can the losing party dispute a bill of costs?
   Yes, they may file a Notice of Dispute or request a detailed assessment by the court.
3. Is a bill of costs always approved as submitted?
   No. Courts assess whether each cost is reasonable, necessary, and properly documented.
4. Who reviews a disputed bill of costs?
   A judge or court officer may be assigned to conduct a formal assessment hearing.
5. Are electronic bills of costs required everywhere?
   No, but in jurisdictions like England and Wales, electronic submission is mandatory for many multi-track cases.

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