Costs Capping Orders 

1. Meaning

A costs capping order is a judicial order that places a ceiling on the amount of future litigation costs that a party may recover from another party under a subsequent costs order.

In simple terms, the court says:

“Even if you ultimately win, you cannot recover more than the specified amount in costs.”

The concept is particularly developed in English civil procedure, where CPR Part 3 expressly empowers courts to make costs capping orders. The purpose is to prevent litigation costs from becoming disproportionately high and to preserve fairness between parties.

It is important to distinguish a costs cap from security for costs. Security for costs requires a party to provide security against an opponent's potential costs liability; a costs cap instead limits the future recoverable costs of the party subject to the order.

2. Objectives of Costs Capping

Costs capping orders seek to:

1. Control disproportionate litigation expenditure.
2. Prevent a party with substantially greater financial resources from overwhelming an opponent through expenditure.
3. Promote access to justice.
4. Prevent tactical or oppressive litigation spending.
5. Ensure proportionality between the dispute and the costs incurred.
6. Provide greater certainty about potential costs exposure.
7. Encourage efficient case management.
8. Prevent unnecessary expert evidence, disclosure and procedural complexity.
9. Protect weaker parties in appropriate cases.
10. Prevent litigation from becoming economically irrational.

The modern approach treats costs control as an important part of civil justice rather than merely a matter between lawyers and clients.

3. Costs Capping Under English Civil Procedure

The clearest statutory/procedural framework is found in CPR Part 3.19–3.21.

Under CPR 3.19, a costs capping order can limit:

• the costs of the whole litigation, or
• the costs relating to a particular issue.

The court may make such an order where:

• it is in the interests of justice;
• there is a substantial risk of disproportionate costs; and
• ordinary case-management directions and detailed assessment would not adequately control that risk. 

The court considers matters including:

• relative financial positions of the parties;
• costs already incurred;
• anticipated future costs;
• stage reached in the litigation; and
• whether the cost of determining the cap itself would be disproportionate. 

The Practice Direction further states that such orders should be made only in exceptional circumstances and that an application should normally be made as early as possible.

4. Costs Capping vs Other Costs Orders

A costs cap therefore concerns the maximum recoverability, rather than simply the amount a lawyer may charge his or her own client.

5. Important Principles

A. Exceptional Nature

A costs capping order is not supposed to be routine. The ordinary mechanisms of case management, budgeting and detailed assessment should normally be used first.

The English Practice Direction expressly characterises costs capping as appropriate only in exceptional circumstances.

B. Proportionality

The court considers whether projected costs are disproportionate to:

• value of the dispute;
• complexity;
• importance;
• issues involved;
• public significance; and
• resources required.

C. Interests of Justice

The central question is not merely whether one party is rich and another is poor. The court asks whether the circumstances justify limiting recoverable expenditure in order to achieve justice.

D. Timing

An application should ordinarily be made early. Delay may weaken the application because substantial costs may already have been incurred.

E. Material Change

Once made, variation generally requires a material and substantial change of circumstances or another compelling reason.

6. Case Laws

1. Process & Industrial Developments Ltd v Federal Republic of Nigeria

[2025] UKSC — Supreme Court

Facts

The litigation involved major international commercial disputes and questions concerning the court's jurisdiction over costs.

Principle

The UK Supreme Court emphasised that an order for costs is fundamentally different from an award of damages. Costs are a discretionary procedural remedy, governed by statutory and procedural rules.

The Court explained that the CPR contains mechanisms for controlling litigation expenditure, including:

• costs budgets;
• costs management orders; and
• costs capping orders.

Importance

The case is important for understanding the conceptual foundation of costs capping: the purpose is not to compensate a party in the same way as damages but to regulate the financial consequences of litigation.

2. CPRE Kent v Secretary of State for Communities and Local Government

[2021] UKSC 36

Facts

The case concerned judicial-review proceedings involving multiple respondents and an interested party. The claimant challenged the costs consequences following refusal of permission.

Principle

The Supreme Court examined the relationship between statutory judicial-review costs protection and costs payable to different parties.

The case demonstrates that costs protection and costs limitation mechanisms must be applied according to their specific statutory and procedural framework.

Importance

It is particularly relevant to costs caps in public-law and environmental litigation, where access to justice and protection against excessive costs exposure are important considerations.

3. Salem Advocate Bar Association, Tamil Nadu v Union of India

(2005) 6 SCC 344

Facts

The Supreme Court considered reforms to civil procedure and the problem of ineffective or merely nominal awards of costs.

Principle

The Court criticised the widespread practice of awarding insignificant costs. It emphasised that costs should generally reflect actual, reasonable and realistic litigation expenditure, subject to judicial discretion.

The Court connected realistic costs with discouraging:

• frivolous litigation;
• unnecessary defences; and
• procedural abuse. 

Importance

Although this is not an Indian costs-capping order case in the strict English CPR sense, it provides an important Indian foundation for judicial control of litigation costs.

It demonstrates the Indian Supreme Court's recognition that costs are an important instrument of civil-procedure discipline.

4. Sanjeev Kumar Jain v Raghubir Saran Charitable Trust

(2012) 1 SCC 455

Principle

The Supreme Court dealt extensively with the meaning of realistic costs.

It explained that realistic costs cannot mean whatever amount a wealthy litigant chooses to spend by engaging an expensive legal team. Costs must remain reasonable and connected with ordinary litigation requirements.

Importance

The principle is directly relevant to cost-capping philosophy:

A party should not be able to impose unlimited recoverable costs on its opponent merely because it possesses greater financial resources.

The case therefore supports proportionality and reasonableness in judicial costs control.

5. Raman Gupta v Anil Kumar Goel

Delhi High Court, 16 March 2016

Facts

The dispute concerned the assessment of realistic costs following litigation.

Principle

The Court explained that the expression “actual realistic costs” cannot mean fanciful or extravagant expenditure merely because a party has the financial ability to employ highly expensive lawyers.

Importance

The case reinforces the principle that costs should be realistic, reasonable and proportionate, rather than determined simply by the wealth of the successful litigant.

This is highly relevant when determining whether a proposed costs ceiling is reasonable.

6. Hirachand v Hirachand

[2024] UKSC

Facts

The Supreme Court considered the nature of costs in family litigation and the statutory/procedural framework governing costs.

Principle

The Court emphasised that CPR Part 44 gives courts a broad discretion concerning:

• whether costs should be paid;
• the amount;
• the circumstances;
• conduct of parties;
• partial success; and
• settlement offers.

The Court recognised that costs rules serve important justice objectives, including controlling litigation costs and facilitating access to justice.

Importance

Although not principally a costs-capping case, it provides an important conceptual foundation for judicial control of litigation costs.

7. Foskett v McKeown

[2000] UKHL 29; [2001] 1 AC 102

Relevance

Foskett is primarily a tracing case rather than a costs-capping case. However, it is sometimes useful in understanding the broader distinction between substantive proprietary remedies and procedural costs orders.

Principle

The House of Lords distinguished substantive proprietary rights from procedural mechanisms for obtaining relief.

Importance

It reinforces the general principle that costs are ancillary to litigation rather than the substantive legal right being adjudicated.

This is consistent with the later Supreme Court's explanation that a costs order is fundamentally different from damages.

7. Judicial Review Costs Caps

A special form of costs protection exists in judicial review.

Under the UK framework, judicial-review costs capping orders are separately governed by the Criminal Justice and Courts Act 2015 and CPR Part 46.

The court can consider:

• claimant's financial resources;
• likely future litigation costs;
• availability of resources to meet adverse costs;
• public interest;
• nature of the proceedings; and
• the statutory requirements governing the particular costs-protection regime. 

This should not be confused with the ordinary CPR Part 3 costs-capping regime.

8. Environmental and Public-Interest Litigation

Costs caps are particularly important where litigation concerns:

• environmental protection;
• planning decisions;
• climate change;
• public authorities;
• constitutional rights;
• public-interest organisations; and
• challenges involving substantial public consequences.

Without costs protection, a claimant may technically have a strong legal claim but be unable to pursue it because of potentially ruinous adverse costs.

The CPRE Kent litigation demonstrates the importance of statutory costs protection in judicial review and environmental/public-law litigation.

9. Procedure for Seeking a Costs Capping Order

A typical application involves:

Step 1 — Identify the costs risk

The applicant demonstrates that future costs are likely to become disproportionate.

Step 2 — Prepare a detailed costs budget

The application should identify:

• costs already incurred;
• anticipated future costs;
• solicitors' costs;
• counsel's fees;
• expert costs;
• disclosure costs;
• travel and other disbursements.

CPR 3.20 expressly requires a budget dealing with incurred and anticipated future costs.

Step 3 — Explain why ordinary controls are insufficient

The applicant must show why:

• case management;
• costs budgeting; and
• detailed assessment

will not adequately control the anticipated disproportionate expenditure.

Step 4 — Demonstrate exceptional circumstances

Because the remedy is exceptional, the applicant should establish a concrete justification rather than merely asserting that the opponent has greater resources.

Step 5 — Court determines the appropriate ceiling

The court may cap:

• the entire litigation; or
• a particular issue.

Step 6 — Variation

If circumstances materially change, a party may apply to vary the cap.

10. Factors Considered by the Court

The court may consider:

11. Effect of a Costs Cap

Suppose:

• Party A spends ₹1 crore on future litigation;
• court imposes a recoverable costs cap equivalent to ₹40 lakh;
• Party A ultimately wins.

If the cap applies to the recoverable costs, Party A cannot simply recover the entire ₹1 crore from Party B merely because Party A actually spent that amount.

The remaining expenditure may have to be borne by Party A.

Thus, a costs cap changes the economic risk allocation of litigation.

12. Costs Capping and Access to Justice

The doctrine has two potentially competing objectives.

Protecting access to justice

A financially weaker party may otherwise be deterred from bringing a legitimate claim.

Preventing unfair advantage

A wealthy party should not be permitted to turn litigation into an unlimited financial contest.

But there is a counter-risk

A cap that is too low can:

• prevent a party from properly presenting its case;
• discourage necessary expert evidence;
• undermine procedural fairness;
• make complex litigation impossible to conduct adequately.

Therefore, the cap must be realistic as well as restrictive.

This is consistent with the Indian Supreme Court's insistence that litigation costs should be realistic rather than either nominal or fanciful.

13. Indian Position

India does not have an exact equivalent of the English CPR Part 3.19 costs-capping regime applicable across ordinary civil litigation.

Indian courts instead control costs through:

• Section 35 CPC — costs;
• Section 35A CPC — compensatory costs in specified cases;
• Section 35B CPC — costs for causing delay;
• Order XXA CPC — costs;
• case-management powers;
• realistic-cost principles;
• exemplary/compensatory costs in appropriate cases;
• inherent procedural powers.

Therefore, when the expression “Costs Capping Order” is used in an Indian legal context, it should generally be understood comparatively or functionally unless a specific statutory/regulatory regime provides an actual ceiling.

14. Costs Capping vs Security for Costs

These concepts should not be confused.

15. Costs Capping vs Protective Costs Order

A costs capping order limits the amount of costs that may be recovered by a party.

A protective costs order generally protects a party—often a public-interest claimant—from an excessive adverse costs burden.

The two may overlap in their access-to-justice rationale but are legally distinct mechanisms.

16. Key Legal Principles Emerging from the Cases

The principal propositions are:

1. Costs are discretionary, unlike damages, which ordinarily compensate an established substantive loss. 
2. Litigation costs must be subject to proportionality and judicial control.
3. Costs capping is an exceptional remedy under the ordinary English CPR regime. 
4. The court should normally consider less intrusive case-management mechanisms first. 
5. Financial inequality can be relevant, but it is not by itself sufficient.
6. The timing of the application is important.
7. A cap can apply to the whole case or a discrete issue. 
8. A cap should be sufficiently realistic to permit effective litigation.
9. A material change in circumstances can justify variation.
10. Indian law strongly supports realistic and reasonable costs, even though it does not replicate the English CPR mechanism generally. 

17. Short Case-Law Summary

Conclusion

Costs capping orders are an important judicial case-management mechanism designed to prevent disproportionate litigation expenditure. Their central purpose is not simply to make litigation cheaper, but to ensure that the financial consequences of litigation remain compatible with proportionality, fairness, access to justice and efficient judicial administration.

The English CPR provides the clearest formal model: a costs cap may be imposed where there is a substantial risk of disproportionate future costs, ordinary case management is inadequate, and the interests of justice require intervention.

In India, there is no general equivalent to CPR 3.19 for ordinary civil cases, but the Supreme Court's jurisprudence on realistic, reasonable and proportionate costs provides a functional foundation for judicial control of excessive litigation expenditure.