The National Judicial Policy 2009 of the National Judicial (Policy Making) Committee calls
for cooperation among stakeholders to address “backlog” and “delays” in our system of
justice. All courts, from the Magistrate Courts to the Supreme Court, are overwhelmed by
this backlog of cases, caused primarily by delay in dispute resolution. Efforts are being
made at the policy level to identify ways to improve the administration of justice.
The subject of this paper is that courts can use the award of costs as a method of effective
administration of justice. One of the modes, which can result in speedier trials and bring
about a reduction in backlog of cases, is award of costs mechanism. In order to achieve
this objective, there is a need of change in law; in particular the High Court Rules. That
being said, however, we can only achieve these goals if there is a change in mindset of the
stakeholders (i.e. litigants, lawyers and the judiciary) on award of costs. Specifically, it
is suggested that as a general rule costs should follow the event i.e. the successful party
should recover its cost of pursuing the litigation.
The term “Costs” as is being used in this paper refers to the burden imposed on the loosing
side in a litigation to compensate the winning side for its expenditure. They are separate
from and in addition to any award of damages or other order for the payment of money,
but the order of costs would form part of the judgment.1
2. CURRENT POSITION: THE LAW
Section 35 of the Code of Civil Procedure, 1908 (hereinafter referred to as the “Code”) deals
with costs and reads as under:
(l) Subject to such conditions and limitations as may be prescribed, and to
the provisions of any law for the time being in force, the costs of an incident
to all suits shall be in the discretion of the Court, and the Courts shall have
full power to determine by whom or out of what property and to what
extent such costs are to be paid, and to give all necessary directions for the
purposes aforesaid. The fact that the Court has no jurisdiction to try the suit
shall be no bar to the exercise of such powers.
(2) Where the Court directs that any costs shall not follow the event, the
Court shall state its reasons in writing.
(3) The Courts may give interest on costs at any rate not exceeding six
percent per annum, and such interest shall be added to the Costs and shall be
recoverable as such.2
Under Section 35 of the Code, the court is empowered to award actual costs3 in order to reimburse the expenses undergone by the successful litigant.4
The High Court Rules 5 also deal with costs as follows:
FEE OF COUNSEL
1. Liability for the fees of adversary’s advocate.—
(1) In all proceedings before the Courts subordinate to the High Court, the unsuccessful litigants shall ordinarily be liable for the fees of his adversary’s Advocate (to be hereinafter called “the fee”) subject to the conditions and according to the rates as provided by these rules.
In Khurshid Ahmed Naz Afridi v. Bashir Ahmed 6 the Supreme Court found the object behind award of costs to be two fold: to compensate the aggrieved party and to penalise a party who may have initiated any action or passed the order in complete disregard of the obvious and glaring facts and provisions of law.
It has been held that the award of costs under Section 35 is not a penalty or punishment against the unsuccessful party. 7 As a necessary corollary to the same, the award of costs under this head cannot be a source of profit for the successful party. 8 The sole aim is to reimburse the successful party for the expenses incurred by him. 9 This is different from Section 35-A that deals with false and vexatious claims i.e. cases that necessitating an award of costs in addition to those under Section 35 and is in the form of a penalty. Discussion on compensatory costs for false and vexatious claims is beyond the scope of this paper and will be discussed in the proposed sequel.
3. DISCRETION ON AWARD OF COURT
It is recognized around the world that courts have discretion on whether to award costs
or not. 10 In Pakistan; the wording of Section 35 allows this discretion whereby “the Courts
[…] have full power to determine by whom or out of what property and to what extent such
costs are to be paid, and to give all necessary directions for the purposes aforesaid.” 11 The existence of this discretion has been highlighted over the years in a number of cases. For instance, it is in the discretion of the court to determine which one of the parties to the litigation will bear the costs of the litigation 12 the proportion in which the parties are to bear the costs13 and how much of the costs actually incurred are to be allowed.14 It can
either direct the unsuccessful party to bear all or part of the cost of litigation or it may
order the parties to bear their own costs or it may direct one defendant to a suit to bear the
costs of all of the other parties including other defendants to a suit. 15 Discretion, however‚
does not mean that a court can make whatever order it likes16 nor does it include failure to
4. CURRENT POSITION: THE PRACTICE
Section 35 of the Code and the High Court Rules notwithstanding, in practice, the courts
rarely award costs. Invariably the order of the court merely states that the parties are to
bear their own costs, be that the cost of counsel or the cost of filing/defending the suit.
Costs – in particular counsel fee – are not recovered for various reasons. Not least because
the method of calculation of fee provided in the High Court Rules is too rigid, mechanical
and outdated. It sets specific guidelines on how much fee can be claimed. For example in a
case of breach of contract where the damages awarded is Rs. 20,000 the High Court Rules
specify that the maximum counsel fee that can be recovered is Rs. 1250. The maximum fee
overall that can be recovered in any situation, irrespective of the complexity of the case or
the final award is Rs. 15,000.17 It is not surprising that no one has felt the need to update
these Rules since 1996. The High Court Rules do not provide sufficient incentive for a
litigant to seek recovery of costs.
Secondly, it is also suggested that tax implications for the legal practitioners and litigants
may also be the reason for non-implementation of the law. Under the High Court Rules a
certificate has to be filed in court stating the fee paid to the practitioner. 18
Finally, there appears to be a belief that an award of costs is a penalty and that costs
should only be imposed when there is a clear wrongdoing by a party or his counsel. This is
contrary to the judicial pronouncements on the law cited above. 19
5. THE CHANGE IN LAW PROPOSED: RULE AS TO COSTS
It is argued that there should be a ‘Rule’ created by law to the effect that “the costs will
follow the event save in recognized exceptions.”
The law, as it was originally envisaged, also supports this position. Reading Section 35
(2) of the Code together with Section 35 (1) it becomes apparent that the intention of the
drafters in 1908 was that costs should generally follow the event requiring a reason to be
provided if there is to be a divergence from the norm. Over the years other common law
countries have developed on this position into a rule through judicial pronouncements 20
and later on codified the same in codes of procedure.21
Broadly speaking, the basis of this Rule is that a successful party should not have to bear
the costs of having his rights vindicated in circumstances where the stance taken by the
unsuccessful party has been proven to be wrong. Therefore, it can be said, the successful
party has a “reasonable expectation” of being awarded costs against the unsuccessful
party.22 We find support to this proposition in other common law countries such as
England and Australia.23
Looking at it narrowly, one could suggest that this Rule might increase costs of litigation.
This perception may not be well founded. A party who uses the length of litigation to
delay the disposal of the case will be deterred by the costs that will be imposed upon him.
Therefore one would be inclined to resolve the dispute at the earliest so as to minimize
ones’ loss. Conversely speaking, implementing this Rule will also improve access to justice.
For instance, a party is unlikely to pursue a right that involves huge time and expenditure
viz-a-viz the reward. That being said, if that expenditure could be recovered, one would be
inclined to pursue his lawful right.
It can also be argued that this Rule will encourage parties to settle their claims out-of-court. Ordinarily out-of-court settlement in Pakistan is the exception rather then the norm, whereas nearly 98% of all civil disputes are resolved out of court in the United Kingdom. One of the deterrents to unnecessary litigation in the United Kingdom is the costs associated with it. Therefore parties endeavor to avoid litigation as far as possible and resolve their disputes amicably.
In terms of procedure, the High Court Rules should be changed to incorporate this Rule.
Rather than providing a rigid framework on the maximum fee recoverable, the Court
should be left to determine the appropriateness of the expenditure. Particularly because
the court is to rule on whether there are circumstances (discussed below), which warrant a
divergence from the Rule. In common law countries a hearing takes place at the conclusion
of the case where there is either a “summary assessment” or “detailed assessment” of costs depending on the complexity of the case. 24
6. CIRCUMSTANCES WHERE THE RULE CAN BE DISPLACED
Needless to say that the Rule advocated here is rebuttable. Onus of rebuttal is on the
unsuccessful party against whom the order of costs is to be made.25
It will be in the discretion of the court to displace the Rule. It will be displaced where there has been some conduct of the successful party disentitling him from the relief.26 It may be noted that
the disentitling conduct need not amount to misconduct, and may simply be any conduct
calculated to occasion unnecessary expense27 or delay. Another example where the Rule
will be rebutted is where the conduct of the successful party amounts to an abuse of court
process such as in forum selection28 or where proceedings are commenced for an ulterior
motive or collateral purpose.29 Finally the Rule will be rebutted in a situation where
the successful party refuses an offer for compromise and fails to obtain a result more
favourable than what was offered by the unsuccessful party.30
7. A REASONED APPROACH TO COSTS
In Common Law countries a more detailed look at the award of costs is being solicited.
This new approach is best summarised by Lord Woolf MR, the author of the reforms of
Civil Procedure Rules (Wolf Reforms in England and Wales), in case titled Phonographic
Performance Ltd., v. AEI Rediffusion Music Ltd31:
"The most significant change in emphasis of the new rules is to require courts to be more ready to make separate orders which reflect the outcome of different issues. In doing this the new rules are reflecting a change of practice which has already started."
It is believed that there is a need to follow a similar approach here in Pakistan requiring courts to perform a deeper and detailed analysis on costs involved in a case.
We started with the objective of finding ways to obtain quicker disposal of cases and
improve access to justice and identify whether award of costs can serve that purpose.
We have found that the law as it exists today, in particular the High Courts Rules, is
rigid, obsolete and in practice completely ignored. The idea of putting an upper-limit on
recoverable fee has proven to be a failure. Court process continues to be abused to cause
delay in the disposal of cases without any consequence. Rather then putting an upper-limit,
specified in the High Court Rules, the decision on reasonableness of costs should be left to
the discretion of the trial court.
Therefore the practice of making no order on costs should give way to the Rule. We have
identified two basis for it. On the one hand, as a matter of principle, a successful party
should not have to bear the costs of proving oneself to be correct. Except where by its own
conduct it has shown to be disentitled to such relief or there is another sufficient reason.
The second basis is the wider implications for the justice system. The trials will be quicker
as parties on a weaker footing will be compelled to minimize their losses. Through this
Rule the practice of delaying tactics can be checked with award of costs taking into account
such behavior. The Rule will encourage parties to seek alternative modes of dispute
resolution. We have also found that the rule can improve access to justice.
With the tax on services being sought, implementation of the Rule will also improve
tax collection, as parties would be required to disclose their counsel fees and other
[Word Count 3120]
The writer was called to the Bar of England and Wales in 2009 by Lincoln’s Inn. He currently practices law
at Ashtar Ausaf Ali and Associates.
The writer was called to the Bar of England and Wales in 2009 by Lincoln’s Inn. He currently practices law at Ashtar Ausaf Ali and Associates. The views expressed in this paper are the writer’s own.
1 For example the Seiminar Held by the Supreme Court Bar Association in February, 2011 in Lahore on Administration of Justice. Delay Reduction Workshops conducted in 2000. Pilot Courts, IT development, Guidelines to Subordinate Courts, Incentive and Reward Scheme etc.
2. Section 35 (3) is no longer operative by the order of Federal Sharia’h Court in 2000 PLD SC 225 M. Aslam Khaki vs. Muhammad Hashim as it has being declared to be repugnant to injunction of Islam from 30th June, 2001.
3. Costs-on-actual-basis in Pakistan is different from other common wealth countries including Australia and United Kingdom where it is further divided into costs-on-standard-basis and costs-on-indemnity basis.
4. PLD 1990 SC 28 Muhammad Akram vs. Mst Farman
5. Vol 1 Chapter 16 Part B of the High Court Rules
6. 1993 SCMR 639
7. AIR 1954 SC 26 The Firm of N. Peddanna Ogeti vs. Srinivasayya setti Sons
8. see AIR 1976 All. 111 Ganesh Gas Ram Gopal vs. The Munish, South Lunknow & another
9. Note that in 2010 PLD 182 Karachi; it was observed that the High Court in its constitutional jurisdiction can
award costs against a public department or state.
10. In an English Court of Appeal case Amaravathi Perinpanathan [R] v Westminster Magistrates & Another [CA
Civil] 2010 it was ruled that costs do not always follow the event, they are at the discretion of the Court.
11. Note that other statutes where costs have been imposed by law include Section 27 of Land Acquisition Act
1894. Secondly, under Section 18 of SRA 1877 if the vender suit for specific performance of agreement to sell
is dismissed on the ground of imperfect title of the vendor, the vendor shall bear the opposite party’s costs.
12. 1919 Ceylon 253 PC Simon de Costa and others vs. M.D.L. de Silva and others, AIR 1934 A 948 Sarju Singh vs.
Shayan Sundar Singh and another
13. AIR 1928 M 16 Sri Ranganatha Thathachariar and others vs. Veeravalli Rajagopalachariar and others, AIR
1919 L 30 Mangat Rai vs. Alia and another
14. See generally AIR 1925 PC 169 Gajadhar Mahton vs. Ambika Prasad Tewari & others, AIR 1940 Lahore 182
Puran Mal vs. Parmeshri Das, AIR 1962 Pat 36 Nandlal Tanti & others vs. Jagdeo Singh & others, AIR 1945 Pat
184 Col. Maharajadhiraj Sir Kameshwar Singh vs. Nebilal Mistri.
15. See also High Court Rules Vol 1, Chapter 16-B and 16-C
16. See for example the In Khurshid Ahmed Naz Afridi v. Bashir Ahmed 1993 SCMR 639 where the Supreme
Court observed that “… As the order granting costs is discretionary, it should be based on well recognized
principles of justice and equity and should not be fanciful, arbitrary, whimsical or capricious. Such discretion
is exercised with regard to the party that will be charged with costs, the amount and the manner in which
costs are to be paid. The discretion exercised by a Court should not be lightly interfered with in appeal unless
well settled principles are violated.” See also generally PLD 1990 Lahore 49 and 1992 SCMR 1898.
17. High Court Rules Vol 1 Chapter 16 Part B Rule 3. A special permission is required if a fee higher then the
limit provided by the Rules is sought See Rule 20.
18. High Court Rules Vol 1 Chapter 16 Part B Rule 20
19. See for example AIR 1954 SC 26 The Firm of N. Peddanna Ogeti vs. Srinivasayya setti Sons. See also Khurshid
Ahmed Naz Afridi v. Bashir Ahmed 1993 SCMR 639
20. See for example the Australian case of Laguillo v Haden Engineering Pty Ltd 1 NSWLR 306.
21. In Australia by virtue of Code of Civil Procedure Act, 2005 rule. 42.1. and Civil Procedure Rules, 1999 in
22. Oshlack v Richmond River Council (1998) 193 CLR 72 at  and .
23. In the Australian case of Laguillo v Haden Engineering Pty Ltd 1 NSWLR 306 where the aforestated
presumption was recognized.
24. In the case of England see Part 44 Rule 7 of the Civil Procedure Rules. Note also that “fixed costs” in
specified areas, such as road traffic accident cases, is also awarded irrespective actual cost incurred by the
parties. See Part 45 of the English Civil Procedure Rules.
25. Waterman v Gerling Australia Insurance Co Pty Ltd (No 2)  NSWSC 1111 at .
26. See the Astralian case of G R Vaughan (Holdings) Pty Ltd v Vogt  NSWCA 263 where the rule was laid
27. See for example the Australian case of Lollis v Loulatzis (No 2)  VSC 35 at ; Keddie v Foxall
 VLR 320 at 323–4
28. AIR 1921 B 34
29. Packer v Meagher  3 NSWLR 486 at 500
30. See for example Calderbank v Calderbank  3 All ER 333. Note that In the case of a Calderbank letter, it
is the offeror (or the unsuccessful party in this case) that bears the burden of satisfying the court to exercise
its discretion in their favour.
31.  RPC 335