Costs

Costs shape the economics of every claim, and they should be considered before the claim is filed rather than afterwards.

The arithmetic is straightforward. Take the amount in dispute, subtract the likely legal fees, subtract the time value of waiting years for a judgment, subtract the risk of losing, and subtract the risk of winning against somebody who cannot pay. What remains is the real value of the claim.

For modest debts that calculation frequently produces a negative number, which is exactly the gap the small claims courts were created to close.

Costs also arise during a case rather than only at the end. Interlocutory applications carry costs orders, and a party who brings unmeritorious applications can be ordered to pay costs even though they eventually win the case.

Security for costs is the related mechanism. A defendant can apply for the claimant to provide security where there is reason to think the claimant would be unable to pay costs if the claim fails, most commonly where the claimant is outside the jurisdiction or is a company with no assets.

The modest scale of Nigerian costs awards has two consequences that pull in opposite directions.

It makes litigation accessible, because a claimant with a genuine but risky claim is not facing ruin if they lose. In jurisdictions where the loser pays the winner's full costs, that risk deters meritorious claims as well as weak ones.

It also means a defendant with no case can litigate for years knowing the eventual costs order will be a fraction of what they imposed on the claimant. Delay becomes a strategy, and the costs regime does not punish it enough to deter it.

Courts have shown willingness to award more substantial costs where a party's conduct was unreasonable, and applicants should ask for them with an explanation rather than leaving the question to the court's general discretion.

For a claimant, the practical planning points are: agree the fee basis with your lawyer in writing at the outset, budget for the whole matter rather than the first step, and factor in that a costs award will not reimburse you.

Where a matter is settled, costs should be dealt with expressly in the settlement agreement, because a settlement silent on costs leaves each side bearing their own, which is usually what was intended but should be stated.

Two different measures, and the gap between them is what surprises litigants.

Party and party costs are what one side is ordered to pay the other. They are assessed by the court and cover what was reasonably necessary for the conduct of the case, at the level the court considers appropriate. In Nigeria this is conventionally modest.

Solicitor and client costs are what you actually owe your own lawyer under your retainer. They cover everything done on your instructions, including work the court would not consider necessary between the parties.

The difference is the shortfall the winner carries. A successful party awarded costs still pays their own lawyer the balance.

That is why the fee arrangement with your own lawyer matters more than the costs order you hope to obtain, and why it should be agreed in writing before the work starts.

Costs awards do not compensate. A successful party is generally out of pocket even after an order in their favour.

Recovering the award is a separate exercise. A costs order against a losing party with no assets is enforced like any other money judgment, which is to say with difficulty.

The discretion also makes outcomes unpredictable, and a party cannot plan on a particular level of recovery.

And costs do not address delay. A defendant who strings a case out imposes years of cost and disruption that a conventional costs order does not begin to reflect.