When a costs agreement is set aside, what may the court order regarding costs?

• A. Pay a penalty to the opposing party.
• B. Apply an applicable cost scale or decide a fair and reasonable amount having regard to relevant factors.
• C. Dismiss the case automatically.
• D. Require the lawyer to reduce the budget by half.

Answer: (B)

When a costs agreement is set aside, the court has power to fix costs either by applying an applicable cost scale or by assessing a fair and reasonable amount having regard to relevant factors. The cost scale provides a standard benchmark for common items and work, giving predictability and consistency. If a scale isn’t used or doesn’t address the situation, the court can conduct a costs assessment, looking at what was actually done, how much time and effort was involved, and other circumstances to decide a fair amount. Relevant factors typically include the complexity and novelty of the issues, the skill and responsibility involved, the results achieved, the conduct of the parties, any offers of settlement, and the overall value of the matter. This ensures costs are fair and reasonable rather than punitive, and it isn’t about automatic penalties, automatic dismissal, or arbitrary budget cuts.