Source: https://kerryunderwood.wordpress.com/2015/03/
Timestamp: 2019-04-25 12:06:31+00:00

Document:
This piece deals with the principles of when indemnity costs should be made as a result of a fault by the paying party. This is very different from indemnity costs under Part 36 which is considered in my piece Part 36: The Dry Salvages.
That is as true of indemnity costs as anything else; with the increased emphasis on proportionality, whatever that means – see Proportionality: The Emperor’s New Clothes – indemnity costs have suddenly become very much more important.
CPR 44.3 deals with the basis of assessment as being either on the standard basis or on the indemnity basis and the default position is the standard basis (CPR 44.3(4)).
resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.
The indemnity hourly rate or solicitor and own client hourly rate, which is the same thing, will almost always be higher than the amount stated in the budget and the amount sought from the other side on the standard basis. Many of us were brought up to advise clients that in the event of success they would recover about two-thirds of their costs. This was long before proportionality revealed its recent head and it reflected the difference in the hourly rates charged to one’s own clients and the rates generally recoverable on taxation (now assessment).
The courts themselves have said that they can and, where appropriate should, reduce hourly rates on proportionality grounds. It follows that if an order on an indemnity basis is made then that reduction goes out of the window.
You do not need to put the solicitor and own client rate in the budget. By not doing so you do not prejudice your chances of getting that full rate if an indemnity order is made.
WHEN SHOULD AN INDEMNITY COSTS ORDER BE MADE?
the court said that public bodies do not have a stronger claim to indemnity costs than other litigants.
the Technology and Construction Court of the High Court, in rejecting the application for indemnity costs in that case, gave extensive guidance as to the grounds on which such an order should be made.
““(1) The court should have regard to all the circumstances of the case and the discretion to award indemnity costs is extremely wide.
(a) Indemnity costs are appropriate only where the conduct of a paying party is unreasonable “to a high degree. ‘Unreasonable’ in this context does not mean merely wrong or misguided in hindsight”: see Simon Brown LJ (as he then was) in Kiam II v MGN Ltd (2)  EWCA Civ 66.
(b) The court must therefore decide whether there is something in the conduct of the action, or the circumstances of the case in general, which takes it out of the norm in a way which justifies an order for indemnity costs: see Waller LJ in Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (a firm)  EWCA Civ 879.
(c) The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable. But the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) may well lead to such an order: see, for example, Wates Construction Ltd v HGP Greentree Allchurch Evans Ltd  EWHC 2174 (TCC).
(ii) Dishonesty or moral blame does not have to be established to justify indemnity costs (Reid Minty v Taylor  EWCA Civ 1723).
(iii) The conduct of experts can justify an order for indemnity costs in respect of costs generated by them (see Williams v Jervis  EWHC 1837 (QB)).
In Kellie v Wheatley & Lloyd Architects Ltd  EWHC 2886 (TCC),  All ER (D) 152 (Aug), the High Court looked at the interplay between costs budgets and indemnity costs, and the grounds for making an indemnity costs order and fundamentally disagreed with another High Court decision on the costs budget issue.
Although this case dealt with alleged misconduct, the findings concerning the interplay between costs budgeting and indemnity costs apply to indemnity costs orders arising out of a claimant matching its own Part 36 offer.
This was a professional negligence claim which was lost and the defendant sought indemnity costs on the ground of the claimant’s conduct.
The relevant rule is CPR 44.3 as set out above.
The court pointed out that whatever was previously thought it is now clear that an indemnity costs order is significantly more valuable than a standard order.
Here the defendant’s budget had been approved at £91,700 with the judge having refused, on proportionality grounds, to approve a budget of over £140,000. The amount now sought on the indemnity basis was £166,469. The court thus had to consider the relevance of a costs budget when an indemnity costs order has been made, and specifically disagreed with a previous decision of the High Court in Elvanite Full Circle Ltd v AMEC Earth and Environment (UK) Ltd  EWHC 1643 (TCC),  4 All ER 765,  BLR 473.
In neither Elvanite Full Circle Ltd v AMEC Earth and Environment (UK) Ltd  EWHC 1643 (TCC),  4 All ER 765,  BLR 473 nor Kellie v Wheatley and Lloyd Architects Ltd  EWHC 2886 (TCC),  All ER (D) 152 AUG was an indemnity cost order in fact made, so both judgments are obiter, that is not relevant to the decision, and therefore not binding on other courts. As to payment on account the judge ordered £90,000 against the approved budget of £91,700.
the Court of Appeal awarded indemnity costs to a legally-aided party in order to penalise the losing party for its unreasonable conduct in the case. It is no bar to an indemnity costs order that the only beneficiary is the claimant’s lawyer, as the claimant would not have to pay anything in any event, whatever the result, that is a loss or a win with costs on the standard basis or a win with costs on an indemnity basis.
In Phoenix Finance Ltd v Federation Internationale de l’Automobile & Ors  EWHC 1028 (Ch),  CP Rep 1, (2002) The Times, 27 June, the Chancery Division of the High Court held that it is not the law that an indemnity costs order will only be made if the conduct complained of has increased the costs that are recoverable.
The question is the reasonableness or otherwise of the conduct and is not dependent upon whether the conduct, whether reasonable or unreasonable, has increased the costs payable.
WILL PROPORTIONALITY ENCOURAGE COURTS TO MAKE INDEMNITY COST ORDERS?
It will be interesting to see if a new line of awards on the indemnity basis emerges on the grounds that although the costs were disproportionate to the matters in issue there were, nevertheless, good reasons for incurring them and therefore the award should be on the indemnity basis so as to avoid the risk of reduction on the ground of disproportionality on the standard basis.
the District Judge had awarded costs on the indemnity basis on the ground that if parties litigate only as to costs, then it seemed to him that they must bear a greater risk that if they are unsuccessful they will be ordered to pay costs on the indemnity basis. In allowing an appeal against that order the Court of Appeal held that there is no reason why parties litigating over costs alone should be at any greater risk of an award of indemnity costs than those litigating over other matters.
the High Court ordered that the costs of the recall of an expert witness to deal with a written statement produced by the other side’s expert during the trial and at the order of the court should be paid on an indemnity basis.
“37. In my judgment, however, the fact that the court was obliged to ask Professor Trimble, in the middle of his evidence, to provide a written statement as to what exactly his evidence was and the basis upon which he was saying that the Claimant’s continuing symptoms were psychogenic did arise from serious shortcomings in the way in which Professor Trimble approached the giving of his evidence. It was helpful to the court to have that material but it was necessary for the Claimant to recall Dr Allder to deal with this new basis upon which Professor Trimble was finally presenting his evidence.
In my judgment, that conduct on the part of Professor Trimble was so out of the norm that it justifies an order for indemnity costs.
the deficient expert evidence produced by the unsuccessful claimant had led to unnecessary costs being incurred by the defendant and accordingly the costs incurred by the defendant in that respect were awarded on the indemnity basis.
the High Court said that CPR 61 does not provide for costs on the indemnity basis where a CPR Part 61 offer is successful, whereas CPR Part 36 does provide for indemnity costs when a CPR Part 36 offer is successful.
That was a clear indication that the authors of Part 61 did not intend that indemnity costs should be awarded merely because the Part 61 offer had been successful.
In those circumstances, it was not appropriate in a collision action in the Admiralty Division of the High Court, governed by Part 61, to order costs on the indemnity basis merely because an offer had been successful.
the court joined a party who had direct control over the second defendant company to the action for the purpose of costs and then made an indemnity costs order against that person.
the court awarded costs on an indemnity basis against third party funders.
The claimants brought what turned out to be a very speculative claim against the defendants and consequently costs were awarded against them on an indemnity basis.
However they did not pay and an application was made that the third party funders pay; some admitted liability to pay but not on an indemnity basis and others denied liability and one third party funder did not acknowledge service.
The claimants had been ordered to provide security for costs but there was a shortfall of £4.8 million between the security provided and the amount of costs.
The security that was paid, as ordered, was £17.5 million and that was supplied from funds from three sets of third party funders.
The basis of the security ordered was, as normal, the standard basis and the shortfall between the security provided and the amount of costs was almost entirely represented by the difference between standard costs and indemnity costs.
The court held that the fact that the security was inadequate was not a ground for declining to make a non-party costs order; indeed it may be the reverse – see Petromec Inc v Petroleo Brasileiro SA Petrobras  EWCA Civ 1038 and Dolphin Quays Developments v Mills  EWHC Civ 385.
At paragraph 58 of the judgment Christopher Clarke LJ sets out a lengthy list of reasons as to why he awarded indemnity costs against the claimant.
The judge then dealt with the law concerning making a costs order against a non-party, commenting that the discretion under section 51(3) of the Senior Courts Act 1981 is very wide and the test is whether in all the circumstances it is just to exercise the power – see Globe Equities Ltd v Globe Legal Services Ltd  EWCA Civ 3023 (see my piece Wasted Costs and Non-Party Costs Orders).
That discretion extends to the form of the order and the proportion of any costs to be paid and the amount of any award – see Nelson v Greening  EWCA Civ 1358.
A third party order does not have to be on the basis of joint and several liability with the litigant.
“66. In the light of those principles I have no doubt that Psari and Mr Lemos… should be liable to the defendants for their costs. The claim could not have been brought without their assistance; they stood to benefit from its success to the tune of a healthy multiple of their investment. That the pursuit of speculative litigation is in the same category and to be viewed in the same way as impropriety for these purposes was affirmed by Rix LJ in Goodwood Recoveries Ltd v Breen  EWCA Civ 414 at . Similar considerations apply to the other funders.
“even where he has acted in good faith or without any impropriety, justice may well demand that he is liable in costs on a fact sensitive and objective assessment of the circumstances”.
This is a change from the earlier requirement that there must be impropriety or a lack of good faith as set out in Metalloy Supplies Ltd v M/A. (UK) Ltd  EWCA Civ 671, 1620; this approach was applied in Landare Investments Ltd v Welsh Development Agency  EWHC 946 (QB).
The judge then went on to consider the issue of whether the costs to be paid by the funders should be on the indemnity basis.
The Divisional Court had taken a similar view in R v SSHD Ex Parte Osman  COD 204 and a similar approach was taken by the court in Murphy v Rayner  EWHC 1 (Ch).
The judge also said that he did not regard the possibility of a wasted costs order against the claimant’s solicitors, Clifford Chance, as a reason not to make an indemnity costs order against the third party funders.
The principle of the “Arkin Cap” is that a professional funder should normally be potentially liable to the opposing party only to the extent of the funding provided. Thus if a funder provides £1 million they should not be liable to the other side for more than £1 million.
“70. The position of a professional funder i.e. a funder who has a commercial interest in the outcome of the litigation, as opposed to a “pure funder” was considered by the Court of Appeal in Arkin v Borchard Lines Ltd (numbers 2 and 3)  EWCA Civ 655. The Court recognised that there were two competing principles. The first was that costs should follow the event so that a funder who wholly or partly causes the defendant to incur costs should be liable for those costs. The second was the policy of ensuring access to justice. Exposure of funders to the risk of having to pay costs of the opposing party assessed on an indemnity basis might increase the risk and hence the price of funding litigation.
The solution derived by the Court was to hold that a professional funder who financed part of a claimant’s costs of litigation (£1.3 million in respect of the cost of expert evidence), should be potentially liable for the costs of the opposing party to the extent of the funding provided. The Court said that it could see no reason in principle why the solution suggested should not also apply where the funder had contracted the greater part, or even all, of the expenses of the action. But it reached no decision on the point.
What was the Funder’s Exposure?
Here the court considered, apparently for the first time in any case, whether the cap should be the sum contributed by the funders for the claimant’s costs and thus not take into account the additional money provided for security of costs or whether it should be the total sum provided, including the sum provided for security of costs.
The court found that it was the total sum provided, including the sum provided for security of costs.
Thus if a funder provided £5 million towards the Claimant costs and then say £7 million for security of costs its total exposure in relation to an adverse costs order is £12 million.
Of course the amount provided by way of security of costs would go straight to the other party and would thus reduce the balance payable and thus it would not always be the case that the total further sum payable would equal the total sum invested by the funder.
In this piece I have looked at indemnity costs orders under CPR Part 44, and as set out above these should only be ordered when there has been conduct outside the norm.
Under Part 36 a claimant who matches his or her own Part 36 offer should get indemnity costs as a matter of right, without there being any suggestion of misconduct on the part of the defendant.
Thus very different considerations apply and I deal with these in my piece – Part 36: The Dry Salvages.
However the consequences of indemnity costs orders under Part 36 are as above, that is that proportionality does not apply and any doubts are resolved in favour of the receiving party rather than the paying party.
I am grateful to Simon Gibbs at http://www.gwslaw.co.uk/blog/ for much of the material in this piece.
Provisional assessment applies to all detailed assessment proceedings commenced in the High Court or County Court on or after 1 April 2013 where the amount of costs claimed is £75,000 or less (CPR 47.15(1)).
This is treble the figure recommended in Chapter 45 of Lord Justice Jackson’s Final Report and treble the figure piloted in Leeds, Scarborough and York County Courts.
“I confirm the costs claimed are over £75,000 and I ask the court to arrange a detailed assessment hearing”.
“Until the time the substantive claim is settled, the “proceedings” relate to liability and the amount of any compensation. After the substantive claim is settled, the “proceedings” relate to the assessment of the costs the paying party has to pay. Although CPR 43.2 contains no definition of “assessment” as such, the White Book comment on this rule accurately states that “assessment” is “the process by which the court decides the amount of any costs payable.
It is not clear, however, what happens about the costs that are incurred in relation to pre-provisional assessment applications such as applications to set aside default costs certificates, applications for interim payments or applications for relief from sanctions.
If such applications are dealt with pre-provisional assessment, it will not be known at that stage whether the proceedings will “go beyond provisional assessment”. Such pre-provisional assessment costs are therefore incurred within the detailed assessment proceedings but are they costs “of the assessment” or are they costs recoverable in addition to the £1,500 cap if the matter does not go beyond provisional assessment?
“In proceedings which do not go beyond provisional assessment, the maximum amount the court will award to any party as costs of the assessment (other than the costs of drafting the bill of costs) is £1,500 together with any VAT thereon and any court fees paid by that party”.
There are no transitional provisions so the old rule applies to provisional assessments up to 1 October 2013 and the new rule to any provisional assessment undertaken on or after 1 October 2013.
Additional liabilities are included within the £1,500 and this is in line with the decision in Jodie Henderson v All Around The World Recordings Limited  EWPCC 19, 27 March 2013, in relation to the cap in the Patents County Court.
Time spent drafting the bill of costs is allowable in addition to £1,500, but seemingly no allowance is made for checking the bill. Compare this with PD47, paragraph 5.19. “The bill of costs must not contain any claims in respect of costs or court fees which relate solely to detailed assessment proceedings other than costs claimed for preparing and checking the bill”.
There is no reference to work done in connection with issuing costs only proceedings and thus such work is included in the £1,500 – see Crosbie v Munroe  EWCA Civ 350 above.
No indication is given for the change of heart, presumably because the true reason is that the original wording was very poor.
It is still unclear as to whether the failure to allow additional costs for checking the bill and the failure to allow additional liabilities over and above the cap are deliberate policy decisions or yet further errors.
Provisional assessment is a procedure whereby the court provisionally assesses costs on paper, that is without an oral hearing, and if either party is dissatisfied then it can seek an oral hearing, but will pay the costs of that exercise if it does not achieve a 20% improvement upon the provisional assessment.
Provisional assessment does not always appear to be going the way it should, as different courts are introducing their own directions.
Replies are optional, but some courts are ordering them and also asking parties to service Replies not limited to points of principle and concessions – that contradicts Practice Direction 47, paragraph 12.1.
In the absence of a Reply from the receiving party to Points of Dispute some courts are assessing costs as per the paying party’s offer, again in clear breach of PD47, paragraph 12.1.
Thus the concept is that at the end of the provisional assessment the judge will open the sealed envelope, see what offers have been made, decide liability and make a decision.
Thus at present it is unclear whether the court require the papers in support of the bill as set out in Practice Direction 13.12, as 13.11 requiring these documents to be filed is exempt from Provisional Assessment, and my advice is to seek the guidance of the court in any given case, and if this is not forthcoming to lodge the whole file and to lodge separately and in addition the very limited papers required by the Practice Direction.
The Senior Courts Costs Office recommends that receiving parties lodge the full file when requesting assessment, but has not made this mandatory, as it believes that it has no power to do so, but takes the view that parties who fail to lodge the full file will be at a serious disadvantage.
Some Regional Costs Judges have taken the same view.
Any oral hearing will be conducted by the District Judge who made the provisional assessment on paper; an oral hearing is not an appeal but rather a “second stage of the process before the assigned District Judge”.
It is unclear as to whether a successful Part 36 offer trumps the 20% rule.
Thus £30,000 is awarded. The paying party makes a Part 36 offer of £28,000. The court cuts the award to £27,000, that is a 10% reduction, which is obviously less than a 20% adjustment in the sum provisionally assessed, but nevertheless is more than the Part 36 offer.
That seems to suggest the judge won’t do the calculations at the end of the provisional assessment. Why then require costs schedule(s) to be filed with the request for the provisional assessment if it is known that further work must be undertaken (doing the arithmetic) but the amount of work required will not be known?
For some bills the extra work needed may be relatively minimal but for others may be more drawn out, particularly where there is disagreement between the parties.
An appeal will be to a Circuit Judge.
This is one of the Jackson reforms that I support. The ‘costs of costs’ has become an Alice in Wonderland feature of English court procedure. Indeed I would go further and extend this procedure to all bills, whatever their value. There is the safeguard of an oral hearing and an appeal to the next tier of the judiciary. The danger is that, rightly or wrongly, High Street solicitors will see this as yet another aspect of the Jackson Report designed to put them out of business while letting firms in the City charge what they want without the same restrictions. That may be unfair, but trust me, that is likely to be the reaction of most solicitors given the bias of the report and the Government’s proposals generally.
The new rules relating to Replies to Points of Dispute apply to all Replies that are served after 1 April 2013.
Thus a receiving party should not reply to the grounds of dispute that has been raised unless a concession is inserted into the box relating to that point.
an argument that proceedings were issued prematurely and that only fixed pre-issue costs should apply.
It should be noted that there is no transitional provision dealing with Points of Dispute and Replies and therefore the new rules apply to any Points of Dispute or Replies served on or after 1 April 2013.
time spent on preparing and checking the bill.
For some reason that has now been dropped from the new Practice Direction to CPR 47.
I am grateful to Paul Hughes – http://www.kingschambers.com for material in relation to this piece.
CPR 47.9(2) states that the period for service of Points of Dispute is 21 days after the date of service of the notice of commencement, and, CPR 47.9(3) prescribes that a party in default of service “may not be heard further in the detailed assessment proceedings unless the Court gives permission”.
On the face of it, this avoids CPR 47.9, but is in fact it does not.
So, does CPR 3.8(3) apply to CPR 47.9?
Yes. The paying party is required to do something – serve Points of Dispute within a specified time, and the Rule specifies the consequences of the failure to comply.
Given the wording of CPR 47.9, it might have been open to argue that as the consequence was qualified (by “unless the Court gives permission”), it was not, in fact, a sanction it all (as it is a discretionary, as opposed to automatic, consequence). That argument, is ruled out by the judgment in Primus Telecommunications Netherlands BV v Pan European Ltd  EWCA Civ 273 (at paras 58 and 59), which concerned CPR 32.10, but the relevant wording is identical to CPR 47.9. Primus has been applied in Papa Johns (GB) Ltd v Doyley  EWHC 2621(QB).
Accordingly, there is a clear conflict between the power in CPD 35.1 and the Rules.
Practice Directions cannot override the CPR (See May L.J. in Godwin v Swindon Borough Council  EWCA Civ 1478 at ), so the provisions permitting the parties to agree to extend time for service of the points of dispute are of no effect.
Thus the sanction in CPR 47.9 applies, irrespective of whether there has been a purported agreement to extend time, unless the paying party applies for relief from sanctions under CPR 3.9.
The sanction to which the paying party is automatically subject is not being “heard further in the detailed assessment proceedings.” This means that the paying party can no longer participate, by contributing to a joint statement or being represented at the hearing.
What, if the Points of Dispute that are filed late? It seems that a paying party may rely upon them (as they predate – and indeed trigger – the debarral of further participation), but only in the sense that a Costs Judge may take them into account in assessing the Bill.
Thus the paying party is required to make an application to Court for an extension of time to avoid the automatic sanction in CPR 47.9. That application should often be a formality, it is unfortunate that it needs to be made at all.
Does this mean that paying parties can no longer get things going? If this was a deliberate decision, why was it taken? Are paying parties now unable to take any positive step to progress matters where a receiving party drags their heels?
The new Practice Direction 3.1 to CPR 47.3 increases the powers of principle court officers from £75,000 including additional liabilities but excluding VAT to £110,000 base costs excluding VAT.
Once you add back in success fees, ATE premiums and VAT the size of the bill that can now be assessed by a principle court officer is £300,000 or more.
For non-principal court officers, the power increases from £30,000 including additional liabilities but excluding VAT to £35,000 base costs excluding VAT. That probably equates to covering some bills with a value of up to £100,000.
You can still object. If both parties agree, the court will automatically relist before a costs judge or district judge (Practice Direction 3.2 to CPR 47.3). Otherwise, an application is to be made to a costs judge or district judge (Practice Direction 3.3 to CPR 47.3).
Note that this is a reference to date of the decision (as was the case prior to 1 April 2013), not the date of the conclusion of the final hearing. This is almost certainly a drafting error as the two conflict. There is no reason the time for appealing against a decision of a costs officer should be stricter that otherwise. Which prevails?
“Once the provisional assessment has been carried out the court will return Precedent G (the points of dispute and any reply) with the court’s decisions noted upon it. Within 14 days of receipt of Precedent G the parties must agree the total sum due to the receiving party on the basis of the court’s decisions. If the parties are unable to agree the arithmetic, they must refer the dispute back to the court for a decision on the basis of written submissions”.
There is a problem in the interplay between provisional assessment and proportionality. The parties undertake the arithmetic on the Bill after it has been provisionally assessed. How then does the judge carry out the global proportionality check on the final figure if she does not know what that figure is?
Some courts are issuing their own directions for the parties to inform the court of the initial calculations so that the court can then consider, and where appropriate, apply, proportionality and give a final, proportionate, figure.
However no provision whatsoever is made in the Civil Procedure Rules; they are simply silent on this point.
I hope all courts will adopt this sensible and clear advice. The common sense that emanates from the SCCO is such that maybe they should try all cases on all matters, rather than just dealing with costs.
CPR 47.19 was scrapped with effect from 1 April 2013 and now Part 36 applies to detailed assessment proceedings, but the old CPR 47.19 applies where detailed assessment proceedings were commenced before 1 April 2013, and this is achieved by the Civil Procedure (Amendment) Rules 2013 at s.22(1).
Where a Part 47.19 offer was made prior to 1 April 2013, but notice of commencement was not served until 1 April 2013 or after, then the new Part 36 provisions apply, but it is not clear what happens in relation to a successful CPR 47.19 offer made before 1 April 2013 in such circumstances.
(1) This rule applies where upon completion of the detailed assessment.
Subparagraph (d)(i) appears to be drafted widely enough to cover a claim for costs. The successful receiving party therefore gets a 10% uplift on whatever the bill is assessed at plus the other benefits listed at (a) to (c).
The fact that the Judge does not make the final calculations also causes obvious problems with Part 36, specifically how does the Judge know whether a party has succeeded in relation to a Part 36 offer?
If the Judge does not know who or who has not won on Part 36, then how does the Judge know what decision to make in relation to the costs of the assessment?
A receiving party who matches or beats its own Part 36 offer receives a 10% uplift on costs, up to a maximum uplift of £75,000, calculated in the same way as the Part 36 uplift on damages. Care needs to be taken in drafting the retainer to ensure that you entitle yourself to this sum, as costs belong to the client and an additional sum cannot be charged in the absence of clear agreement.
Claimant for, Paye Cash & Praye are currently negotiating with defendant costs firm Kermit & Co over a £10,000 bill. Points of Dispute and Replies have been served.
On 2 April 2013 Paye Cash & Praye make a Part 36 offer to settle those costs for £7,000.
Kermit & Co accept the offer on 3 April 2013.
Acceptance of the offer creates a deemed costs order under the new CPR 44.9(1)(b). Under CPR 36.10(1) this means the receiving party is entitled to their costs of the assessment proceedings up to the date on which notice of acceptance was served.
In this example the matter has never come before a judge and summary assessment is not appropriate. All that’s left is detailed assessment proceedings in the absence of agreement.
In reliance on the deemed costs order Paye Cash & Praye serve a Notice of Commencement and new bill in respect of their assessment costs on 10 April 2013. (As an aside, where a matter settles prior to a provisional assessment being carried out, but the bill is for less than £75,000, does the £1,500 cap apply?) The costs claimed are £1,000. Service of the new Notice of Commencement amounts to commencement of new detailed assessment proceedings.
Kermit & Co, rather taken back by this turn of events, make a Part 36 offer of £800 in respect of those costs on 17 April 2013. No response to that offer is received within 21 days of service of the Notice of Commencement forcing Kermit & Co to serve Points of Dispute to the bill, which they serve on 1 May 2013. On 3 May 2013 Paye Cash & Praye serve Replies. On 4 May 2013 Paye Cash & Praye accept the Part 36 offer of £800. As the offer has been accepted within 21 days of it being made the Claimant is entitled to their costs of the new assessment proceedings up to the date on which notice of acceptance was served, including the period covering preparation of the new Replies.
Acceptance of the new Part 36 offer also creates a further deemed order for costs.
In reliance on the new deemed costs order Paye Cash & Praye serve a Notice of Commencement and new bill in respect of their further detailed assessment costs considering the Defendant’s Points of Dispute, drafting Replies and considering the Part 36 offer.
“The rule concerning filing of statements of costs is a mess. PD 47 para.14.3(c) refers to filing “a [in the singular] statement of the costs claimed in respect of the detailed assessment” implying that it is just the receiving party that will file a statement. What if the paying party has won? There is no requirement to serve the statement of costs on the opponent. The statement of costs will have to be prepared before the provisional assessment has occurred and before the parties have agreed the arithmetic. How much time should go in the statement of costs for the post-assessment number crunching and trying to agree the figures with the other side, when the work has yet to be done? For a Bill at the top end of the £75,000 figure, this can be time consuming if there have been, for example, amendments to the hourly rates and VAT figures. What if the parties cannot agree the figures and need to make written submissions to the court. How is this time dealt with in the statement?
Contrary to what some commentators have said, there is no requirement on a paying party to make an offer, either under Part 36 or otherwise.
Thus there is no requirement to make an offer; if there was, then the words “if any” would be superfluous. However, some claimants are, presumably through ignorance, taking this point and so it may save time to make it clear in writing that no offer is being made if that be the case.
I have not come across anyone who can explain to me what is the purpose of the open offer, but those drafting the Civil Procedure Rules and the Practice Directions move in mysterious ways.
Will a party who wins on its open offer ever not be awarded the costs of the detailed assessment?
Thus it is clear that the rules envisage offers other than those under Part 36 being relevant to the costs of assessment.
Where costs are not expected to exceed £25,000 only the first page of the nine pages of Form H Costs Budget needs to be completed.
Now that provisional assessment is to cover all cases of £75,000 or less it remains to be seen whether the exemption from completing the full Costs Budget form will also rise to £75,000.
Otherwise there is the prospect of a very detailed budget and a Costs Management Order all ending in a paper-only assessment for those bills between £25,000 and £75,000.
QOCS is widely regarded as the weakest part of the Jackson Reforms, and as the old joke has it, that is against some pretty stiff opposition. The unanswered question here is whether the costs risk of failing to achieve 20% more than the provisional assessment figure applies in QOCS cases, that is all personal injury cases of all kinds. On the face of it, it does not, as the exceptions to QOCS are limited, and this is not one of them.
Precisely the same point applies in relation to Fixed Recoverable Costs, which has the same 20% escape rule; here the rich irony is that Fixed Recoverable Costs apply only to personal injury cases, just like QOCS.
Oh dear! It cannot possibly be the case, can it, that Fixed Recoverable Costs were announced out of the blue, without thinking of this can it? Can it?
Obviously everything else in relation to this exercise has been checked and checked again by the Ministry of Justice until perfect. See for example Precedent A: Model Form Bill of Costs.
I set out below our annotations. Can you spot any more errors?
In these proceedings the claimant sought compensation for personal injuries and other losses suffered in a road accident which occurred on 1 January 2011 near the junction between Bolingbroke Lane and Regency Road, Brighton, East Sussex. The claimant had been travelling as a front seat passenger in a car driven by the defendant. The claimant suffered severe injuries when, because of the defendant’s negligence, the car left the road and collided with a brick wall.
The defendant was later convicted of various offences arising out of the accident including careless driving and driving under the influence of drink or drugs.
In the civil action the defendant alleged that immediately before the car journey began the claimant had known that the defendant was under the influence of alcohol and therefore consented to the risk of injury or was contributory negligent as to it. It was also alleged that, immediately before the accident occurred, the claimant wrongfully took control of the steering wheel so causing the accident to occur.
The claimant first instructed solicitors, E F & Co, in this matter in July 2011. The claim form was issued in October 2011 and in February 2012 the proceedings were listed for a two day trial commencing 25th July 2012. At the trial the defendant was found liable but the compensation was reduced by 25% to take account of contributory negligence by the claimant. The claimant was awarded a total of £78,256.83 plus £1,207.16 interest plus costs.
The claimant instructed E F & Co under a retainer which specifies the following hourly rates.
Except where the contrary is stated the proceedings were conducted on behalf of the claimant by an assistant solicitor, admitted November 2008.
Sue: What a mess! Kerry, may I ask you advice on one issue? As stated above – where a Part 47.19 offer was made prior to 1 April 2013, but notice of commencement was not served until 1 April 2013 or after, then the new Part 36 provisions apply. I have a case where a very healthy Part 47.19 offer was made before 1 April 2013. The NoC was served post 1.4.13 and Points have just been drafted. I do not wish to make a Part 36 offer that, if accepted, would entitle the Claimant to his costs to date. I believe he is at risk on the pre Pods Part 47.19 offer. Any suggestions?
Part 36 is now the applicable law – CPR 47.19 is of no application where notice of commencement not served until after 1 April 2013, and obviously you do not want to make a Part 36 offer for the reasons stated.
However the court can take in to account non-Part 36 offers, and given that your offer was made under the appropriate law at the time, the court should indeed take that in to account and give it weight.
It maybe worth you writing to the other side to put them on notice of your intention to argue that and to seek costs if they fail to beat the CPR 47.19 offer.
The transitional provisions, or rather the lack of them, are a shambles throughout the Jackson reforms.
We have received word from Court that the figure for provisional assessment is £1,500.00 PLUS disbursements and VAT. The court will release full clarification next month.
That is interesting.The wording is sufficiently vague that it could be interpreted as £1,500 plus VAT and disbursements,or £1,500 in total.
Sue King: I know we have now had clarification that the £1500 is exclusive of VAT and the Court fee but am I correct in assuming that it is inclusive of the base costs AND any applicable success fee???
Thus it is clear that although VAT and court fees are not included within the maximum of £1,500.00 all other costs, that is base costs and success fees must be included.
The costs of drafting the bill of costs, that is base costs and any success fee, are not included within the maximum £1,500.00 that the court can award.
Hannah Lambe: Hi Kerry, for those matters now destined for provisional assessment are we to still use the current N252 form and if so, has the fixed costs and court fee changed or is it still okay to put £140 on top of the bill total?
Paragraph 5.2(a) Practice Direction 47 on CPR 47.6 states that the current Form N252 as well as Form N258 under CPR 47.15(3) confirming that notice to commence assessment has been given will have to be completed where a request for provisional/detailed assessment has been made.
b) the extra sum payable by way of fixed costs and court fees if a default cost certificate is obtained.
“Where a receiving party obtains a default costs certificate, the costs payable to that party for the commencement of detailed assessment proceedings will be the sum set out in Practice Direction 47”.
“Unless paragraph 1.2 of Practice Direction 45 (Fixed Costs in Small Claims) applies or unless the court orders otherwise, the fixed costs to be included in a default costs certificate are £80 plus a sum equal to any appropriate court fee payable on the issue of the certificate”.
If the claim is issued in the small claims track paragraph 1.2 Practice Direction 45 provides that fixed costs are those detailed in CPR 45.2 and are determined by the value of the claim. Thus where a claim is not issued in the small track fixed costs for a default costs certificate are £80.
Paragraph 10.8 Practice Direction 47 also provides that the fixed costs included in a certificate must not exceed the maximum sum specified for costs and court fees in the notice of commencement.
In relation to the court fee, as paragraph 5.3(b) Practice Direction 47 applies to a default costs certificate, the relevant court fee will be the fee for the request to issue a default costs certificate. This is £60.
Provided that paragraph 1.2 of Practice Direction 45 does not apply the total sum for fixed costs if a default judgment is obtained is £140.
Pip Riley: Where can we find the practice direction 47 as it is not on the justice.gov website in Civil Procedure Rules yet?
Kerry’s reply: 60th Update – it is on the website – looking at it now. Also there is a link to it in the Jackson overview blog.
Are you aware of whether there are any transitional provisions for the situation where costs proceedings are commenced after 1.4.2013 but the matter was settled (in pre-action) prior to 1.4.2013 and the Claimant has the benefit of CFA/ATE.
Of particular interest is whether provisional assessment remains an option where, but for the success fee, the base costs plus disbursements would have fallen below the £75,000 limit.
The new assessment regime applies to any case, however old, where costs proceedings are commenced on or after 1 April 2013. The existence of a recoverable success fee and ATE insurance do not affect this.
Provisional assessment is a form of detailed assessment that applies where the bill is £75,000 or below (CPR 47.15(1) and PD 14.1) including any success fee. As I understand it the key figure is the overall total.
The major concern regarding Replies appears to me to be that receiving parties are totally reliant on the Costs Officer’s willingness to delve behind the PoDs. As per your suggestion on papers to lodge, they may not even have the file of papers to consider such objections in any reasonable detail. What prevents a paying party making spurious comments to sow a seed of doubt as to the reasonableness of the costs or making ridiculous offers for specific or general costs within the bill? The answer must be nothing, as unless a point of principle can be found then no reply would be made to any such objections, in accordance with PD to CPR 47.13.
It seems a wholly skewed process when the receiving party may legitimately have no concessions to make and cannot provide any form of rebuttal to objections raised unless that “point of principle” is found. Proportionality arguments cannot be responded to unless the figure work is wrong (thus providing a point of principle one presumes?); paying party paints a picture of simplicity for a matter settling for say £70k damages to attempt to justify Grade C rates, no reply can be made; paying party offers 20% of all time communications on Claimant, no reply can be offered, who would bet against an arbitrary minimum of 20-30% being removed as a halfway house?; same applies to document item of course and a return to the old days of you say 10 hours, bill says 30 hours, 20 hours allowed as a compromise seems inevitable.
The list goes on doesn’t it? Any suggestions as to how to provide the CO with a fuller picture without falling foul of the precedent and CPD and CPR? I would certainly welcome any steer as representing non cost building and honest firms has, it seems, become much harder and unfairly so.
These problems have simply not occurred in the pilot. The key is to get across the issues properly in the original bill, with a detailed opening narrative, as I have always done. Replies should only be necessary if you have failed to anticipate the Points of Dispute. Don’t wait for proportionality to be raised – deal with it! Don’t wait for level of fee-earner to be raised – justify it in your bill! Far too many substantial bills just consist of figures, with no proper justification.
Overall the assessment of my firm’s bills has been fair. Most District Judges were solicitors in practice, and Deputy DJs still are. I don’t buy the idea that DJs and Costs Officers hack bills for no good reason. Recently, for another reason, I have seen many what are frankly ludicrously high claimants’ bills.
I approve of the new system and my advice is to do a much fuller narrative – ours is normally one to two pages of A4.
Thanks for that Kerry, I am encouraged by your own experience of Provisional Assessments. I agree a full and detailed narrative is (and always has been) necessary and on reflection I guess the same hope remains that the DJ/DDJ/CO you used to sit before has actually read the narrative and considered the papers. The only difference now being that you are not present to see if that is indeed the case.
I shall have faith in the narrative and strong file of papers and hope the PA is a reasonable and fair one.
Hi, I have just had the result of my first provisional assessment back from my local Court. The assessment took place on 27th September 2013. After numerous letters and calls to the Court and at least three personal visits to the Court office I collected the provisionally assessed bill from them on 21st November! I wonder if this is going to be the norm?? Incidentally when I double checked with the Court a few days prior to the hearing whether or not my complete file was required I was handed an Order that had just been made requesting the file. If I had not gone to the Court office that day the Order would probably not have been received at my office in time to deal with the request.
Kerry’s reply: Thanks for this. What are other people’s experience of Provisional Assessment?
I just got absolutely slaughtered on one.
Am thinking of seeking an oral hearing.
Did the “20% rule” make it into the rules, or was it only in the pilots?
The “20% rule” can now be found at CPR 47.15.(10).
I’ve been on one Oral Hearing at which the Judge refused to look at the full file of papers filed 7 days in advance of the hearing or indeed allow me to expand on any issues unless they were already referred to in the bill of costs and Replies! His reasoning was that as the file was not submitted with the request for PA only the papers filed with the request for PA could be relied upon at the Oral Hearing. Very unfair but I did manage to get well over a 20% increase. Have you come across this situation?
No, I have not and it seems to me to be a fundamentally flawed approach to what is after all a detailed assessment. No guidelines have been given and the provisional assessment limit was tripled from £25,000 to £75,000 without warning or consultation.
The SCCO is very hostile to provisional assessment.

References: EWCA 
 EWCA 
 EWCA 
 EWCA 
 EWCA 
 EWCA 
 EWCA 
 EWCA 
 EWCA 
 EWCA 
 EWCA 
 EWCA