The defendant costs specialists

Part 47.18

By on Dec 2, 2010 | 12 comments

I am still recovering from a run of detailed assessment hearings in the Senior Courts Costs Office.

(Yes, I do sometimes do some real work.)

A number of these cases have gone part heard but these were the outcomes in the other claims:

1. Bill of costs in first case reduced from £87,279 to £47,461.
2. Bill of costs in second case reduced from £76,685 to £37,954.
3. Bill of costs in third case reduced from £77,578 to £31,850.
4. Bill of costs in fourth case reduced from £96,422 to £32,969.

(Yes, I really am that good.)

Unfortunately, despite the impressive size of the reductions achieved, the claimants in each case still managed to beat the defendants’ Part 47.19 offers. The claimants’ did not succeed on their own offers and so Part 47.19 did not come into play.

One then turns to the factors listed in Part 47.18 when determining which party should pay the costs of assessment. The starting point is that the receiving party is entitled to the costs but the court must have regard to all the circumstances. The key factor in each of these cases was obviously, and as recognised by the court, “the amount … by which the bill of costs has been reduced”.

So what orders did the court make?

In the first three cases the claimant receiving party was still awarded 50% of their costs. In the fourth case the court made no order as to costs.

I’ve mentioned before the reluctance of the courts to fully utilise their powers under Part 47.18.

How big a reduction is needed to a bill before the receiving party has to pay for the privilege of submitting an inflated bill?

    12 Comments

  1. The court adopts an approach similar to the old ‘Part 36 offer – beat your offer at trial to get indemnity costs approach’ (and how Part 36 did(n’t) work for defendants pre-Carver).

    In the case of 47.18 the defendant must, in practice, beat his own offer to get costs and then only from date offer was made.

    Fair?

    I think so.

    A receiving party is entitled to a standard basis contribution towards his legal fees. If the paying party offers something less (as determined by the outcome of the detailed assessment hearing) the necessity of the detailed assessment is established regardless of the sum by which the bill is reduced.

    If the paying party beats his own offer (no matter how insignificantly) he can rather smugly plead that he offered the receiving party more than the award and costs should follow from the date of the offer.

    “the amount … by which the bill of costs has been reduced” is a flawed assessment of who has won.

    100% uplift reduced to 20% knocks the costs down by 40% (ish) with little argument

    – Was it reasonable to claim 100%? well probably since that was the uplift set out in the CFA
    – did the receiving party make a 47.19 offer taking into account a significant reduction in the uplift? I would hope so if the uplift was reduced so drastically.

    The significant sums are likely to be the receiving party’s best offer and the sum allowed by the court on assessment.

    There are of course other considerations, but I need to defrost the car.

    Robert Pettitt

    2nd December 2010

  2. I personally think it depends on the reason for the reduction. Say for instance if the solicitors who handled the matter were a small firm with only three file handlers who all qualified in 1912 and who therefore charge a Grade A rate, but the court decided that the work was Grade C work, then the reduction on that alone can be up to 30%. I do not consider that this should result in a costs penalty if the Defendant draftsman has failed to make a reasonable offer. On the other hand, if the time charges are overly excessive i.e. two hours claimed for preparing a one page statement, then that should in my view result in some sort of penalty. No doubt some will disagree.

    Congratulations on those results by the way, although I do think the court made the right orders.

    Pete B

    2nd December 2010

  3. I was at a DA, we got Claimant bill reduced by 28% (36% of profit costs) but just by a gnats pube failed to beat our offer, the DJ took the view that the reduction we did obtain was significant therefore ordered we pay a “contribution” in his words as to Claimant DA costs of 1/3rd of those claimed.

    We had also used CPR 47.18(2) as to conduct as we were the only party that made any Part 47.19 offers and the DJ took that on board also.

    Interestingly, as we put the case re the reduction obtained the Claimant representative indicated to the DJ that “in practice you tend to tell a clinet he will lose some 35% of costs as detailed assessment” (words to that effect) – really?? 35% as standard?? Surely not (and in honour of the late Leslie Nielsen “no, and don’t call me Shirley”).

    Anonymous

    2nd December 2010

  4. As I represented one of the receiving parties above I would not comment on the whys and wherefores of the reductions but would simply say that this would not be a problem if the paying party made more realistic offers in the first instance. 4 near misses suggests to me that the policy on offers should be re-evaluated

    Matthew Harman

    2nd December 2010

  5. I personally have always tied in representations under 47.18, to what would happen on a solicitor/ own client assessment. I say to the DJ, here is a bill which represents everything a solicitor has done for his client, and if it were not for the Defendant paying and standing in the clients place, these are the costs you have just assessed as unquestionably reasonable. Now if this were s/oc, a 20% reduction would result in no order for costs. a 50% reduction, a referral to the Law Society. Recognising this is not a s/oc assessment, regard still must be had to 47.18CPR, and the fact of the reductions, which are within the range of the s/oc penalties, which may be taken as useful guidance by the Profession as to what they can expect if they conduct work and claim fees manifestly unreasonable

    This usually works!

    And in brief reply to Mr Harman, with deep respect, if it were one of my bills reduced by the amounts Simon refers to, I would not be berating a Defendant for making low offers, but rather keeping my head down for presenting and maintaining a bill which on assessment was so unreasonable to be slashed as the examples demonstrate! Perhaps if there were more realism on the part of Claimants in what they present, there would be a corresponding narrowing of the gulf in offers

    Anonymous

    2nd December 2010

  6. The points made along the lines of “well, the defendant should have made a better offer” seem to me to overlook the terrible difficulties defendants labour under in a regime where there is no disclosure. It is not the same as part 36 and damages, where you can make an informed calculation of your exposure. Things might be different were bills generally to be a reliable indication of at least the _bracket_ of reasonably recovery, but as SG’s experience shows, this is not the case.

    Part 47.19 makes provision for both sides to make offers. Why shouldn’t the outcome be that generally a party is only awarded costs after service of PODs if its offer is effective; if the outcome comes between the parties’ offers, then there is no order as to costs?

    Jacques Hughes

    2nd December 2010

  7. Jacques, perhaps I am the only one who prepares bills that only include items that were reasonably incurred (I really couldn’t say), but the majority of reductions made against my bills are down to reduction in rate and occasionally success fee. The item-by-item reductions are usually just 6-30 minutes off here and there.

    I simply can’t see how an item-by-item challenges can reduce bills by a massive amount. I accept that sometimes a solicitor may claim costs in relation to something he ought not to (such as an application where costs were awarded to the opponent) or where a techinical challenge has wiped out a significant portion of a bill. In those scenarios I would expect the court to consider those issues (whether it means an issue/percentage based order or winner takes all).

    That being said my local Regional Costs Judge has started to order disclosure to the opponent of all documents upon which the receiving party intends to rely at the detailed assessment hearing. The directions for disclosure intend for disclosure to take place before the matter is listed for hearing. This was intepreted on application to mean all documents (attendance notes, letters, reports) that will be replied on to justify time claimed not simply the CFA, which I understand many claimants are still reluctant to disclose.

    @ Anon 2:51

    Using solicitor-own-client assessment principles to achieve an award under 47.18 is truly a reflection on how little judges know about costs and perhaps the inability of your opponent to repel such a weak point.

    Between a solicitor and his client costs are assessed pursuant to 48.8. This is a modified version of the indemnity basis assessment. Not simply the indemnity basis.

    [i]costs are to be assessed on the indemnity basis but are to be presumed –
    (a)
    to have been reasonably incurred if they were incurred with the express or implied approval of the client;
    (b)
    to be reasonable in amount if their amount was expressly or impliedly approved by the client;
    (c)
    to have been unreasonably incurred if –
    (i)
    they are of an unusual nature or amount; and
    (ii)
    the solicitor did not tell his client that as a result he might not recover all of them from the other party. [/i]

    Basically, the only costs not recoverable from own client are those that are both unusual in nature and amount AND the client was not told that they might not be recovered from the other party.

    That’s quite a high hurdle and it is not hard to see why a 20% reduction would have a penalty and why a 50% reduction has a greater penalty.

    The position inter partes is miles away from this. It is not simply a case of replacing the client with the opponent.

    As an example, on a solicitor own client assessment a client is unlikely to obtain a finding that it was unreasonable to use a Grade A solicitor at £250 per hour(given that he wanted an experienced solicitor and contractually accepted the rate by way of the retainer), but on an inter partes assessment the court may find a Grade C fee earner at £148 per hour could have done the job. That’s 40% off the bill with little effort.

    It’s obvious for client care reasons (even more so when claimant’s starting seeing costs eating into their damages) that a bill will be submitted to the opponent with all costs claimed. The bill is the pleadings for the costs. No one drafts Particulars of Claim conceding half their claim.

    I think the defendant has to beat his offer to certainly get costs, but I think there is some possiblity of the defendant getting costs if the claimant has not negotiated (or other conduct issues) and his offer is not fair off the mark.

    Robert Pettitt

    3rd December 2010

  8. Robert

    Who is your RCJ? He is making an ultra vires order, he cannot order disclosure of privileged material. I would expect a newly appointed deputy to know this, how on earth can an RCJ get it so wrong?

    Jacques Hughes

    3rd December 2010

  9. Hi Jacques

    It’s District Judge Wallace at Macclesfield.

    Technically he isn’t ordering disclosure.

    He is ordering us to disclose any evidence that we intend to rely on at the detailed assessment.

    As I recall the general rules regarding disclosure at detailed assessment is that a party must be put to his election whether to disclose material to justify the claim or otherwise rely on some other method of justifying the claim.

    In reality most PP’s are content to only have sight of specific documents were a significant dispute lies such as the CFA, reports, etc as opposed to looking at the 20 routine letters to the client.

    However, strictly the court could (more normally at the PP’s request) find that refusal to elect to disclose leaves him with no choice but to only allow what the PP has offered in accordance with the burden of proof test on the standard basis.

    On the other hand a PP who requests full disclosure at a detailed assessment hearing could find himself burdened with the costs of that costly exercise if it is for nothing.

    The RCJ directions briefly require:

    – Disclosure of any documents upon which the claimant intends to rely
    – Meeting of parties to narrow issues
    – A joint schedule of issues in dispute filed at court
    – DA hearing time estimate

    I firstly thought that as the disclosure direction was in conflict with the election principle set out at CPD 40.14 that it could be dismissed.

    The court has, however, been quite insistant that it is complied with at that stage (presumably to ensure that the issues in dispute can be properly pleaded in front of the RCJ rather than the RP ambushing the PP with some document at the hearing).

    The question of privilege is also a very difficult issue to navigate. At the end of the substantive claim it has been argued (correctly, I would say)that privilege can be temporarily/partially waived in relation to the documents produced in the course of the proceedings. I think McCreery v Massey Plastic Fabrications Limited (2003) QBD Manchester went along those lines.

    Para 10.2(b) of the SCCO Guide 2006 (the status of the guide is a bit uncertain states that the court cannot order disclosure, but I think election is a difference beast.

    Rob

    Robert Pettitt

    3rd December 2010

  10. Would the innimitable Miss Hughes please come to our neck of the woods, and tell DJ Wallace that his Orders are ultra vires – I havent seen someone being flayed alive before!

    These orders, and their intent, are commonplace attempts by the DJ’s in the NorthWest to stop exactly the sort of stance Miss Hughes (with deep respect to her) shows in her comments.

    For a fact, a full file is not privilaged. For a fact, the content of a document can be refferred to , without divulging anything in the way of “advice” or truly confidential material.
    For a fact, unless you have a letter from the client themself stating they do not wish to waive privilage, you will be staring at the wrong end of a Costs Order, probably on the Indemnity Basis, if you do not comply, with the likely disallowance of costs in the bill for the items you will not deal with

    At the end of the day, the parties are supposed to assist the court in resolving issues, and the court has a discretion in doing so proportionately – which is not served by parties adopting “stances”

    Anonymous

    9th December 2010

  11. Most paying parties don’t offer enough. ‘Twas ever thus. The more balance there is in a costs practice between paying party and receiving party work the more likely it is that an objective recommendation will be made.

    You don’t need to obtain an order for costs of detailed assessment as a receiving party. The paying party needs to rebut the presumption. C’est la vie.

    Jackson wants to put Part 36 into detailed assessment. Until that happens …

    Andy Ellis

    9th December 2010

  12. We have reduced costs by 60 per cent on an IP’s claim in bankruptcy. The purpose of the hearing was to consider the IP’s costs. We are saying that since the reduction justified the hearing, we should get our costs. Other than CPR 47.18, is there any case law to support the general principle that if you are successful in reducing costs to that magnitude you are entitled to your costs?

    Looking for answer quickly.

    Regards

    Naim lone

    4th May 2011

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