The defendant costs specialists

New Costs Practice Direction

By on Feb 27, 2013 | 21 comments

The new Costs Practice Direction has finally been released.

Now we have both the new CPR rules and the new CPD I will start to analyse these in detail. Obviously, it’s perfectly possible that between now and 1 April 2013 half the rules will have been rewritten, but we might as well start somewhere.

First up, and in no particular order, is the provision governing the recoverable costs for the new provisional assessment process that will deal with bills where the costs claimed are £75,000 or less.

By CPR 47.15(1):

“This rule applies to any detailed assessment proceedings commenced in the High Court or a county court on or after 1 April 2013 in which the costs claimed are the amount set out in paragraph 14.1 of the practice direction supplementing this Part, or less.”

By virtue of CPR 47.6(1) (as before):

“Detailed assessment proceedings are commenced by the receiving party serving on the paying party—

(a) notice of commencement in the relevant practice form; and
(b) a copy of the bill of costs.”

The claims to which this will apply are therefore clear.

CPR 47.15(5) states:

“The court will not award more than £1,500 to any party in respect of the costs of the provisional assessment.”

“Costs” retains its current definition (but now under CPR 44.1):

“’costs’ includes fees, charges, disbursements, expenses, remuneration, reimbursement allowed to a litigant in person under rule 46.5 and any fee or reward charged by a lay representative for acting on behalf of a party in proceedings allocated to the small claims track”

This is clearly broad enough to include (as it has always been treated as doing) both court fees and VAT.

Secondly, and I suspect this is an oversight on the part of those making the rules, this includes any success fee (the term is “costs” not “base costs”). It will therefore apply to claims being conducted with recoverable success fees where the detailed assessment proceedings are commenced on or after 1 April 2013.

A paying party who is VAT registered will therefore be able to recover the full £1,500 as profit costs.

A receiving party not registered for VAT will get £1,500 less the court fee, less VAT and to include any success fee. The current court fee for requesting a detailed assessment hearing where the costs claimed are between £50,000 and £100,000 is £980. By my maths, for a £75,000 bill where the claimant is not VAT registered and where a 100% success fee applies that leaves a balance of £216.67 base profit costs for the whole provisional assessment process.

There is a reasonable argument for saying the recoverable base costs of a receiving party should be much less than a paying party given the relatively limited amount of work expected from receiving parties with the massively streamlined Replies that are all that will be allowed, but still…

Also, it means that the lower the amount claimed the greater the profit costs recoverable as the court fee will be correspondingly lower. The court fee for a bill of £15,000 or less is £325. That would leave, where the receiving party is not VAT registered and where there is a 100% success fee, base profit costs of £489.58

It may be that the court fee for provisional assessment will be reduced, but no news yet on that front so far as I know.

Now for the killer.

The new CPD 5.19 to CPR 47 contains the same provision as appears in the current CPD:

“The bill of costs must not contain any claims in respect of costs or court fees which relate solely to the detailed assessment proceedings other than costs claimed for preparing and checking the bill.”

Implicit in this is that the costs of preparing and checking the bill form part of the assessment proceedings, even if the costs can be included within the bill itself. If that is so, the £1,500 must be taken to include the costs of drafting the bill. Firstly, that would mean the maximum recoverable for drafting a bill with a value of up to £75,000 is £1,500 (inclusive of VAT and any success fee). Secondly, any amount allowed for drafting the bill then needs to be offset against the £1,500 if the receiving party is awarded the costs of the provisional assessment.

Anyone fancy drafting a bill with a value of £75,000 (even including a 100% success fee) for £216.67 base profit costs? It is difficult to see how it could be argued that drafting a bill is part of the costs of “detailed assessment proceedings” but not part of the costs of “provisional assessment” (and thus excluded from the £1,500). The only part of the “provisional assessment” that is expressly unique to the process, rather than being part of the assessment proceedings overall, is the lodging of the limited papers with the court. Clearly the £1,500 is meant to cover the whole process and not just that limited step.

I’m going to enjoy the next fee months.