New Costs Practice Direction

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.

21 thoughts on “New Costs Practice Direction

  1. I am afraid I cannot agree with you here.Why all of a sudden would the costs of Bill drafting currently properly sort and recoverable within the Bill of costs itself as a cost of the action now fall as a cost of Assessment.The CPD wording remains constant.
    Agree to disagree on that one!

  2. These inconsistencies in the CPD have been there since it was first published. As the detailed assessment proceedings are commenced by serving the bill, it follows that the costs of the preparation of the bill, which of course are incurred before that point, must be part of the costs of the substantive proceedings and cannot be part of the costs of the detailed assessment proceedings.

    I have argued for many years that the provisions in the present CPD (4.13 and 46.2) which appear not to recognise this distinction are erroneous. I suspect that the mismatch may have come about because the provision in CPD 4.18 making the costs of bill preparation and checking recoverable between the parties was introduced at the very last moment before the CPD was unveiled. It was indeed a surprise (but a pleasant one for receiving parties’ costs draftsmen) at the time.

    The LSC recognised the importance of this distinction between the substantive costs and the costs of detailed assessment. That is why they were keen to make clear that the costs of preparing and checking the bill did not form part of the costs of detailed assessment, so were not exempt from the statutory charge. While the LSC’s regulations (eg regulation 119(3) of the Civil Legal Aid (General) Regulations 1989) and guidance were amended to make this absolutely clear, the CPR and CPD were never amended. In 2005 I wrote to the Chief Costs Judge pointing out this and some other apparent defects in the CPD but, although I received an acknowledgment, nothing was ever done about them.

    I shall continue to argue that the costs of preparing and checking the bill (and of preparing and serving the N252!) are part of the substantive costs.

  3. Simon, your comments and “interpretation” of CPD 5.19, are a prime example of why the Costs Rules have been changed to this degree and threaten the livelihood and sanity of so many solicitors and cost practitioners. The intent was plain and simple, to have the bill preparation a seperate part of the process and the fees recoverable, not the garbled suggestion you put forward. Perhaps working on making the law simpler and more cost effective, rather than trying to tie it up in knots and finally killing it, should have finally sunk in with the Defendant brigade, but clearly not………

  4. That doesn’t sound right to me. I would have thought the £1500 relates to costs incurred after the bill prep costs, which I would think are still recoverable in the usual way. I am not even sure it would include the court fee. we shall see.

  5. It is quite simple…

    The costs of preparing & checking the bill will be assessed by the DJ when he/she provisionally assesses the bill. This will form part of the substantive costs. As Mr Burdge points out above, the bill is prepared & checked BEFORE the commencement of detailed assessment proceedings and therefore is part of the substantive costs.

    I wonder if seeing your comments SImon, paying parties, with the belief that prep & checking the bill forms part of the costs of PA, might now begin to make offers for costs which don’t include the costs of prep & checking the bill?

    They would be ill advised to do so because this might just be what swings the PA in favour of one party to another…

  6. 47.6(1) provides that detailed assessment is commenced by the receiving party serving a notice of commencement and copy bill of costs, this process applies to all bills regardless of the amount, accordingly the costs in preparing, approving the bill together with any success fee is claimed in the bill and does not form part of the costs that may be awarded under 47.15(5).

    Unless i have missed something this must be correct !!!!.

  7. the costs of bill preparation, is not a cost of the DA process, because it is a requirement to firstly draw the bill BEFORE the DA process can commence under the “old” CPR 47.6
    this is a particularly poor attempt to split hairs and redefine something which has always been clear

  8. Mistakes happen all the time Simon, there’s no shame in them anymore. Come on, own up, you’ve made a mistake on this one!

  9. I’ll return to this topic at a later point given the interest it has sparked, but at this stage the only thing I would say is that the argument that drafting the bill cannot form part of the costs of assessment because such work is incurred before the detailed assessment proceedings are commenced seems to fly in the face of In re Gibson’s Settlement Trusts and other cases dealing with pre-commencement of proceedings work.

  10. I have to agree with SG that CPD 5.19 makes it clear that the preparation and checking of a Bill are costs of the assessment. With the current onslaught of amendments to the rules, you would have thought now would be the time to clarify all these unwritten rules.

  11. CPD 5.19 states “Consequently in the circumstances described in the preceding paragraph, a bill of costs presented for agreement or assessment should not claim any VAT which will not be allowed on assessment”.

    The preceding paragraph states “where a litigant acts in litigation on his own behalf he is not treated for the purposes of VA as having supplied services and therefore no VAT is chargeable in respect of work done by that litigant (even where, for example, that litigant is a solicitor or other legal representative”.

    How can this make Simon’s, simply erroneous comment, accurate?

  12. To my mind the only thing that new CPD 19 makes clear is that both the old and the new CPD have the same inconsistencies in their drafting.

    If Simon’s interpretation is correct now, it has presumably been correct since 1999, so why haven’t paying parties routinely objected to claims for the costs of bill preparation and checking in all cases which don’t end up with an agreement or order requiring them to pay the costs of detailed assessment?

  13. The new 5.19 states clearly that bills cannot claim any costs or court fees solely relating to the assessment proceedings other than the costs claimed for preparing and checking the bill.

    Surely there is no misunderstanding to be had

  14. What a fuss about nothing. There are going to be no bills to draw once budgeting comes in anyway. We will all be fighting over jobs at McHorseBurger. And I didn’t go to cantering college either.

  15. I agree with Peter Burdge.

    I don’t see how the new CPD 5.19 changes the position from how it is now. Parties have routinely accepted that checking and preparing the Bill forms part of the substantive costs.

    I don’t believe paragraphs 33 and 34 of Crosbie v Munroe add anything to the argument – I don’t think many would doubt that “assessment proceedings cover the whole period of negotiations about the amount of costs payable”, but until the Bill has been prepared and checked, there is no accurate figure of costs to negotiate on!

  16. I must stand up for Simon here. I have not agreed with a single one his critics.

    Costs of preparing and checking a formal bill are detailed assessment costs, however, they are the only detailed assessment costs which can be included within the formal bill.

    The suggestion that Defendants have never objected to the costs of preparing and checking the bill is nonsense. Forward v Burton is a case we often use to resist the costs of preparing and checking if a reasonable offer has been made prior to preparation (based on an informal schedule). The costs of preparing and checking the bill are also governed by CPR 47.18(2) and we also sometimes use this to ask the Court to strip out these times if the bill is incorrect or contains startling errors.

  17. I dont think i can take this anymore!! after 30 years of listening to utter rubbish i personally have had enough.RIP Costs profession.

  18. I note that the numbering of the new Practice Directions about costs is completely different from the numbering of the current version.

    It will no longer make sense to refer to “Costs Practice Direction 5.19″; it will instead be mandatory to refer to “CPR 47 Practice Direction 5.19″.

    Simon’s link to the new Practice Directions is not working for me. Here is a link to the same document on a different site
    http://www.keithetherington.co.uk/downloads/files/New%20Practice%20Direction.pdf

  19. Please run this argument, and many more like it Simon. Without clever and technically minded Defendant Costs Professionals like you, I dont think I would have a job…

  20. ‘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.’

    There could, however, be argument about whether detailed assessment proceedings were VALIDLY commenced – for example if the bill is unsigned or certificates are missing or the notice of commencement is inaccurate or incomplete.

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