The defendant costs specialists

Costs reserved

By on Feb 4, 2014 | 6 comments

Of the different types of order the court can make in relation to interim matters is one for “costs reserved”. PD 44 para.4.2 explains the effects of such an order:

“The decision about costs is deferred to a later occasion, but if no later order is made the costs will be costs in the case.”

I have always understood this to mean that where such an order is made but this is overlooked when the matter settles, whether at trial or by agreement, then tough luck for the party who is ultimately unsuccessful. The costs of that interim matter are treated as costs of the claim overall. Cook on Costs states:

“It is worth pointing out that an order for ‘costs reserved’ becomes an order for ‘costs in the case’, if there is no later determination of where responsibility for those costs lies.”

It is not uncommon for this issue to be overlooked, particularly where counsel is not properly briefed as to the existence of such orders before a final hearing.

However, a recent decision from the Court of Appeal suggests that this analysis is not necessarily correct.

In Taylor v Burton & Anor [2014] EWCA Civ 21 an interim order was made permitting the claimant to amend their particulars of claim, permitting the service of an amended defence and permitting the defendant to serve a further statements of fact dealing with any new factual issues arising in the amended case. The judge ordered that the “costs of and occasioned by the amendment are reserved to the trial judge”.

At trial the defendant was ordered to pay the claimants’ costs of the action on the standard basis. This had the effect of also picking up the costs of the amendment reserved to the trial judge. The Court of Appeal proceeded on the basis that the trial judge was unaware of this as he had not been referred to the fact that those costs had been reserved to him and did not refer in his costs judgment to the fact that they had.

The Court of Appeal’s conclusion was:

“In my view, the judge was innocently in error in not dealing separately with this head of costs. I say ‘innocently’ because he was not told that this head of costs had been reserved to him. He ought to have been told and he ought then to have considered separately how to deal with them. He might have decided simply to include them as the costs to which the Burtons were entitled as part of their costs of the claim. He might have thought it appropriate to make a different order. We do not know. As, however, he did not address his mind to how to deal with them, we consider that he fell into error and that, in consequence, we can and should exercise our own discretion as to what order to make in respect of the reserved costs.”

The defendant was a litigant in person representing himself at the trial but this does not appear as part of the reasoning for the decision and there is nothing in the judgment to suggest the position would have been different if the defendant had been represented.

This judgment appears to place the onus on the trial judge to check whether there are any interim costs orders reserved to him and gives virtually an automatic right of appeal if the judge does not do this. It must be said that whatever the fairness of the decision, resolving such issues by way of appeal appears a very cumbersome and expensive route. Why not just allow the matter to be remitted to the trial judge for consideration? It also begs the question as to when the wording of PD 44 para.4.2: “if no later order is made the costs will be costs in the case” actually applies. This decision suggests there must be a formal judicial decision on the point before there is any finality.

    6 Comments

  1. Surely the duty is on the parties to bring this information to the trial judges attention?
    Ok, so absent some other Order it remains open to an application (I disagree it can be remitted to the trial judge, as his is a final order, and so his involvement is done), which would have to be an appeal, but in the circumstances the fool not bringing it to the trial judges attention ie The defendant making the application, should be condemned in costs of the appeal for their poor conduct and wasting court time

    But frankly, if this is the continuing sort of rubbish which is occupying appeal time of the court, then nobody has learned a damn thing from why the reforms came about

    Stroll on fixed costs for everything

    Anonymous

    4th February 2014

  2. Although the reasoning in Taylor is less than full, the point is a fairly simple one.

    Where costs are reserved, that ‘reserves’ the discretion on those costs to any later judge dealing with costs of the case.

    That discretion includes, of course, deciding to not make any further order, and thereby letting the costs fall as costs of the case generally, in accordance with the PD.

    In order to exercise that discretion, he must do so properly, having regard to all material considerations. If he is not even aware that he has a discretion in respect of those costs, much less that he is exercising it (as in Taylor) it is unsurprising that he is at risk of being found to be in error.

    Obviously, many times it will not matter – the proper order would have been for those costs to be costs in the case anyway. This, combined with the fact that the CA will rarely be so generous to a party that failed to take the point at first instance, explains why there will be very few appeals on the point.

    In Taylor it did make a difference (though it seems that the parties in that case are far keener to waste lots of money re-arguing a lot of other issues anyway).

    PD 4.2 really exists for two reasons. Firstly, many cases settle. If cases do so and neither party seeks a different order, the PD makes it clear that the reserved costs are costs in the case.

    Secondly, it exists for the benefit of a costs judge, so that, on any assessment, if there are costs which have been reserved and there is no further order the judge can just rely on PD 4.2 and does not have to listen to inane arguments about whether those costs form part of the costs of the case (though this does not stop the occasional ill informed paying party from trying).

    From the perspective of an assessment, Taylor changes nothing. If costs have been reserved and there is no later order, the costs are costs in the case.

    Anon

    4th February 2014

  3. Would the reserved costs order not be within the trial bundle somewhere?

    On a practical level it seems more important that the Defendant doesn’t fail to raise the issue at the trial, given they are the ones who stand to suffer from the oversight.

    Anonymous

    4th February 2014

  4. I doubt that a party represented professionally would seek to appeal. He would instead refer the issue back to the trial judge. In that way, the effect of PD 44 para 4(2) would be avoided without the need to vary the prior direction. The party seeking the determination would normally have to pay for any further hearing unless the party opposing was doing so unreasonably.

    Dunca

    4th February 2014

  5. Many years ago I was opposing an ancillary relief bill where the case was littered with costs reserved prior to an appeal. The orders were still not picked up on the appeal which the client lost. The receiving party sought all of the costs. Set down for a two day hearing of a £100K bill offered £40K. Costs judge dismisses argument on basis that Judge overlooked matter! Discussed matter with my solicitor landlord and came to the conclusion (maybe because family division) that if the receiving party had been unsuccessful then they could have made a free standing application to have the costs reserved picked up. I think the case in support was S v S 1995

    Ian

    4th February 2014

  6. I understood that in civil case if there is an order for Costs Reserved it falls to be recovered by the receiving party.
    There was a different position in family cases in that the reserved costs order needed to be specifically picked up by the trial judge or final order for it to be recovered by the receiving party.
    It is more than likely that I haven’t given this any great consideration since pre CPR, therefore my opinion may be way out of date.
    It appears however that I concur with Anon 11.34

    Anonymous

    4th February 2014

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