The defendant costs specialists

Recoverability of costs of negotiating costs

By on Oct 15, 2014 | 5 comments

A recent post discussed the Court of Appeal’s decision in Tasleem v Beverley [2013] EWCA Civ 1805 and apparent suggestion (flying in the face of an earlier Court of Appeal decision) that issuing Part 8 costs-only proceedings was not part of the detailed assessment proceedings (with the apparent consequence that such costs would fall outside the £1,500 cap for provisional assessment). The crucial passage was:

“The bringing of Part 8 costs-only proceedings is not the commencement of, or part of, the detailed assessment proceedings, albeit it is a necessary preliminary to that process if there are no underlying proceedings in existence.”

This leads on to a secondary issue of work done in relation to negotiating costs prior to Part 8 proceedings being issued.

The earlier Court of Appeal decision in Crosbie v Munroe [2003] EWCA Civ 350, [2003] 1 WLR 2033 was simple and logical. There were two types of costs:

1. Those costs incurred in relation to the substantive claim.

2. Those costs incurred quantifying the costs of the substantive claim. This would cover all work post-settlement of the substantive claim negotiating costs, dealing with Part 8 proceedings and through the assessment process. Brooke LJ explained at paragraph 34:

“By this route it is easy to see that even when Part 8 proceedings have to be commenced in order to obtain a court order for detailed assessment, the ‘costs of the proceedings’ within the meaning of CPR 47.19 still relate only to the costs leading up to the disposal (on this occasion by agreement) of the substantive claim. They are ‘the proceedings which gave rise to the assessment proceedings’, and the assessment proceedings cover the whole period of negotiations about the amount of costs payable through the Part 8 proceedings to the ultimate disposal of those proceedings, whether by agreement or court order.”

It all seemed neat and straightforward until Tasleem v Beverley.

Some of the difficulties are created by the confusingly worded CPR and Practice Directions.

CPR 46.6(1) (mirroring the pre-Jackson wording) states:

“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.”

That would appear to support the Tasleem thinking that issuing Part 8 proceedings is not part of the assessment proceedings, simply a necessary preliminary step. On this analysis, service of the N252 commences the detailed assessment proceedings and work done before this falls outside the process (and therefore outside the provisional assessment cap).

On the other hand, PD 47 para.5.19 (again mirroring the pre-Jackson wording):

“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 the fact that the costs of drafting the bill are part of the detailed assessment proceeding, even if it is permissible to include these in the bill. Clearly a bill must be drafted before an N252 is served and the only court fee that might normally be incurred before a bill is drafted is the Part 8 issue fee. This of course was the reason CPR 47.15(5) had to be amended from:

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

to the current:

“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.”

If the costs of drafting a bill were not costs of the assessment the issue would never have arisen. Self-evidently, a bill will always be drafted before it is served with an N252.

The importance of the distinction between whether work does or does not fall within the detailed assessment proceedings is heightened by the fact so many cases are now subject to provisional assessment.

Take the following example. A claim settles prior to proceedings being issued with the defendant agreeing to pay the claimant’s costs. The claimant serves a draft bill. The defendant serves draft points of dispute. The claimant serves draft replies. Negotiations continue for several months. Negotiations break down and the claimant issues Part 8 proceedings. Following an order for costs being made, the bill is formally served. Can it seriously be argued that all work done up until that point falls outside the detailed assessment proceedings (because it pre-dates service of the N252) and therefore both parties have effectively managed to totally escape the £1,500 cap? If it does, CPR 47.15(5) needs to be rapidly redrafted (third time lucky?).

A further oddity thrown up by Tasleem is to be found at paragraph 13:

“We have not called upon Mr Mallalieu [for the Claimants} to respond on behalf of the respondents to this appeal, but in his written arguments it is clear that he does not quarrel with the proposition that when there is an underlying claim followed by a notice of commencement of detailed assessment proceedings and a default costs certificate, the recoverable costs are limited to those in the default costs certificate. In such a case, the costs specified in it are apt to cover the additional costs the receiving parties incurred by using the procedure, subject only to the cap of the fixed costs regime.”

If that is correct, consider the following situation. Proceedings are issued in relation to the substantive claim which settles, with the defendant being liable for the claimant’s costs. A bill is informally served. Several months of heated negotiations are then entered into over costs. Negotiations break down and a bill is formally served. The defendant fails to file points of dispute and the claimant obtains a default costs certificate. Are the claimant’s costs really limited to those shown on the “default costs certificate”? Is nothing recoverable for the months of negotiations?

The Court of Appeal has created various problems entirely unnecessarily. It would have been much simpler to conclude, adopting a purposive approach to interpretation of the rule the court was being asked to consider, that the fixed fees under CPR 47.11 were intended to cover the costs of applying for a default costs certificate alone. It would not then have been necessary to try to treat the issuing of Part 8 proceedings as falling outside the assessment process (clearly contrary to Crosbie).

The Court of Appeal will no doubt shortly be asked to sort out the mess they have created, unless the rules committee gets there first.

    5 Comments

  1. On the matter of the costs of obtaining a default costs certificate, CPR 47.11(3) provides that ‘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.’

    PD 47 para 10.7 states that ‘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.’

    I observe:

    (a) That the sum of £80 has not been increased since 1999.

    (b) That, rather oddly, it is expressed to be in respect of the costs of commencing detailed assessment proceedings (ie preparing and serving the N252 with the bill and supporting documents) and not for the costs of preparing the application for a default costs certificate, although you do get the court fee on that application in addition.

    (c) The wording ‘unless the court orders otherwise’ suggests that in your proposed scenario you could file a request for a default costs certificate coupled with a request that the court should allow more than the fixed costs to cover all your abortive negotiations. That would present a wonderful opportunity to try out your argument that those negotiations formed part of the detailed assessment proceedings even though those proceedings had not been commenced.

    Peter Burdge

    15th October 2014

  2. Simon
    Your 1st scenario : whom really would prepare PODs against a draft bill pre-issue??

    Also, consider the following. bill drawn and served with N252. The standard wording on the N252 refers to the added amounts to pay if you object, and the default if you don’t. What happens if you ACCEPT the N252, and simply write saying you will pay it? After months of haggling, Part 8, et al, and that stops it dead. Nothing more to pay. It’s the same as paying a debt on receipt of a claim form. OK, so it won’t be appropriate in big disputes/cases, but in matters where there’s not much between you at that point save maybe the costs of the costs, it’s a very effective remedy

    Finally, don’t forget, a DCC is a Finall Costs Certificate. It ends the case finally. I know from experience, the Court will not go behind it to award more costs after it’s been applied for

    Anonymous

    15th October 2014

  3. I think you are trying to invent an issue here.

    Tasleem and Crosbie fit together.

    You have –

    – Costs the substantive proceedings
    – Costs of the Part 8 proceedings
    – Costs of assessment proceedings to include all negotiations pre-N252

    I accept that there is an anomaly regarding the status of negotiation costs (and, indeed, commencement costs) when a DCC certificate is obtained, but this issue has always existed (and Peter points out that there is route to seek more costs). I suspect that a RP who managed to keep a DCC is happy enough to get his full bill paid that foregoing the costs of negotiation/N252 is a small price for a windfall.

    Finally, I agree (referring to the earlier post)that the sums allowed for Part 8 proceedings in Tasleem were crazy. I suspect these did include negotiation costs and perhaps the appeal judge was not entirely switched on to that.

    Robert Pettitt

    15th October 2014

  4. I have seen lots of instances of paying parties after losing their Provisional Assessment seeking to contend that there should be no order for costs.

    This then necessitates further written submissions to court. I consider that such costs are outside the cap in my opinion but the courts will not order an additional amount. Does any one have any thoughts on this?

    abcde

    17th October 2014

  5. @ abcde

    See CPR 47.15 PD 14.6

    Self explanatory really

    That being said, one particular court in the NW (on the opposite side of a well known ferry route) refuses to have written submissions per this PD, demanding that a party requires to apply for an Oral Hearing.

    They then have the affront to whine about the pressure on Court time for hearings, costs of process etc etc

    Anonymous

    21st October 2014

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