Gordon Exall’s excellent Civil Litigation Brief has a post reporting the decision in Cross v Black Bull (Doncaster) Limited (Sheffield County Court) concerning the appropriate consequences of a party not serving a statement of costs at least 24 hours before a hearing.
His Honour Judge Robinson summarised the issue thus:
“Miss Buck who did not appear before me in the appeal nor did she appear before the Deputy District Judge submits on instructions that because a costs statement had not been filed at the hearing before the Deputy District Judge in accordance with the CPR namely, without looking it up and from memory 24 hours before the hearing, then summary assessment could not have occurred and therefore the claimant should be deprived of all of his costs.
Now, I asked Miss Buck if there was anything by way of authority or principal or direction or anything that might assist me in determining the appropriateness of that costs direction. Namely the costs should be denied a successful claimant and as very fairly said no. Therefore, I am asked to exercise my discretion.”
Exercising his discretion from first principles, he declined to disallow the costs.
It is unfortunate that neither Miss Buck nor the judge (nor, presumably, the advocate for the other side) appeared to be aware of the actual wording of PD 44:
“9.5(4) The statement of costs must be filed at court and copies of it must be served on any party against whom an order for payment of those costs is intended to be sought as soon as possible and in any event –
(a) for a fast track trial, not less than 2 days before the trial; and
(b) for all other hearings, not less than 24 hours before the time fixed for the hearing.
9.6 The failure by a party, without reasonable excuse, to comply with paragraph 9.5 will be taken into account by the court in deciding what order to make about the costs of the claim, hearing or application, and about the costs of any further hearing or detailed assessment hearing that may be necessary as a result of that failure.”
It is also unfortunate that the judge, who was clearly aware there was a provision within the CPR that required filing of the costs statement in advance of the hearing, decided to rely on memory rather than looking up the actual wording. If there is a sanction for non-compliance of a rule, it is invariably contained within the rule itself.
The actual outcome may not necessarily have been different. The note in the White Book states:
“The failure of a party to comply with (what is now) para.9.5(4) of Practice Direction 44 by omitting to file and serve a copy of the statement of costs not less than 24 hours before the date fixed for the hearing did not warrant the wholesale disallowance of costs. Where the only factor against awarding costs was merely the failure to serve a statement of costs without aggravating factors a party should not be deprived of all their costs. The court would take the matter into account but its reaction should be proportionate. The court should ask itself what if any prejudice there had been to the paying party and how that prejudice should be dealt with, e.g by allowing a short adjournment or adjourning the summary assessment to another date, or directing detailed assessment: MacDonald v Taree Holdings Ltd, The Times, 28 December 2000, Neuberger J. The court may mark the failure to serve a statement by disallowing some of the costs that would otherwise have been allowed: Simpson v MGN  EWHC 126 (QB)(Warby J).”
Nevertheless, the approach taken to the exercise of discretion would no doubt have differed.
The real lesson from this is that even experienced lawyers do not necessarily possess photographic memories of every aspect of the Byzantine civil procedure rules and there is no substitute to carefully reviewing the relevant provisions rather than relying on “on instructions” or “memory”.
The new electronic bill of costs becomes mandatory from 6 April 2018.
The relevant transitional provisions state that where work was done both before and after 6 April 2018, a party may serve and file either a paper bill or an electronic bill in respect of work done before that date and must serve and file an electronic bill in respect of work done after that date.
The new electronic bill is not required for all cases. The circumstances in which bills of costs must be electronic bills are that—
“(a) the case is a Part 7 multi-track claim, except—
(i) for cases in which the proceedings are subject to fixed costs or scale costs;
(ii) cases in which the receiving party is unrepresented; or
(iii) where the court has otherwise ordered; and
(b) the bills of costs relate to costs recoverable between the parties for work undertaken after 6 April 2018 (“the Transition Date”).”
Fast-track cases are presumably excluded from the requirement to be in electronic format because:
- Those that are not already subject to fixed fees are likely to become so in the near future with the next wave of the Jackson reforms.
- The majority of bills in fast-track cases that are not already subject to fixed fees are likely to be relatively modest in amount meaning there would be little to be gained from insisting they are in electronic format.
However, the wording of the rules clearly means that the relatively large number of higher value cases that settle pre-issue and the further relatively large number of cases that settle post-issue, but pre-allocation, are not required to be in electronic format (as they are not multi-track yet) and can continue to follow good old Precedent A. I am not sure this is what was intended. (Assuming the electronic bill is a good thing,) would it not have made more sense to include cases that settle pre-allocation but for an amount in excess of the fast-track limit within the category of claim for which an electronic bill was required?
The recent decision of Master Leonard in Douglas v Ministry of Justice & Anor  EWHC B2 (Costs) concerned the issue of the recoverability of the costs of attending an inquest.
One particular comment made during the judgment has attracted attention:
“... the cost of preparing witness evidence will normally be recoverable as part of the cost of a successful claim even if that claim settles before the witness evidence is ever needed.”
Gordon Excall’s Civil Litigation Brief blog interpreted this as meaning:
“This emphasises the point that there is nothing to lose (and everything to gain) by the careful and early collection of witness evidence.”
It is no doubt correct that the mere fact a matter settles prior to witness statements being served will not of itself prevent recovery of the costs of obtaining them.
However, I am not sure that Master Leonard sought to imply that the costs of obtaining witness statements would always be recoverable regardless of the stage of the claim they were obtained. It is important to the see the context within which his comment was made:
“one must not use hindsight in applying the Gibson principles. So, for example, the cost of preparing witness evidence will normally be recoverable as part of the cost of a successful claim even if that claim settles before the witness evidence is ever needed.”
This is no more than pointing out that hindsight will not usually be applied when assessing costs. The key issue remains as to whether obtaining witness evidence was reasonable at that point in time. Obviously, each case is fact specific, but costs are routinely disallowed on detailed assessment on the basis they have been incurred prematurely.
Friston’s Civil Costs correctly summaries the position:
“Speaking of a costs regime long since passed, Lord Hanworth referred to the following extract from a Master’s certificate dealing with material thrown away:
‘We have always acted upon the principle that the costs of all work in preparing, briefing, or otherwise relating to affidavits or pleadings, reasonably and properly and not prematurely done, down to the time of any notice which stops the work, are allowable; and … the Taxing Master, having regard to the circumstances of each case, must decide whether the work was reasonable and proper and the time for doing it had arrived.’
This extract illustrates the fact that it is possible to carry out work prematurely; if the benefit of that work is ultimately thrown away, the costs may be disallowed on the basis that the work ought not to have been carried out until it was known whether there was a need for it.”
So, is there anything to lose by obtaining witness statements at an early stage? Yes, potentially the costs of that work.
Two letters received from the Claimant’s solicitors, both dated 4 August 2017. The first is a Part 36 offer. The second attaches Replies and states:
“We shall now be making a Request for a Detailed Assessment Hearing.”
As the Part 36 offer was unacceptable in amount, I simply awaited receipt of a notice of hearing from the court. (Given the date of the final costs order, a request for assessment needed to be filed by 13 October 2017 in any event.)
By 14 November 2017, I had heard nothing further and so wrote to the other side asking them to confirm the date they had filed their request for assessment.
The response received, dated 21 November 2017, read:
“We did not receive a response to our Part 36 offer and was awaiting a response before incurring further costs by lodging the matter. We assume that our Part 36 offer is rejected and are now taking instructions. We intend to lodge the matter for assessment by the end of the week.”
Am I being overly legalistic to suggest that the original statement that “we shall now be making a Request for a Detailed Assessment Hearing” failed to adequately convey what was presumably the intended meaning:
- We currently have no instructions to request a hearing.
- We intend to take no further steps in this matter, including sending any chase-ups, until we hear further from you.
Needless to say, I am still awaiting a hearing date.
At the heart of the successful appeal in May v Wavell Group was the appeal judge’s view that, apparently, the issue of proportionality is something readily discoverable once all the relevant factors have been taken into account. He held:
“the construction of the rules relating to the definition of proportionality and their application do not involve a discretion properly so called but require the court to make a judgment on what the rules mean and how they should be applied. That is a matter of law. The application of the rules, once interpreted, require a balance to be undertaken, in that weight (which includes the possibility of no weight) has to be accorded to each of the factors specified by the rules, but that again is the making of a judgment, albeit of a rather broader nature than construction of the rules, rather than the exercise of a discretion.”
“There may be a limited range of acceptable difference in the total figure once the rules have been applied, in that different judges could legitimately come to slightly different conclusions as to the proportionate sum, and so long as they have applied the rules correctly they should not be open to challenge on appeal.”
Given the rules and Practice Direction are entirely silent as to what amounts to “proportionality”, this is a surprising view. We now have a member of the judiciary who believes that the new proportionality test can be applied in a quasi-scientific manner.
“Whether the relationship is reasonable is, in my view, a matter of judgment, rather than discretion, and, as I have said above, requires a costs judge to attribute weight, and sometimes no weight, to each of the factors (a) to (e).”
His criticism of Master Rowley’s decision was that:
“the final figure in this case does not appear to be based on any specific mathematical calculation nor is there a specific explanation of how the weighting of the various factors resulted in the final figure.”
Surely then, the appeal decision undertook just such a careful mathematical calculation and/or gave a specific explanation as to the weighting given when allowing the figure of £75,000 plus VAT. Here it is:
“In those circumstances we have undertaken our own assessment of the costs having regard to the factors mentioned in this judgment. We have given greater weight to the sums in issue and to the factor of complexity, both of which tip the balance significantly in the appellants’ favour. We have discounted the notional reduction for early settlement. We bear in mind, as the respondents recognised in argument, that the reduction made on the item by item assessment was unusually large, albeit unchallenged on appeal and that the learned Master concluded that it had been reasonable for the claimants to have spent nearly £100,000 on costs prior to settlement. When the reasonable costs are compared against a value of between £50,000 and £100,000 in a reasonably complex claim requiring specialist expert evidence, in what is to judge from the pre-action correspondence likely to be hard fought litigation, they appear less disproportionate than previously. We have revisited the elements of the bill and take the following approach, having regard to our view of the factors, including the factors which were not challenged before us. First, we would not reduce the court fees or costs of drawing the bill and secondly we would apply a smaller reduction to the expert’s fees than we would to the profit costs reflecting our view of the essential part played by the expert evidence. In those circumstances I concluded that in all the circumstances the proportionate figure is £75,000 (plus VAT), which I believe to be a fair figure bearing a reasonable relationship to the factors as I see them after taking careful account of the advice of Master Whalan to whom I am particularly indebted at this stage of the process.”
I am sorry, but this is doing no more than substituting one arbitrary figure for another. There is nothing approaching any kind of reasoning as to why one figure is more proportionate than another.
For example, the judge disagreed with Master Rowley’s decision that this “case was neither legally nor factually complicated”. The appeal judge concluded:
“If one compares such a claim to the range of claims which are made in the county court it can readily be seen that this is towards the more complex end of the range. It is almost impossible to generalise but there will be many road traffic accident claims and those arising out of sale of goods or contracts, all of similar value (ie £50,000 to £100,00) which may be much less complex than this claim. … Although this case may not have been complex within its category it seems to me that it was complex when compared with other claims of similar value within the county court.”
However, the judgment fails to give any indication as to how much weight the complexity issue was given, other than it was “greater” than Master Rowley (who in fact gave it no weight as he concluded it was not complex). Put another way, if this claim had been, in terms of complexity, more like the many “road traffic accident claims and those arising out of sale of goods or contracts” that are “much less complex”, what amount would have been judged as proportionate? If this is a question of law, as opposed to discretion, there should be a ready answer and it should be spelt out in any detailed assessment (or subsequent appeal).
There is something rather unsatisfactory about an appeal judge criticising a judge below for lack of reasoning and then repeating exactly the same “error” himself.
The history of the courts’ attempts to ensure legal costs are proportionate is a strange one. The appeal decision in May v Wavell Group Plc is no exception to that trend.
To recap, Master Rowley, on a line-by-line assessment, reduced the costs claimed from £208,236.54 to £99,655.74. He then concluded that this was still disproportionate for a claim which settled pre-trial for £25,000 and made a further global reduction, to reflect proportionality, down to £35,000 plus VAT.
On appeal, His Honour Judge Dight, CBE concluded that Master Rowley had misinterpreted and misapplied the new proportionality test and concluded a figure of £75,000 plus VAT was proportionate (presumably resulting in a global figure close to £90,000). (There was no challenge to the finding that the reasonable costs were £99,655.74.)
Of the various interesting comments made by the judge, one that stands out is:
“I doubt … that the proper interpretation of the rules requires or indeed entitles a costs judge at the end of an item by item assessment to impose a very substantial reduction on the overall figure without regard to the component parts.”
The issue of whether it is appropriate to reduce a successful litigant’s costs below the level that it was reasonable and necessary for him to incur is one of policy. There were many strong arguments advanced as part of the Jackson consultation process as to why this was wrong, but those arguments did not prevail. (It is equally a matter of policy that means that in the field of personal injury claims, successful defendants are now usually deprived of all the legal costs they have reasonably and necessarily incurred.)
The rules relating to proportionality expressly state:
“Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred”
The express intention of the new rule is that proportionality trumps reasonableness/necessity (ie the assessment of the component parts).
On what basis can it be suggested from the wording of the rules that the test is not designed to “impose a very substantial reduction on the overall figure”? There is none. A County Court judge has decided he does not like the new proportionality test and has therefore sought to re-write the rules. Presumably, he would have the rules read:
“Costs which are disproportionate in amount may be disallowed or reduced to a small extent even if they were reasonably or necessarily incurred”
We have, of course, been here before. The old proportionality test was completely undermined by the Court of Appeal in Lownds v Home Office by the Court ruling that the word “proportionate” (which clearly has one meaning) should be read as “necessary” (which clearly has a completely different meaning).
It was only a matter of time before the judiciary started to try to dismantle the Jackson reforms. Expect more of the same to come.
The Court of Appeal has given an important judgment on the issue of the costs of provisional assessment. In W Portsmouth and Company Ltd v Lowin  EWCA Civ 2172, the Court ruled that the £,1500 cap on the costs of provisional assessment continues to apply even where a party has succeeded on a Part 36 offer made in the assessment proceedings.
This is to be distinguished from the situation where a party succeeds on a Part 36 offer in relation to a fixed fee matter. In that case, Part 36 trumps fixed fees (as per Broadhurst v Tan  1 WLR 1928).
This is a sensible decision and should speed up the provisional assessment process by reducing the scope for argument and ensure the overall costs are proportionate.
Interestingly, an unnamed spokesman for the Association of Costs Lawyers was reported as commenting:
“While the clarity provided by the ruling was needed, the outcome is very harsh for costs lawyers.
There will be plenty of cases where the paying party does not accept a part 36 offer and instead causes the other side to spend significantly more than £1,500 in dealing with costs issues.
But on beating their own offer at assessment, the receiving party enjoys all the usual benefits, except in relation to this one aspect of their case. And it will be their costs lawyer who suffers through no fault of their own.
We call on the Civil Procedure Rule Committee to consider the impact and fairness of this ruling – making this exception seems at odds with the thrust of the whole part 36 scheme.”
I am not sure I agree.
Plainly, this decision will have no adverse impact on in-house Costs Lawyers.
It will also have no impact on Costs Lawyers employed by costs firms.
I believe the “harsh” outcome being described was intended to mean: “Costs Lawyers who own their own costs firms and who conduct costs litigation on a CFA Lite basis will lose out because they will be unable to recover any shortfall between the work undertaken and the cap of £1,500”.
I do not know how common it actually is for costs firms to agree to limit their fees to the level of costs recovered from the other side.
More to the point, although there will clearly be some exceptions, generally the reason the level of costs exceeds the £1,500 cap in provisional assessment matters is because:
- The receiving party has ignored PD 47 para.12.1: “A reply served by the receiving party under Rule 47.13 must be limited to points of principle and concessions only. It must not contain general denials, specific denials or standard form responses”; or
- the paying party has ignored PD 47 para.8.2: “Points of dispute must be short and to the point. They must follow Precedent G in the Schedule of Costs Precedents annexed to this Practice Direction, so far as practicable.”
If Costs Lawyers comply with the Practice Direction, their costs of assessment should rarely exceed the cap.
The Court of Appeal decision in BNM v MGN Ltd  EWCA Civ 1767 manages to be both very important and a massive anti-climax.
The decision is important because it finally resolves the issue of whether post-1 April 2013 additional liabilities are subject to the old or new proportionality test. The answer is that the old test applies (contrary to Master Gordon-Saker’s original decision). Although this will potentially have a large impact on the costs recoverability of some big-ticket costs claims, this is mainly limited to a dwindling number of old cases (4½ years and older).
What the judgment entirely fails to do is give any wider guidance as to how the new test should be applied. Even on the facts of the case, we still do not know the answer as the matter is to be referred back to Master Gordan-Saker for him to have another go.
In light of the problems facing ACL Training, I commented that: “It seems unlikely it can possibly continue in its current form”.
Unsurprisingly, the CLSB has now announced that it is to suspend any further intake onto the current three year Costs Lawyer qualification.
The CLSB “will now focus on other means of entry into the profession e.g. Costs Lawyer competence test, apprenticeship, thus assuring standards expected of a regulated profession are met”.
The negative impact of the Jackson reforms continues apace.
Virtually simultaneous to the news about Just Costs, is the announcement that defendant costs firm Cost Advocates is to close at the end of the year.
As an example of the rise and fall of the costs industry, Cost Advocates’ story is, perhaps, even more dramatic than that of Just Costs.
Cost Advocates (then Cost Auditing) was purchased by outsourcing giant Capita in 2002 for an initial consideration of £4.9m in cash with additional deferred payments of potentially another £3m.