The Association of Costs Lawyers often used to have an examination question along the lines of: “There is no point in a receiving party making an offer to settle in detailed assessment proceedings. Discuss.”
The reasoning behind the question is that receiving parties currently have a presumption in their favour that they will be awarded their detailed assessment costs. Unless and until the paying party makes an offer that puts them at risk they can carry on regardless. If a receiving party does make a successful offer (usually by way of Part 47.19) there is no bonus (eg by way of enhanced interest or costs on the indemnity basis)) for making such an offer. All that is likely to happen is that the receiving party will be awarded their assessment costs; which is no more than the general presumption allows for in any event.
From 1 April 2013, Part 47.19 offers, as they now are, go. Part 36 will then apply. I have already written about one of the problems this creates and there are others. Nonetheless, Part 36 is here to stay.
The wording of Part 36 is changed slightly (eg “receiving party” substituted for “claimant”), but with the amended wording this is the position where a paying party makes a successful Part 36 after 1 April 2013 and that offer is not beaten at assessment:
"Costs consequences following detailed assessment
(1) This rule applies where upon completion of the detailed assessment –
(a) a receiving party fails to obtain an outcome more advantageous than a paying party’s Part 36 offer;
(2) … the court will, unless it considers it unjust to do so, order that the receiving party is entitled to –
(a) his costs from the date on which the relevant period expired; and
(b) interest on those costs."
Subparagraph (a) is much the same as one would expect now (although “from the date on which the relevant period expired” may be worse than now where a successful offer may result in all detailed assessment costs being awarded to the Defendant). The only benefit to the current position is interest on those costs. This is likely to be of little extra incentive.
On the other hand, where the receiving party makes a successful offer and the matter proceeds to assessment:
"Costs consequences following detailed assessment
(1) This rule applies where upon completion of the detailed assessment –
(b) the outcome of the detailed assessment hearing is at least as advantageous to the receiving party as the proposals contained in a receiving party’s Part 36 offer.
(3) … the court will, unless it considers it unjust to do so, order that the receiving party is entitled to –
(a) interest on the whole or part of any sum of money (excluding interest) awarded at a rate not exceeding 10% above base rate for some or all of the period starting with the date on which the relevant period expired;
(b) costs on the indemnity basis from the date on which the relevant period expired;
(c) interest on those costs at a rate not exceeding 10% above base rate and
(d) an additional amount, which shall not exceed £75,000, calculated by applying the prescribed percentage set out below to an amount which is—
(i) where the claim is or includes a money claim, the sum awarded to the claimant by the court
Amount awarded by the court Prescribed percentage
up to £500,000 10% of the amount awarded;
above £500,000 up to £1,000,000 10% of the first £500,000 and 5% of any amount above that figure"
Subparagraph (d)(i) appears to be drafted widely enough to cover a claim for costs. The successful receiving party therefore gets a 10% uplift on whatever the bill is assessed at plus the other benefits listed at (a) to (c). (Again, not clear how the judge undertaking the provisional assessment will deal with (a) or (c).)
Taken together, this change means a receiving party who makes a successful Part 36 offer will find themselves, on average, somewhere in the region of 15-20% better off at the end of an assessment than currently.
This change will act as a massive incentive for receiving parties to make sensible early Part 36 offers. The days of silly drip feeding of offers by receiving parties will hopefully end. (Yes, I know some paying parties are also guilty of this and the new rule does little to discourage this.) Claimant Costs Lawyers and law costs draftsmen who do not advise on sensible Part 36 offers at an early stage are likely to leave themselves open to negligence claims.
I will shortly be setting up shop as an expert witness to help deal with these negligence claims. I’ll need something to keep myself busy post-April.
One of the inherent difficulties when advising defendants in relation to cost disputes is the difficult question of determining which points are worth taking and which ones are not. One costs judge’s technical dispute wholly lacking in merit is another costs judges perfectly proper challenge that will meet with success. For example, where there has been a failure to serve the proper statements/risk assessments in support of a success fee or a fully compliant ATE certificate, some costs judges will happily grant relief from sanctions even where the application is not made until the middle of the detailed assessment hearing itself, and only made orally without any evidence in support (notwithstanding the fact the dispute was raised many months in advance); whereas other costs judges will invariably disallow the additional liabilities in the absence of an early formal application properly supported by evidence.
The unpredictability of the process is made worse by the equally unpredictable approach adopted by opponents. Although it comes as no surprise when they fail to make any concessions to disputes raised, sometimes regardless of the strength of the dispute, there are others who will make voluntary concessions that certainly go way beyond what it is probable a court will disallow, even if not impossible.
The difficulty is therefore whether to plead every available point, regardless of how speculative in nature, on the off-chance that it might possibly be successful, or whether to limit one's disputes to those that are most likely to succeed. The former approach runs the risk of escalating the detailed assessment costs, and annoying some costs judges; the latter approach runs the risk that potential costs savings are not maximised.
Obviously, in large part this comes down to a question of judgement based on experience. But, again, the difficulty is that experience shows the inherent unpredictability of the whole process.
This year’s White Paper Conference Company costs conference on Costs, Funding, CFAs and Jackson was such a success it was repeated twice and sold out on both occasions almost immediately. (That’s what you get when you promote a costs event via the Legal Costs Blog.)
One of the speakers, Michael Kain from costs firm Kain Knight, talking about costs budgeting, warned the delegates to “Be afraid…Be very afraid”. This warning was in large part no doubt aimed at the costs professionals attending as he predicted that costs budgeting would largely mean an end to detailed assessments. Specialist costs counsel Jeremy Morgan QC has made similar predictions where costs management is applied, suggesting it is “hard to see any room for arguments on proportionality, hourly rates or the reasonableness of the work done”. With an end to recovery of additional liabilities around the corner, that doesn’t leave much left.
HH Judge Simon Brown QC, the judge responsible for one of the current costs budgeting pilots, writing in the New Law Journal, stated:
“if the budget of the receiving party is approved, then its costs are likely to be paid in full without delay or further later assessment at the end of the case.”
Although those involved in running the costs management/budgeting pilots have been keen to emphasise that it is not meant to be the equivalent of costs capping or performing a pre-emptive detailed assessment, it is difficult to see much scope for detailed assessment where the costs come in on budget. Where the budget is exceeded, the rules as currently drafted provide that any judge assessing costs will not depart from such approved budget unless satisfied that there is good reason to do so. And, as HH Judge Simon Brown QC notes, where detailed assessment is required because of inaccurate estimating: “the expense of that process [is] likely to be upon the defaulting receiving party”.
Perhaps most chillingly, he concluded:
“The days of putting in a bill at the end of a case based on a multiple of billable hours x £x per hour and expecting to be paid are over.”
Whichever way the issue is viewed, the importance of accurately setting budgets cannot be overstated.
One of the controversial forthcoming changes to the CPR concerning detailed assessment proceedings is to scrap the current CPR 47.18 and 47.19, concerning liability for detailed assessment costs, and substitute these with:
(1) The general rules about costs contained in Parts 36, 43 and 44 apply to the costs of detailed assessment proceedings, as if “claimant” means receiving party and “defendant” means paying party.
(2) The court will summarily assess the costs of detailed assessment proceedings at the conclusion of those proceedings, unless otherwise ordered.
Unless the court otherwise orders, interest on the costs of detailed assessment proceedings shall run from the date of the default, interim or final costs certificate, as the case may be.”
Now, I, along with other members of the Association of Costs Lawyers, must have missed the consultation document that went out when these changes were first proposed. If I had seen it (and surely they didn’t just press ahead without bothering to consult those people who will have to work with this) there would have been a long list of problems pointed out.
However, putting to one side some of the theoretical problems, there is one rather glaring practical difficulty.
The Statement of Rights, which governs the rights of a Costs Lawyer holding a current practising certificate, says it covers:
“Rights of audience in all proceedings being conducted under Parts 43-48 of the Civil Procedure Rules 1999 (“CPR”) and under Part 52 of those rules with regard to appeals from detailed assessment hearings before a High Court Judge or a Circuit Judge such rights to exclude an issue of entitlement to costs under CPR 44.3 and entitlement to a wasted costs order arising solely under CPR 44.14(1)(b) or CPR 48.7 other than in connection with proceedings commence [sic] under (vi) and (vii) below.”
So, it expressly excludes rights of audience as to “an issue of entitlement to costs under CPR 44.3”. (We’ll ignore for the moment that there is no obvious good reason for such a general exclusion.)
The new rule change means that Part 44.3 will apply to liability for costs of detailed assessment proceedings but a Costs Lawyer, who otherwise has rights of audience in such proceedings, will not have rights of audience in relation to this specific issue. So, exercising my Costs Lawyer rights, I will be able to appear in a detailed assessment hearing but at the conclusion of the same will be unable to address the Court as to which party should have to pay the costs of the hearing. (Thank God for Kynaston v Carroll  EWHC 2179).
You couldn’t make it up.
No doubt the Costs Lawyer Standards Board and the Civil Procedure Rules Committee will wish to liaise before April 2013.
In fact, looking carefully at the wording of the Statement of Rights I am somewhat struggling to see how a Costs Lawyer currently has any automatic right to address a High Court Judge or Circuit Judge as to the costs of an appeal they are appearing in. Surely this normally falls under CPR 44.3. The court obviously has discretion and it would be bizarre in the extreme if a judge refused permission to the very same advocate who had previously been addressing the court as to the substantive appeal, but surely this issue should be covered by the Statement of Rights.
Surely the answer to this is to remove the words “such rights to exclude an issue of entitlement to costs under CPR 44.3”. If Costs Lawyers are deemed competent to appear on costs appeals then it is difficult to see why they are not competent to deal with CPR 44.3 issues.
Forthcoming change to CPR 47.14:
“(8) If an assessment is carried out at more than one hearing, then for the purposes of rule 52.4 time for appealing shall not start to run until the conclusion of the final hearing, unless the court orders otherwise.”
It currently runs from the date of the judgment on the particular issue, which can make a decision as to whether to immediately appeal more difficult. It is only at the end of a detailed assessment one has a full picture. For example, a party may want to appeal a specific point if it will make the difference between winning or losing on an offer but otherwise would be prepared to let the decision stand. In fact, many costs judges already make such an order staying the time for appealing where the issue arises, but it does need someone to remember the problem.
Sir Geoffrey Bindman QC writing in the New Law Journal:
“In short, what the elaborate structure of assessment comes down to, is not to keep costs down to a reasonable level, but to determine a market rate. In reality, it does not even do that. At best, it is an imperfect means of limiting dishonest claims.”
One of the proposed changes to the provisional assessment pilot is:
“When lodging documents for PA the parties should file (a) any open offer and (b) in a sealed envelope any offer under Part 36”.
Now, filing sealed offers is very sensible and answers the problem I raised last year when the pilot was first launched (see Provisional Assessment Pilot – Unanswered problems).
But why open and sealed offers? What is the open offer for? If the other party has accepted the open offer there is no need for an assessment.
Can a paying party make an open offer of £10,000 on the bill which the judge can "accept" without bothering to go through the bill? Then the judge can open the sealed Part 36 offers to see who to award the assessment costs to (eg the paying party if they made a Part 36 offer of £11,000). That should cut the judicial time down to below the current 37 minutes. If not, what is the judge meant to do with the open offer?
I note that among the forthcoming changes to the Costs Practice Direction will be the deletion of the current CPD 39.2:
"Where there is a dispute about the insurance premium in a staged policy (which has the same meaning as in paragraph 19.4(3A)) it will normally be sufficient for the receiving party to set out in any reply the reasons for choosing the particular insurance policy and the basis on which the insurance premium is rated whether block rated or individually rated."
I was trying to work out why this is going and then realised that it will not be needed once recoverability of ATE premiums ends. The Rules Committee is clearly not in any doubt that this will happen.
Still, is it not a bit premature given we are going to have a long run-off of old cases where staged premiums are claimed (probably a good five years)?
Iain Stark, chairman of the Association of Costs Lawyers, was recently reported on the Legal Futures website, in connection with the plan to extend the provisional assessment pilot nationwide, as suggesting that provisional assessments should be handled by regional costs judges, or alternatively that regional costs officers should be appointed.
This is such a no brainer that I really can’t understand why it was not implemented long ago. As the number of detailed assessment hearings will start to decline with the introduction of the Jackson Reforms and roll out of provisional assessments the Senior Courts Costs Office could probably cover the whole of the South of England and a second court could cover the North. You would only need a handful of costs judges/costs officers in the Northern SCCO and the time freed up for other members of the judiciary would cover the “extra” costs of having dedicated judges. Indeed, it would almost certainly lead to an overall saving as full time costs judges/officers invariably deal with detailed assessment hearings much faster than those with little or no experience of costs. The time savings would be even more obvious for provisional assessments.
I’ve yet to meet a costs practitioner against this idea (although I suppose there might be one or two who would hate matters being moved away from their “friendly” local DJ and having the matter looked at objectively in a “neutral” court).
Such a move would bring a large(r) measure of consistency to costs judgments and enable costs professionals to give more accurate advice to clients, thus further reducing the number of cases that run the distance.
The system has worked perfectly well since all cases in London have been dealt with in the SCCO (allowing for the fact they are somewhat overworked at the moment) and would work equally well nationally.
What is there not to like?
Forthcoming change to Costs Practice Direction deletes the current CPD 45.3:
"No party should file or serve a statement of costs of the detailed assessment proceedings unless the court orders him to do so."
That will mean that the existing CPD 13.5(4) will kick in:
"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. The statement of costs must be filed and the copies of it must be served as soon as possible and in any event –
(b) for all other hearings, not less than 24 hours before the time fixed for the hearing."
I wonder if this was intended. The current system works perfectly well, even if it does sometimes cause some nasty shocks at the end of a hearing.