Recoverability of costs of negotiating costs
A recent post discussed the Court of Appeal’s decision in Tasleem v Beverley  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  EWCA Civ 350,  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.