Inter partes bills of costs that do not exceed £75,000 are normally subject to provisional assessment. Where a case does not go beyond provisional assessment, the maximum amount the court can award either party in respect of the costs of assessment is £1,500, plus VAT, plus the court fee.
Is not uncommon for a bill of costs to be submitted that exceeds £75,000 but is subsequently settled (whether by agreement or assessment) for less than £75,000. Where this happens, what is the scope for the paying party to successfully argue that the costs should be restricted to the £1,500, plus VAT, plus the court fee?
This is the issue that the court was faced with in UK Sovereign Investments Ltd v Hussain  EWHC 2390 (SCCO).
A bill had been served totalling £83,425.18. The matter settled by way of negotiation for £59,000 (£4,023.04 of which was interest).
The paying party sought to argue that the receiving party’s bill only exceeded £75,000 because it had been “grossly exaggerated”. It was argued that this amounted to “unreasonable conduct” and the court should exercise its powers under CPR 47.20 such as to limit the receiving party’s costs to those which would have been payable if the matter had been subject to provisional assessment.
Deputy Costs Judge Campbell rejected these submissions made on behalf of the paying party. The reasons given were:
- As the court had not carried out any detailed assessment of the bill, it was not possible for the court to make a finding as to whether the amount claimed within the bill was exaggerated and that the receiving party’s conduct was therefore unreasonable.
- The mere fact that the bill had been reduced from £83,000 odd down to £59,000 did not lead to an “irrebuttable inference that the costs claimed must, accordingly, have been exaggerated”. There were many reasons as to why the receiving party might have been prepared to accept a discount to the bill, including to reflect a discount for risk, accelerated receipt of money and achieving finality to the dispute.
- The fact that the settlement amount was closer to the receiving party’s own Part 36 offer (of £60,000) than the offer (of £42,500) made by the paying party. It was suggested that the paying party could have made an earlier realistic Part 36 offer and was therefore now trying to have a “second bite of the cherry having failed to make an offer under Part 36 which could have achieved exactly what he is asking the court to do now, namely to make a different order to the default order to be found in CPR 47.20”.
- The fact that the rules do not provide that a receiving party’s costs will be limited to those applicable for provisional assessment whenever a bill is reduced to below £75,000.
I am not entirely sure I understand the reasoning of 3 above. If the paying had made an offer of £42,500 which had been accepted, it would not have automatically limited the receiving party’s costs to those applicable to provisional assessment. This was what the paying party was seeking based on alleged exaggeration of the bill. The fact that the paying party’s might have been able to protect its position in relation to post-Part 36 costs appears to be an entirely different issue. (Although Deputy Costs Judge Campbell seems to be partly following his own reasoning in Mullaraj v Secretary of State for the Home Department  EWHC B5 (Costs)).
The decision is not entirely surprising given 1 above, but it should not be thought that other judges would not reach a different decision where there had been an assessment of the bill and there was a finding that a bill exceeding £75,000 had been “exaggerated” to bring it over that level.