Default Costs Certificate Set Aside Due To Unexplained 300% Costs Increase Despite Defective Application

A default costs certificate was set aside under CPR 47.12 despite the paying party’s procedural failures, where a 300% unexplained increase between legal aid and inter partes bills risked eroding matrimonial assets.

AKHTAR V BASHIR [2025] EWHC 2218 (SCCO)

In Akhtar v Bashir [2025] EWHC 2218 (SCCO), Deputy Costs Judge Erwin-Jones determined an application to set aside a Default Costs Certificate in detailed assessment proceedings. Following service of a Notice of Commencement requiring Points of Dispute by 6 March 2025, H’s solicitors requested an extension on 5 March, but W’s costs lawyer lacked instructions to agree. A Default Costs Certificate was issued on 11 March. H applied to set it aside on 21 March, initially failing to include draft Points of Dispute as required by Practice Direction 47, paragraph 11.2(3). The court criticised both parties’ conduct: H for inadequately explained delays and W for acting “only very slightly short of opportunistic” in seeking the certificate without warning. However, the court granted relief, placing significant weight on an unexplained 300% increase between a prior N260 statement and the current bill of costs, which risked eroding matrimonial assets. Applying Denton v White principles, the court set aside the certificate to permit detailed assessment but made no order as to costs of the application, given neither party had furthered the overriding objective.

... I am satisfied that the circa 300% increase and difference between the two bills of costs is sufficiently significant and unexplained for relief being granted. Given the potential impact on the value of the assets in the divorce proceedings more (something) could and in my view should have been done by W’s team to explain the reasons for the difference both on service of the bill, and between the making of H’s application before this court and the hearing of that application.

Citations

Denton v White [2014] EWCA Civ 906 Relief from sanctions under the Civil Procedure Rules must satisfy a three-stage test: the seriousness of the breach, its explanation, and an overall assessment of all the circumstances, with particular regard to efficiency and compliance.

Track allocation housing disrepair CPR 46.13 settlement sum costs restriction SCCO

MRO fee markup cap 25% detailed assessment personal injury Senior Courts Costs Office

Security for costs refused CPR 25.27 very high probability success excessive estimate King's Bench

IPEC scale costs transfer Patents Court PD 30 para 9.2 costs caps Court of Appeal

Costs budget variation CPR 3.15A promptness significant development unfair prejudice Chancery Division

Costs budgeting inter partes proportionality high hourly rates AI disclosure Patents Court CPR 3E

Beneficiary personal liability section 71(3) Solicitors Act 1974 indemnity costs VAT self-supply SCCO

Summary assessment indemnity costs unless order payment on account disclosure default Chancery Division

Provisional assessment set aside CPR 3.1(7) points of dispute filing duty PD 47 para 14.3 SCCO

Fixed recoverable costs police claims CPR 26.9(10)(e) intentional tort exemption

Key Points

A Default Costs Certificate will generally be set aside under CPR 47.12 only if the applicant provides a good reason and includes with the application a copy of the bill, the existing Default Costs Certificate, and draft points of dispute as required by PD 47, paragraph 11.2(3).
Where a Notice of Commencement of a bill of costs includes a clear warning that a Default Costs Certificate will be sought in the event of non-compliance, there is no procedural obligation on the receiving party to provide further notice before applying for such a certificate.
A party’s legal representative may be regarded as having implied authority to apply for a Default Costs Certificate where such a course of action was clearly stated in the Notice of Commencement and not contradicted by further instructions.
In considering whether to set aside a Default Costs Certificate, the court may take into account unexplained and significant discrepancies between previous cost estimates (e.g., Forms N260) and the full bill, especially where such differences may materially affect the financial outcome of underlying proceedings.
Failure by the applicant to file draft points of dispute with the application to set aside a Default Costs Certificate, or to act promptly in doing so thereafter, may weigh against granting relief unless justified by proper evidence and explanations.

"I have not seen any evidence that she or her solicitors required that application to be made the very moment it fell due. Although it was not “wrong” to apply for the DCC at that point, more could and should have been done in my view to alert H’s team to their intention to quickly apply for the certificate. I find their conduct to have fallen only very slightly short of opportunistic. Whether it would have made any difference in view of the slightly tardy conduct of H’s team thereafter is impossible to assess."

Key Findings In The Case

The Respondent’s (H’s) request for an extension of time to serve points of dispute was made only one day before the deadline and was neither expressly rejected nor accepted, as the Petitioner’s (W’s) costs lawyer was unable to obtain instructions; this did not constitute a refusal, nor did it mandate postponement of the application for a Default Costs Certificate (DCC).
The court found that the application to set aside the DCC was procedurally defective at the time it was made, as it did not include a draft of the points of dispute; this omission, along with a lack of explanation for delays in both the application and the submission of the draft points, weighed against granting immediate relief.
Although there was no obligation on W’s team to seek fresh instructions prior to applying for the DCC—since the Notice of Commencement had clearly pre-authorised such a step—the court found their conduct fell slightly short of best practice in failing to provide further notice before making the application.
The court accepted that a substantial and unexplained increase—approximately 300%—between the N260 costs estimate served prior to the final hearing and the inter partes bill of costs merited scrutiny in a detailed assessment, particularly given its potential impact on the matrimonial assets; this supported the granting of relief to set aside the DCC.
The judge found that neither party had conducted themselves in a manner that sought to limit legal costs or further the overriding objectives of the Civil Procedure Rules or Family Procedure Rules, and thus declined to award costs of the application to either side.

“Neither party has in my view conducted themselves in any way that seeks to limit legal fees, maximise the matrimonial assets or further the overriding objectives set out within the CPR or FPR. Accordingly whilst I am prepared to set aside the costs certificate dated 11 March 2025, and permit H to rely on the Points of Dispute I have seen dated 26 March 2025, I am not prepared to award either party their costs of this application.”

Background

The matter concerned an application to set aside a Default Costs Certificate in detailed assessment proceedings arising from family litigation. The underlying case was a divorce petition under Case Number BV20D09765, where an order had been made by HHJ Poole on 15 May 2024 requiring the Respondent (H) to pay the Petitioner’s (W) costs. Those costs were to be assessed on the standard basis from 1 June 2020, in respect of the divorce petition and incidental applications, including applications by H for declarations regarding the validity of the divorce. The assessment was to be conducted in accordance with Regulation 21 of the Civil Legal Aid (Costs) Regulations 2013, with both parties having instructed solicitors on record.

On 11 February 2025, W served a Notice of Commencement of Bill of Costs, which was emailed to H’s solicitor and formally served by post on 12 February 2025. The notice, in Form N252, specified that points of dispute were to be served by 6 March 2025, and it included a warning that failure to do so would lead to an application for a Default Costs Certificate for the full amount of the bill. H did not serve points of dispute by the deadline. On 6 March 2025, W’s representatives applied for a Default Costs Certificate, which was issued on 11 March 2025 and served on H’s solicitors. H then issued an application to set aside the Default Costs Certificate on 21 March 2025.

During this period, there were assertions regarding the health of both parties. W was noted to have been incapacitated, as evidenced by a sick note dated 27 February 2025. H was also reported to have been unwell, although the only medical evidence provided was a sick note dated 10 April 2025, which post-dated the relevant period. H had agreed to vacate a parallel hearing in March 2025, but this was attributed to Ramadan rather than health issues. H’s solicitor indicated that delays were partly due to H’s need to secure funds for a payment on account to his legal team and that he was in no position to finalise instructions until 3 March 2025.

Costs Issues Before the Court

The primary issue before the court was whether the Default Costs Certificate should be set aside pursuant to CPR 47.12. The application required consideration of whether H had shown a good reason for the certificate to be set aside and whether the application complied with Practice Direction 47, paragraph 11.2(3), which mandates that a draft of the proposed points of dispute be filed with the application. Additionally, the court had to evaluate the conduct of both parties in the context of the overriding objectives and the principles from Denton v White [2014] EWCA Civ 906 regarding relief from sanctions.

The Parties’ Positions

H sought to set aside the Default Costs Certificate under the discretionary limb of CPR 47.12(2). It was accepted on behalf of H that the first two stages of the Denton test were not met, but it was argued that the certificate should be set aside for several reasons. Firstly, H’s representatives had made an in-time request for an extension to file points of dispute on 5 March 2025, which was not expressly refused but was not agreed due to W’s costs lawyer lacking instructions. Secondly, it was questioned whether W had given specific instructions to reject the extension request. Thirdly, H emphasised a significant and unexplained increase of approximately 300% between the costs claimed in a prior N260 statement from the final hearing and the current bill of costs, arguing that this discrepancy could not be justified solely by the difference between legal aid rates and market rates. H contended that allowing the certificate to stand would diminish matrimonial assets unfairly.

W opposed the application, asserting that the Notice of Commencement had clearly warned of the consequences of non-compliance. W’s costs lawyer had been unable to obtain instructions to grant an extension by the deadline, and the application for the Default Costs Certificate was made in accordance with the pre-authorised course of action. W argued that H’s delays, including the failure to file points of dispute promptly and the subsequent delay in applying to set aside the certificate, were not sufficiently justified. W also maintained that the increase in costs was attributable to legitimate differences between legal aid billing and inter partes costs assessment, including variations in hourly rates, claimable items, and assessment bases.

The Court’s Decision

The court granted the application to set aside the default costs certificate under CPR 47.12 dated 11 March 2025 and permitted H to rely on the points of dispute served on 26 March 2025. However, no costs were awarded to either party in respect of the application.

In reaching this decision, the court found that H’s request for an extension on 5 March 2025 had not been rejected out of hand; rather, W’s costs lawyer had been unable to secure instructions in time. The court noted that W’s legal team had been pre-authorised to apply for a Default Costs Certificate upon non-compliance, but criticised their failure to provide prior warning to H’s team before making the application, describing their conduct as “only very slightly short of opportunistic.” Nevertheless, the court emphasised that H’s team had been aware of the deadline and the lack of authority to extend, and there was no adequate explanation for the delays between the issuance of the certificate and the application to set it aside, or for the initial failure to include draft points of dispute with the application.

The court placed significant weight on the unexplained 300% increase in costs between the N260 and the current bill. While acknowledging that differences between legal aid and inter partes costs could account for some variance, the court found the magnitude of the increase sufficiently concerning to warrant setting aside the certificate, given the potential impact on matrimonial assets. The court noted that W’s team had not adequately addressed this discrepancy before or during the application.

Applying the principles from Denton, the court concluded that neither party had acted in a manner that furthered the overriding objective of dealing with cases justly and at proportionate cost. Consequently, while the Default Costs Certificate was set aside to allow detailed assessment to proceed, the court exercised its discretion to make no order as to the costs of the application.

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