CPR 44.2(8) | Payments On Account In Civil Litigation

In the world of civil litigation, managing cash flow can be as crucial as the legal arguments themselves. When a court orders one party to pay another’s legal costs, the final amount is often subject to a detailed assessment process, which can take time. This is where Civil Procedure Rule (CPR) 44.2(8) comes into play, offering a mechanism for the winning party to receive a portion of their costs upfront. At TMC Legal, we believe in empowering our clients with clear insights into such vital procedural rules.

What is CPR 44.2(8)? The Power to Award Interim Costs

CPR 44.2(8) is a key provision within the rules governing civil litigation in England and Wales. It states: “Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so”.

This rule is part of the court’s broader discretion regarding costs. While the general principle is that the unsuccessful party pays the successful party’s costs (CPR 44.2(2)), CPR 44.2(8) specifically directs the court to order an interim payment when costs are heading for detailed assessment. The use of “it will order” signifies a strong starting point in favour of the receiving party, a shift from older, more permissive rules.

Why Does CPR 44.2(8) Exist?

The main goal of CPR 44.2(8) is to allow a party who is owed costs (the “receiving party”) to get some of that money before the detailed assessment process concludes, which can often be a lengthy affair. This helps to:

      • Alleviate financial hardship: It prevents the successful party from being significantly “out of pocket” for a long time.
      • Prevent unfair settlements: It reduces the risk that a receiving party, especially one with fewer resources, might feel forced to accept a lower overall costs settlement simply to get some funds quickly.

These aims are not just about financial convenience; they touch upon the fundamental principle of access to justice. An interim payment helps ensure the effective and fair operation of our civil justice system.

The Court’s Approach: “Will Order… Unless Good Reason Not To”

The wording of CPR 44.2(8) creates a strong presumption that an interim payment will be made. The responsibility falls on the paying party to convince the court that there’s a “good reason” why such a payment shouldn’t be ordered, or why a lower sum is justified.

What Counts as a “Good Reason”?

The CPR doesn’t list all possible “good reasons,” so it’s down to the court’s discretion based on the case specifics. However, case law gives us some clear pointers:

      • Inability to pay is generally NOT a good reason: The paying party’s financial difficulties usually don’t negate the receiving party’s right to an interim sum. This was confirmed in Bank St Petersburg PJSC v Arkhangelsky EWHC 2817 (Ch).
      • Not asking immediately is NOT a good reason: Failing to request the payment when the initial costs order was made isn’t, by itself, a reason to refuse a later application, as seen in Culliford & Anor v Thorpe EWHC 2532 (CH). 

Potential “Good Reasons” might include:

      • A grossly unreliable statement of costs: If the receiving party’s costs claim is so overinflated or flawed that the court can’t rely on it to determine a “reasonable sum” (FCA v Papdimitrakopoulos EWHC 3048 (Ch)).
      • Diminishing security for a defendant’s set-off: Especially in applications made mid-proceedings (NAX v MAX & Anor EWHC 3492 (QB)).
      • Part 36 offer acceptance: It has been argued that Part 36 (which deals with offers to settle) is a self-contained code and doesn’t provide for interim payments under CPR 44.2(8) if an offer is accepted under its terms.
      • Short time to final assessment: If the detailed assessment isn’t far off, the urgency for an interim payment might be less.
      • Ongoing issues affecting the final costs order: If substantive matters could lead to a different costs outcome at trial.

How Much? Determining a “Reasonable Sum”

If the court decides an interim payment is due, the next question is: how much?

The leading case, Excalibur Ventures LLC v Texas Keystone Inc EWHC 566 (Comm), established that the court should aim for a “realistic estimate of the reasonable costs likely to be determined on detailed assessment, with an appropriate margin to allow for an overestimate”. This refines earlier guidance like that in Mars UK Ltd v Teknowledge Ltd FSR 138, which suggested a “lesser sum than the likely full amount” on a “rough and ready basis”.

Importantly, the “reasonable sum” isn’t necessarily the “irreducible minimum” the receiving party might get. The court isn’t conducting a mini-assessment but making a pragmatic, predictive estimate based on available information, including costs schedules and, crucially, any approved costs budgets.

Factors Influencing the Amount:

      • Likelihood of recovering the claimed costs.
      • Difficulty in recovering costs after detailed assessment.
      • Conduct of the parties (CPR 44.2(4) and (5) remain relevant).
      • Approved costs budgets: These are very significant. An approved budget often serves as a primary reference point.
      • Clarity of the costs statement: A clear, reasonable statement helps; an “overinflated statement of costs on which it is difficult to place any reliance” can lead to a nil award (FCA v Papdimitrakopoulos).

What Percentage Can You Expect?

While each case is fact-specific, some general benchmarks have emerged:

      • Historically, around 50% of costs claimed was a common starting point.
      • More recently, awards in the region of 65-70% of costs subject to detailed assessment are common. For example, in Cleveland Bridge UK Ltd v Sarens (UK) Ltd EWHC 827 (TCC), 70% of incurred costs was awarded.
      • For costs already approved within a costs budget, the percentage can be much higher, often up to 90%. Cases like Thomas Pink Ltd v Victoria’s Secret UK Ltd EWHC 3258 (Ch) (90% of approved budget) and MacInnes v Gross EWHC 127 (QB) (budget less 10%) illustrate this.

The “certainty factor” plays a big role here. Approved budgets have already undergone judicial scrutiny, giving the court more confidence in those figures compared to unbudgeted incurred costs.

When Might an Interim Payment Be Inappropriate?

Despite the strong presumption, certain situations can make an interim payment unsuitable:

      • Part 36 Settlements: As mentioned, if a Part 36 offer is accepted, it’s argued that Part 36 rules govern costs recovery, and these don’t explicitly provide for CPR 44.2(8) interim payments. If an interim payment is desired in such a scenario, it should be negotiated and included in any settlement agreement or Consent Order.
      • Unreliable Costs Statements: If a costs claim is so grossly inflated or unreliable that the court cannot determine a reasonable sum (FCA v Papdimitrakopoulos).
      • Prejudice to the Paying Party: This includes risks to the paying party’s security for a potential future set-off of their own costs, especially in mid-proceedings applications (NAX v MAX & Anor). The court will consider the entirety of the paying party’s potential costs recovery (Chernunkhin v Danilina EWCA Civ 1802, cited in commentary on NAX v MAX ).
      • Mid-Proceedings Applications: Courts may be more cautious if substantive liability issues are unresolved or if there’s a real chance the trial judge might make a different final costs order. The time until final resolution is also key; an “exceptionally long period” might support an interim payment (X v Hull, referenced in NAX v MAX analysis ), but a standard timeframe (e.g., 18 months to trial) might not.

Arguments For and Against

For the Receiving Party (Supporting an Interim Payment):

    1. Essential Cash Flow: Covers incurred legal expenses and funds the detailed assessment process. 
    2. Reduces Financial Pressure: Prevents being forced into a lower settlement due to immediate financial needs.
    3. Access to Justice: Ensures practical benefit from successful litigation.
    4. Fairness: Realises part of an established entitlement promptly. 
    5. Enables Proper Detailed Assessment: Provides funds to effectively engage in the assessment process.
    6. The Rule is Mandatory: CPR 44.2(8) says the court “will order” payment unless there’s good reason otherwise.

For the Paying Party (Opposing or Seeking a Lower Sum):

    1. Risk of Overpayment: Concern that the interim sum might exceed the finally assessed costs, making recovery of the excess difficult (mitigated by the Excalibur “margin for error” principle). 
    2. Inflated/Unreliable Claim: Argument that the overall costs claim is excessive or poorly substantiated.
    3. Preserving Set-Off Security: An interim payment might deplete funds needed for the paying party’s own potential costs recovery or other set-offs.
    4. Costs Not Yet Finalised: The final amount is unknown until detailed assessment concludes.
    5. Premature Application: If outstanding issues could affect ultimate costs liability or if the time to assessment is short.
    6. Procedural Bars: Such as the Part 36 acceptance scenario.

Timing and Procedure

The best time to apply for an interim payment is usually when the court makes the order for costs subject to detailed assessment. However, applications can be made later. Culliford & Anor v Thorpe confirmed the court’s jurisdiction to hear later applications, even after the main costs order is sealed. Not asking initially isn’t automatically a “good reason” to refuse a later request , though promptness is generally advisable.

In some long-running cases (e.g., complex clinical negligence), where liability is resolved but quantum will take years, ‘prospective’ costs orders with interim payments for costs up to a certain date might be considered. 

Enforceability: A Binding Order

An order for an interim payment under CPR 44.2(8) is not just a suggestion; it’s an enforceable court order. Master Kaye confirmed it’s “a final judicial determination or decision of a reasonable sum to be paid,” not contingent on the detailed assessment outcome. Failure to pay can lead to enforcement action, such as charging orders or orders for sale.

Strategic Steps

For Receiving Parties:

      • Submit a realistic, well-supported costs statement.
      • Highlight any approved costs budgets. 
      • Apply promptly , though later applications are possible.
      • Anticipate and counter potential “good reasons” for refusal.
      • Frame arguments around the policy aims of CPR 44.2(8).

For Paying Parties:

      • Thoroughly scrutinise the costs claim for genuine inflation or unreliability. 
      • Articulate specific, evidenced “good reasons” for opposition.
      • Provide supporting evidence for your arguments.
      • Engage constructively on the “reasonable sum,” arguing for an appropriate “margin for error”.

Conclusion

CPR 44.2(8) is a vital mechanism for ensuring fairness and managing the financial realities of litigation. It strongly favours an interim payment on account of costs unless the paying party can demonstrate a compelling “good reason” otherwise. Understanding the principles from key cases like Excalibur Ventures and the impact of costs budgets is crucial for both those seeking and those facing such applications. 

When Can A Liquidator Be Held Personally Liable For Costs?

Introduction: The Liquidator’s Role and the Specter of Personal Costs

When a company faces insolvency, a liquidator steps in to manage its affairs. This crucial role involves realising assets, investigating the company’s dealings, and distributing proceeds to creditors. Naturally, this process incurs costs – from the liquidator’s own fees to legal and administrative expenses. Generally, these are paid from the insolvent company’s assets. The Insolvency Act 1986 (IA 1986) and the Insolvency (England and Wales) Rules 2016 (IR 2016) provide the framework for these costs. 

However, a significant concern for any insolvency practitioner is the possibility of being held personally liable for these costs. This blog post explores the principles and practices surrounding a liquidator’s personal liability for costs in UK insolvency proceedings.

The “Exceptional” Nature of Personal Liability

It’s a cornerstone of UK insolvency law that holding a liquidator personally liable for costs, especially litigation costs, is an exceptional measure. This protection is vital. Liquidators often pursue complex and contentious claims. If they constantly faced personal financial ruin for performing their duties, finding willing professionals would be challenging, and those who did accept might be overly cautious, harming creditors’ interests.

The law strives to balance protecting liquidators acting properly with providing recourse against those who demonstrate misconduct.

The General Rule: Costs are Paid from the Insolvent Estate

Insolvency Expenses: A Priority

The IA 1986 and IR 2016 stipulate that costs properly incurred in a winding-up are paid from the company’s assets, prioritised over most other claims. These include legal fees, accountancy costs, valuation expenses, the liquidator’s remuneration, and asset realisation costs. If reasonable and for the estate’s benefit, these are usually priority claims.

The Liquidator’s Indemnity

A liquidator acting correctly is generally entitled to an indemnity from the company’s assets for costs incurred, including litigation costs. This is crucial for enabling them to pursue claims for creditors’ benefit.

However, this indemnity isn’t absolute. Costs must be “reasonably incurred” and for the “benefit of the estate”. Doubts about the “appropriateness, fairness or reasonableness” of sums claimed can be resolved against the office-holder. Remuneration should reflect the “value of the service rendered,” not just time spent. Negligence or misconduct can jeopardise this indemnity. The Practice Direction on Insolvency Proceedings (PDIP) provides further guidance on remuneration applications.  

Even if costs are legitimate estate expenses, the actual availability of assets is key. Adverse costs orders against the company in liquidation rank as an expense, potentially depleting funds before the liquidator’s own remuneration for that litigation is met.

Personal Liability as a Non-Party: A High Bar to Clear

A liquidator directs litigation for the company but isn’t usually a personal party. However, courts can make costs orders against non-parties, which is how a liquidator might become personally liable.

The Court’s Power: Section 51 Senior Courts Act 1981

Section 51 of the Senior Courts Act 1981 grants courts wide discretion over costs, including against non-parties. CPR 46.2 outlines the procedure, requiring the non-party to be joined for costs purposes and given a chance to be heard. This discretion must be exercised “justly”.

Exceptional Remedy: Protecting the Public Function

A non-party costs order is an “exceptional” remedy. This was highlighted in Symphony Group PLC v Hodgson QB 179. For liquidators, this exceptionality is rooted in public policy: they perform a vital public function, and routine personal liability would undermine the insolvency system.

The Metalloy Supplies Test: “Impropriety or Bad Faith”

The Court of Appeal in Metalloy Supplies Ltd v M A (UK) Ltd BCC 165 established that personal liability for a liquidator arises only from their “impropriety or bad faith”. In Metalloy, no such conduct was found.  

What Constitutes “Impropriety” or “Bad Faith”?

These terms aren’t rigidly defined. “Bad faith” implies dishonesty or malicious intent. “Impropriety” is broader, suggesting conduct unacceptable for a liquidator, a serious deviation from professional standards – more than mere negligence. The Hong Kong case Super Speed Limited (in Liquidation) v Bank of Baroda affirmed that “impropriety,” not just “unreasonableness,” is needed. Pursuing purely speculative litigation or acting for personal gain rather than creditor benefit could be deemed improper.  

Security for Costs: The Primary Recourse

Metalloy Supplies also stressed that defendants sued by an impecunious company (like one in liquidation) should primarily seek security for costs. Failure to do so can weaken a later application for a personal costs order against the liquidator.  

This high “impropriety” threshold prevents overly defensive liquidations, encouraging robust action for creditors. Security for costs applications act as a filter, reserving personal orders for genuinely blameworthy conduct.

When Else Might a Liquidator Face Personal Costs? Judicial Considerations

Beyond the “impropriety or bad faith” test for non-party costs orders (NPCOs), other factors can influence a liquidator’s personal cost exposure.

Unreasonable Conduct and the “Perversity” Test

Courts are reluctant to interfere with a liquidator’s commercial judgment. Intervention requires the liquidator to have “done something so utterly unreasonable and absurd that no reasonable man would have done it” – the “perversity” test from Re Edennote, affirmed in Re Edengate Homes (Butley Hall) Ltd EWCA Civ 626. This is a “formidable test”. While mainly for substantive decisions (like asset sales), perverse conduct in litigation could support personal costs liability, likely overlapping with impropriety. 

Litigation for Personal Gain

If litigation is pursued for the liquidator’s personal benefit (e.g., to generate fees) rather than for the company or creditors, this strongly indicates impropriety and can lead to personal costs or denial of indemnity. The Irish case of United Power Limited saw a provisional liquidator personally liable for costs of an unsuccessful application to increase his own remuneration, deemed self-serving. Similarly, in the Australian case Australia’s Residential Builder Pty Ltd (in liquidation) v Wiederstein (No.2), an appeal pursued solely to meet the liquidator’s fees resulted in personal costs.

Broader Misconduct

General misconduct can also lead to personal costs or loss of indemnity. The “Ballyrider Principles” (from Irish law, but reflecting UK concepts) suggest indemnity can be denied for misfeasance, bad faith, serious negligence, unfitness for office, or dishonesty. Section 212 IA 1986 allows action against office-holders for misfeasance. Australian examples (often sharing common law roots) include unreasonably defending proceedings, rejecting sensible settlements, provoking litigation through self-interest, or causing unnecessary costs through poor communication.

Litigating in the Liquidator’s Own Name

A distinction exists when a liquidator sues in their own name (e.g., for wrongful trading under s.214 IA 1986 or misfeasance under s.212 IA 1986 ). Here, they are a direct party. The rule “costs follow the event” (CPR 44.2(2)(a)) applies more directly, making them prima facie personally liable if unsuccessful. While indemnity from company assets is expected, it can be lost through misconduct.

Specific Contexts: Environmental Liabilities

In areas like environmental protection, liquidators might face personal statutory liabilities, for instance, for remediation costs if their actions or omissions regarding environmental hazards are deemed unreasonable.

These considerations span a spectrum from “unsatisfactory” conduct (which may not be enough for intervention, as in Re Edengate Homes ) to “unreasonable” conduct, “perversity,” and ultimately “impropriety or bad faith.” 

Losing the Shield: Denial of Indemnity from Company Assets

Even without a direct NPCO, a liquidator’s finances are hit if denied indemnity from company assets for costs incurred.

Why Might Indemnity Be Denied?

Indemnity relies on proper conduct for the estate’s benefit. It can be denied for:

  • Misfeasance or breach of duty: Abusing powers, breaching fiduciary duties, or negligence causing loss.
  • Bad faith: Dishonest or improperly motivated actions.  
  • Serious negligence: Culpable negligence, though simple errors in judgment might be excused. 
  • Unreasonable cost incurrence: Unnecessary or excessive costs.
  • Actions for personal benefit: Prioritising personal gain over the estate’s interests. 

Denial of indemnity means the liquidator cannot use company funds to cover costs for which they are liable.

The Practical Problem: Insufficient Assets

A major risk is when the insolvent company lacks assets to cover all liquidation costs, including adverse costs orders. Even with impeccable conduct, an indemnity is worthless without assets to back it. If the liquidator is personally liable for costs (e.g., from losing a case brought in their own name, or an NPCO), they bear any shortfall. This risk drives the use of litigation funding and creditor indemnities.  

Practical Steps for Liquidators to Mitigate Personal Cost Risks

Liquidators must be diligent in managing the risk of personal liability.

1. Thorough Pre-Litigation Assessment: Rigorously assess the merits of any legal action, including potential costs, prospects of success, asset availability, and net benefit to creditors. Obtain comprehensive legal advice. 

2. Document Decisions Clearly: Meticulously record all significant decisions, especially regarding litigation, including rationale and advice received. This is vital if conduct is later challenged.   

3. Anticipate Security for Costs Applications: Be prepared for defendants to seek security for costs when the company is the claimant.

4. Explore Funding and Indemnities: If estate assets are insufficient, actively seek litigation funding or specific indemnities from interested creditors. Scrutinise funding agreements for adequate protection against adverse costs. Consider After The Event (ATE) insurance. 

5. Avoid Conflicts of Interest and Personal Benefit: Never pursue litigation primarily for personal gain (e.g., fee generation) rather than genuine creditor benefit.

6. Act Reasonably and Proportionately: Conduct litigation reasonably, consider sensible settlement offers, and avoid vexatious tactics. Unreasonable refusal to settle or pursuing hopeless cases can lead to adverse costs.  

These steps are essential for defending against allegations of impropriety or unreasonable conduct.

Conclusion: Balancing Protection and Accountability

UK law makes personal liability for liquidators an exceptional outcome. Costs are generally paid from the insolvent estate. An NPCO against a liquidator typically requires “impropriety or bad faith” (Metalloy Supplies Ltd). Security for costs is the primary defendant recourse.  

Liquidators acting honestly, diligently, reasonably, and in creditors’ best interests are generally well-protected. Proper procedure, careful advice, transparent decisions, and good records are key.

The law balances the public interest in enabling liquidators to perform their duties effectively against the need for accountability and remedies for misconduct.

Regarding Sanrose Investment Ltd v Foley & Ors, its precise impact on this area awaits further detailed legal reporting and analysis.

The legal framework empowers liquidators to act robustly for creditors while incorporating safeguards against improper conduct, maintaining the integrity of the insolvency regime.

Table 1: Key UK Case Law on Liquidator Personal Liability for Costs

Case Name & Citation Court Year Core Principle(s) Regarding Liquidator Costs Liability Snippet(s)
Metalloy Supplies Ltd v M A (UK) Ltd [1997] BCC 165 Court of Appeal 1996/7 Personal liability exceptional; requires “impropriety or bad faith.” Security for costs is the standard remedy. Public policy protects liquidators.
Symphony Group PLC v Hodgson [1994] QB 179 Court of Appeal 1994 Orders for costs against non-parties are exceptional. (Cited in Metalloy)
Re Wilson Lovett & Sons [1977] 1 All E.R. 274 High Court 1977 When a liquidator acts in their own name, personal liability for costs follows standard procedures (indemnity usually expected). (Cited in Metalloy)
Re Edengate Homes (Butley Hall) Ltd [2022] EWCA Civ 626 Court of Appeal 2022 “Perversity” test for court interference with liquidator’s decisions (so utterly unreasonable and absurd no reasonable liquidator would have done it).
Goknur v Aytacli [2021] EWCA Civ 1037 Court of Appeal 2021 NPCO against director of insolvent company rare; may apply if director is “real party” seeking personal benefit; impropriety/bad faith relevant.

 Table 2: Thresholds for Scrutiny of Liquidator’s Conduct Regarding Costs/Decisions

Test/Threshold Primary Context Key Case Authority (UK, if available) Description/Application Snippet(s)
Impropriety or Bad Faith Non-Party Costs Order against liquidator for litigation brought by the company. Metalloy Supplies Ltd Serious misconduct, dishonesty, or improper use of position. High threshold. Negligence generally insufficient.
Perversity Challenge to a liquidator’s commercial or administrative decision. Re Edengate Homes Decision so utterly unreasonable and absurd that no reasonable liquidator would have made it. Very high bar.
Litigation for Personal Benefit/Self-Interest NPCO or denial of indemnity. Goknur v Aytacli (directors, analogous for liquidators) Liquidator is the “real party” to the litigation, seeking personal gain rather than creditor/company benefit. Can demonstrate impropriety.
Misconduct leading to Denial of Indemnity Liquidator seeking to recover costs from the insolvent estate. (Principles, Ballyrider – Irish, illustrative) Includes misfeasance, bad faith, serious negligence, unfitness, dishonesty, or incurring costs unreasonably or not for estate benefit.

Who Pays The Costs Before A Land Registry Dispute Reaches The Tribunal?

When a dispute arises in relation to a Land Registry application and eventually proceeds to the First-tier Tribunal (Property Chamber), parties often overlook a critical question: who pays the legal costs incurred before the Tribunal gets involved?

The short answer:

Costs incurred before the matter is formally referred to the Tribunal are considered to be part of the proceedings before the Registrar. These are governed by a different costs regime than that which applies in Tribunal proceedings.

Key legal framework:

      • Section 76 of the Land Registration Act 2002 (LRA 2002)
      • Rule 202 of the Land Registration Rules 2003
      • Practice Guide 38 (HM Land Registry)
      • Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013

Proceedings before the Registrar

Until the application is referred to the Tribunal (under section 73(7) of the LRA 2002), any dispute remains a matter before the Registrar. This includes initial objections, correspondence, and preliminary work.

Under Rule 202 of the Land Registration Rules 2003, the Registrar may order a party to pay another party’s costs only where the paying party has behaved unreasonably. There is no general power to award costs just because a party is unsuccessful.

Practice Guide 38 confirms this …

Paragraph 2.1 of HM Land Registry’s Practice Guide 38 states:

“The tribunal has no power to make an order for costs in respect of the proceedings before the registrar whether incurred before or after the reference to it.”

This means that even after the Tribunal takes over the dispute, costs incurred prior to that referral still fall outside its jurisdiction.

The Tribunal’s powers on costs

The Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 limit the Tribunal’s ability to award costs. It may only do so where:

      • A party has acted unreasonably in the Tribunal proceedings,
      • There is a wasted costs application, or
      • Another limited statutory provision applies.

None of these extend to the pre-referral phase.

What changed in 2013?

Not much. Before 2013, such disputes were handled by the Adjudicator to HM Land Registry. Since July 2013, they are determined by the Tribunal. But the cost regime has remained the same:

      • Costs before the referral are governed by section 76 / Rule 202, not by the Tribunal.
      • The Tribunal cannot retrospectively award those costs.

Why does this matter?

Because parties frequently attempt to recover pre-reference legal costs through Tribunal proceedings. This is not permitted. Parliament has made clear that any such recovery must be sought via a costs application to the Registrar, and only in cases involving unreasonable conduct.

Summary

      • Costs incurred before the date of reference (e.g. 6 October 2022) are governed by the Registrar’s costs regime.
      • The Tribunal cannot award those costs.
      • Only the Registrar can do so, and only where the paying party acted unreasonably.

This reflects a deliberate and structured separation of jurisdiction – and a more limited entitlement to costs than many parties assume.

Blank Space? | Costs Budgeting In Cases Without A Stated Value

Ever found yourself with a Part 7 claim form where the “value” section is conspicuously blank? This often happens when the main goal isn’t a straightforward sum of money – think of applications for injunctions, or TOLATA (Trusts of Land and Appointment of Trustees Act 1996) claims seeking orders about property occupation, ownership shares, or whether a property should be sold. Sometimes, the financial value is genuinely up in the air when proceedings kick off.

Whatever the reason, getting to grips with the costs implications from day one is absolutely vital. The general rule that the loser pays a portion of the winner’s costs still applies. So, understanding the costs management rules is key to managing your client’s expectations and your firm’s exposure.  

And things are about to get even more interesting. A significant shake-up to costs budgeting is coming with new pilot schemes under Practice Directions 51ZG1, 51ZG2, and 51ZG3, set to run from 6 April 2025 for three years. These pilots, applying to claims issued on or after this date in specific courts, aim to simplify costs budgeting, making it more proportionate. Expect new, streamlined costs budgeting forms, like the much-talked-about Precedent Z, which is tipped to be a more concise document.

This means we’re heading into a temporary dual system: claims issued before 6 April 2025, or those in courts not part of the pilots, will stick with the current costs management rules in CPR Part 3. Claims falling under the pilots will follow the new Practice Directions. This split demands extra vigilance to ensure you’re on the right track.

The new pilots consistently stress “proportionate cost” , a clear signal from the Civil Justice Council’s review which called for a more flexible approach. For claims without a stated monetary value – often seeking significant non-monetary outcomes – this idea of proportionality becomes particularly nuanced.  

Why is “No Value Stated” on the Claim Form?

As mentioned, it’s usually because:

  • The main relief isn’t monetary: Injunctions, TOLATA orders for sale or declarations of property rights, specific performance. 
  • Genuine uncertainty: Sometimes, the financial value is truly unknown at the start, perhaps needing disclosure or expert evidence to crystallise.
  • A word of caution: Deliberately omitting a value that could have been reasonably stated might not sit well with the court and could influence case management.

The reason for the blank space can subtly affect how a judge views the case, even if the rules seem to treat all such claims the same initially. The court has discretion, often signalled by the phrase “unless the court orders otherwise” in the new pilot Practice Directions. Be ready to explain the omission clearly in the Directions Questionnaire (DQ) and at any Case Management Conference (CCMC).

The rise of digital claim portals like OCMC and DCP might eventually lead to more structured input about a claim’s nature, even if “no value stated” remains an option.

Track Allocation: The First Big Step (CPR Part 26)

Allocating a claim to the small claims, fast, intermediate, or multi-track is a crucial early decision. For “no value stated” claims, CPR 26.7(2) says the court will allocate it to the track it “considers most suitable having regard to the matters mentioned in rule 26.8(1)”.  

The court looks beyond just money, considering factors from CPR 26.8(1) like : 

      • The nature of the remedy sought.
      • Likely complexity (facts, law, evidence).
      • Number of parties.
      • Value and complexity of any counterclaim.
      • Amount of oral evidence needed.
      • Importance of the claim to non-parties.
      • Parties’ views on allocation.
      • Parties’ circumstances.

The Directions Questionnaire (DQ) is your main chance to provide this information and argue for a suitable track. Many non-monetary or complex claims end up on the multi-track. The multi-track is the default for cases not fitting other tracks, often those valued over £100,000, but complexity or the remedy sought can also lead here. 

If necessary, the court can assess a financial value itself, disregarding undisputed amounts, interest, costs, and contributory negligence (CPR 26.8(2)).

Don’t forget the Intermediate Track, introduced in October 2023. It generally covers claims between £25,000 and £100,000, with trials up to three days and limited expert evidence. If a “no value stated” claim (like a declaration with limited factual dispute) seems to fit these complexity criteria, it could be allocated here. This is significant because the intermediate track usually means Fixed Recoverable Costs (FRC), which would generally override standard costs budgeting.

Costs Budgeting: Keeping Up with Changes

Once a “no value stated” claim lands on a track requiring costs management (usually the multi-track), the budgeting rules kick in. How this works depends on whether your claim is under the existing CPR or one of the new pilot schemes.

Scenario 1: The Current Rules (Claims NOT Under the New Pilots)

This applies to claims issued before 6 April 2025, or those issued after but outside the pilot’s scope, if allocated to the multi-track where CPR 3.12 mandates costs management. 

      • The Form: Precedent H.
      • Filing Deadlines (CPR 3.13):
        • If the claim form states a value less than £50,000, file Precedent H with the DQ. 
        • For any other case (including claims over £50,000 or where value is unstated/problematic), file it no later than 21 days before the first CCMC. 
        • The “No Value Stated” Dilemma: Since there’s no stated value “less than £50,000,” the safer bet is the “any other case” rule (21 days before CCMC). Some play it extra safe and file with the DQ anyway to avoid any doubt.
      • Precedent H Detail: It needs incurred costs and estimated future costs for each litigation phase, verified by a statement of truth. If total budgeted costs are under £25,000 OR the stated claim value is under £50,000, you might only need the first page. Again, for “no value stated” claims, caution suggests a full Precedent H if unsure.
      • The Big Stick (CPR 3.14): Fail to file on time, and your recoverable costs for future work could be slashed to just court fees, unless the court orders otherwise. Relief is possible (Denton test) but not guaranteed.
      • Budget Discussion Reports (Precedent R): If budgets are filed, represented parties must file an agreed Precedent R no later than 7 days before the first CCMC.

The ambiguity around CPR 3.13 filing deadlines for “no value stated” claims is a real headache. Getting it wrong can be costly.

Scenario 2: The New Pilot Schemes (Claims From 6 April 2025)

For Part 7 claims issued on or after 6 April 2025 that fit the specific criteria of the new pilot schemes (PD 51ZG1, PD 51ZG2, and PD 51ZG3), the rules change. These pilots run for three years, until 6 April 2028. 

      • New Forms: Say hello to Precedent Z (Simplified Costs Budget), Precedent RZ (Simplified Budget Discussion Report), and Precedent TZ (Simplified Variation Form). Precedent Z is expected to be much shorter than Precedent H. 
      • CPR 3.13 & 3.14 Don’t Apply: For claims in these pilots, the old filing and sanction rules are out. 
      • Pilot Filing Deadlines (generally, unless court orders otherwise):
        • Precedent Z: File and serve no later than 21 days before the first CCMC. 
        • Precedent RZ: Represented parties served with a Precedent Z file and serve no later than 7 days before the first CCMC. (PD 51ZG3 has a 14-day rule for defendants and claimants usually don’t file one ). 
      • Pilot Sanctions: If you don’t comply (e.g., fail to file Precedent Z), the court may impose sanctions, which may include limiting your recoverable costs to court fees. This is more discretionary than the old CPR 3.14.

Let’s break down the main pilots for “no value stated” claims:

1. Practice Direction 51ZG1 (Business and Property Courts / Work)

      • Scope: Part 7 multi-track claims (issued 6 April 2025 – 6 April 2028) in the Business and Property Courts (BPC) of England and Wales, BPC in Manchester/Leeds, or “Business and Property work” in the County Court at Manchester, Leeds, or Central London.  
      • Key Rule for “No Value Stated” (Para 5): If a claim has no stated value, seeks only non-monetary relief, OR parties can’t agree if it’s £1m+, then unless the court orders otherwise, the claim is treated as having a value of £1 million or more.  
      • What this means:
        • If treated as >= £1 million: The court will not automatically make a Costs Management Order (CMO) unless it’s satisfied it’s necessary for justice and proportionate cost (PD 51ZG1, para 6(a)). If a CMO is made, the court directs the budget form (Precedent Z, H, or updated Z) (PD 51ZG1, para 6(b)). 
        • If treated as < £1 million (e.g., by court order or party agreement): At the CCMC, a CMO using Precedent Z is the default, unless a CMO isn’t required (PD 51ZG1, para 7(b)).  
      • Important: Regardless of this valuation, all represented parties (except litigants in person) must still file and serve a Precedent Z no later than 21 days before the first CCMC, unless the court says otherwise (PD 51ZG1, para 4). 

2. Practice Direction 51ZG2 (Certain County Court Claims <£1 million)

      • Scope: Part 7 multi-track claims (issued 6 April 2025 – 6 April 2028) valued at less than £1 million, where costs management would normally apply, and which are not under PD 51ZG1 or QOCS rules (PD 51ZG3). This pilot applies to such claims in the County Court at Central London, or the Leeds or Bristol District Registries.
      • “No Value Stated”: PD 51ZG2 does not have the same default £1m+ valuation rule as PD 51ZG1. So, if a “no value stated” claim is in one of these County Courts and isn’t “Business & Property work,” the court will assess its notional value. If it’s deemed <£1m, PD 51ZG2 applies.
      • If PD 51ZG2 applies: Parties file Precedent Z (21 days before CCMC) and Precedent RZ (7 days before CCMC). A CMO using Precedent Z is the likely default (PD 51ZG2, paras 4, 5, 6). 

3. Practice Direction 51ZG3 (QOCS Cases in specific High Court Registries)

      • Scope: Part 7 multi-track QOCS claims (issued during pilot period) in the District Registry at Manchester or Birmingham. 
      • All parties (except LiPs) file Precedent Z 21 days before CCMC. Defendants file Precedent RZ 14 days before CCMC. Claimants usually don’t file RZ. 
      • CMO for Defendant’s costs isn’t automatic.
      • Parties can give notice to seek a split trial or full Precedent H budgeting.

What if no CMO is made under the Pilot Schemes? If the court doesn’t make a CMO:

      • The Precedent Z budgets are treated as costs estimates (PD44, paras 3.2-3.7 apply).
      • Parties usually need to file and serve an updated Precedent Z no later than 28 days before trial (or trial window/7 days before PTR, whichever is earlier), unless the court says otherwise.

The default valuation in PD 51ZG1 (para 5) for “no value stated” claims in BPC/designated B&P work is a big shift. It means costs management isn’t automatic if the claim is treated as £1m+. This will likely lead to arguments at the CCMC.

Real-World Examples & Strategic Thinking

Let’s see how this might play out:

A. Claim for Purely Non-Monetary Relief (e.g., an injunction, or a TOLATA claim for a declaration or order for sale).

      • Under PD 51ZG1 (BPC/B&P work in specified CCs, issued on/after 6 April 2025):
        • Default: Treated as >= £1 million (PD 51ZG1, para 5).
        • Result: CMO not automatic. All file Precedent Z. CCMC decides if CMO is needed.
      • Under PD 51ZG2 (Specific CCs, not B&P, notional value <£1m, issued on/after 6 April 2025):
        • Court assesses notional value. If <£1m, PD 51ZG2 applies. Parties file Precedent Z. CMO with Precedent Z likely.
      • Outside Pilots (issued before 6 April 2025, or in non-pilot court):
        • Likely multi-track. Standard CPR Part 3 costs management. Precedent H 21 days before CCMC.

B. Claim Where Monetary Value is Genuinely Uncertain at Outset.

      • Under PD 51ZG1: If parties can’t agree if value is £1m+, treated as >= £1 million by default (PD 51ZG1, para 5). Implications as above.
      • Under PD 51ZG2: Court assesses notional value. If <£1m, PD 51ZG2 regime (Precedent Z) applies.
      • Outside Pilots: Likely multi-track. Precedent H 21 days before CCMC.

C. Claim Where Value is Omitted but Could/Should Have Been Stated.

      • Judicial View: Courts don’t like tactical omissions.
      • Impact: Could influence track allocation, costs management decisions (especially “unless court orders otherwise” clauses), and final costs recovery.

The “unless the court orders otherwise” in PD 51ZG1, para 5, will be a battleground. A party wanting a CMO (likely a defendant) will need to argue against the default >=£1m treatment or argue a CMO is needed anyway.  

For TOLATA claims, choice of court after April 2025 could be strategic. Issuing in a County Court designated for “Business and Property work” (e.g., Manchester, Leeds, Central London under PD 51ZG1 ) means the PD 51ZG1 default >=£1m rule applies to “no value stated” claims. Issue the same claim in a County Court under PD 51ZG2 (e.g., Bristol, or non-B&P list in Central London/Leeds) with a notional value <£1m, and PD 51ZG2’s simplified budgeting applies. 

Quick Comparison: “No Value Stated” Claims

Feature Standard CPR (Pre-Pilot / Outside Pilot) PD 51ZG1 (BPC/B&P Work in specified courts) PD 51ZG2 (Specific CCs, <£1m, non-B&P work)
Default Value for “No Value Stated” Court assesses (CPR 26.8(1)&(2)). Often multi-track. Treated as >= £1 million unless court orders otherwise (para 5). Court assesses notional value. If <£1m, PD 51ZG2 applies.
Budget Form Precedent H. Precedent Z (initially). Court may direct H or updated Z if CMO for >=£1m claim. Z if <£1m. Precedent Z.
Budget Filing Deadline Likely 21 days before CCMC (CPR 3.13(1)(b)). Risk if DQ deadline deemed to apply. 21 days before CCMC (Precedent Z). 21 days before CCMC (Precedent Z).
Sanction for Non-Filing CPR 3.14: Costs limited to court fees (unless relief). Discretionary: “may include” limiting to court fees (para 11). CPR 3.14 disapplied. Discretionary: “may include” limiting to court fees (para 9). CPR 3.14 disapplied.
Costs Management Order (CMO) Automatic? Yes, if multi-track & CPR 3.12 applies. No, if >=£1m (unless court deems necessary). Yes, if <£1m (unless not required). Yes (unless court deems not required).
Key Strategy for “No Value Stated” Clarify filing deadline; meticulous compliance. Justify track via DQ. Challenge/defend default >=£1m valuation? Argue for/against CMO at CCMC. Persuade court of notional value <£1m for PD 51ZG2.

Key Pointers for Your Practice

      • Early Assessment is King: Even without a stated value, internally assess potential financial implications, complexity, and importance. This helps anticipate track and budgeting needs.
      • The DQ is Your Stage: For “no value stated” claims, the Directions Questionnaire is where you make your case for track allocation, using CPR 26.8(1) factors.
      • Talk to Your Opponent: Early discussion on notional value and the applicable costs regime can save contested CCMC hearings.
      • CCMC Prep: Be ready to explain why no value is stated. If under PD 51ZG1, be prepared to discuss the default >=£1m valuation and CMO appropriateness.
      • CRITICAL – Know Your Regime: Is it standard CPR or a pilot scheme? This depends on issue date, court, and claim nature.
      • Budget Diligently: Precedent H or Z, make it realistic, well-supported, and on time. Don’t forget the statement of truth.
      • Sanctions Awareness: Know the difference: CPR 3.14 (fairly automatic) vs. pilot schemes (discretionary, but can still be severe).
      • Litigants in Person (LiPs): They generally don’t file budgets, but represented parties must still serve their budgets on LiPs.

Even though Precedent Z is “simplified” , it still needs careful preparation. The core principles of proportionality and reasonableness remain. The simplification is more about the form and process, not a free pass on justifying your costs. 

The next few years, especially during the pilot schemes (April 2025 – April 2028), will be a learning curve. Keeping up with how these new rules are applied in pilot courts will be essential.  

The Future of Costs Budgeting

These pilot schemes are a testing ground, driven by the Civil Justice Council’s call for a “more flexible approach” to costs management. Costs budgeting, in some form, is clearly here for the long haul.

The success of these pilots, especially for “no value stated” claims, will depend on consistent judicial application and clear guidance. If deemed successful, they could well shape the future of costs budgeting nationwide. So, getting to grips with these changes now isn’t just about the next three years – it’s about preparing for the future of civil litigation costs.

Need help with a Part 7 claim or understanding these upcoming costs budgeting changes? Contact the team at tmclegal.co.uk for expert advice.

CPR 44.10 | The Sound of Silence | When A Court Order Is Silent As To Costs

In the busy world of civil litigation, the wording of a court order is paramount. Every phrase, every comma can have significant implications. But what happens when an order is conspicuously silent on the issue of costs? This isn’t just a minor oversight; it triggers a specific rule – Civil Procedure Rule (CPR) 44.10 – with potentially significant financial consequences for your clients.

The General Rule: Silence Usually Means No Costs

The starting point, and the most critical takeaway, is CPR 44.10(1)(a)(i). It states with stark clarity: “Where a court order does not mention costs no party is entitled to costs in relation to that order”. 

This means if you’ve attended an interim hearing, made an application, and the judge issues an order that simply doesn’t address who pays the costs for that specific event, the default position is that each party bears their own. This principle has been consistently upheld by the courts. For instance, in Griffiths v Commissioner of Police for the Metropolis , it was established that a trial judge generally can’t just go back and add a costs order to an earlier interim order that was silent. More recently, Baltaj Johal & Others v Secretary of State for the Home Department confirmed that CPR 44.10(1)(a)(i) is clear in its effect: if previous orders didn’t mention costs, and no one tried to vary them at the time, the general rule applies – no party gets costs for those specific orders.

When Silence Doesn’t Mean No Costs: The Deemed Order Exceptions

Like many legal rules, CPR 44.10(1) has exceptions, found in CPR 44.10(2). In certain specific circumstances, even if an order is silent on costs, a costs order is “deemed” to have been made, usually for “the applicant’s costs in the case”. This means the applicant can recover those costs if they ultimately win the main litigation. These exceptions include orders:

  • Granting permission to appeal.
  • Granting permission to apply for judicial review.
  • Made on an application made without notice to the other side (an ex parte application).

The logic for the “without notice” exception is clear: the other side wasn’t there to argue about costs, so the applicant’s position is preserved contingently. However, as Baltaj Johal highlighted, if the orders were not made without notice, this exception can’t be relied upon. 

Don’t Confuse Silence with Other Costs Orders

It’s vital to distinguish an order that is “silent as to costs” from orders that explicitly deal with costs, such as:

  • “No order as to costs” / “Each party to pay own costs”: This is an active decision by the court that each side bears its own costs for that stage. CPR 44.10 doesn’t apply because the order isn’t silent.
  • “Costs in the case” / “Costs in the application”: The costs of that interim step will follow the final costs award. 
  • “Costs reserved”: The decision on costs for that stage is deferred. If not later decided, it defaults to “costs in the case” under Practice Direction 44 paragraph 4.2.

Understanding these distinctions is crucial for advising clients accurately.

What About Multiple Applications and Adjournments?

A common scenario involves a hearing dealing with multiple applications. What if the order from that hearing is silent on costs, and some of those applications were adjourned to a later date?

  • For applications determined at the first hearing: If the order is silent, CPR 44.10(1) applies. No party is entitled to costs for those specific applications from that first hearing. That ship has likely sailed. 
  • For applications adjourned at the first hearing: The silence of the initial order does not typically prevent a costs order being made when these adjourned applications are eventually heard and determined at the subsequent hearing. The second hearing is a new event for those specific applications, and costs can (and should) be addressed then.
  • Costs of the adjournment itself: If a party sought costs specifically for the adjournment at the first hearing (e.g., costs thrown away) and the order was silent on that specific request, then CPR 44.10(1) would likely mean no one gets those adjournment costs.

This highlights the need for precision. If an order from a multi-application hearing is globally silent, costs for all determined matters at that point are generally lost.

A Note on Family Proceedings: The Timokhina Distinction

You might encounter the case of Timokhina v Timokhin , where the Court of Appeal discussed a “residual discretion” to make retrospective costs orders even if an earlier order was silent. It’s important to note that Timokhina was a family law case. The Family Procedure Rules (FPR) have a distinct costs regime, notably disapplying the general civil rule that “costs follow the event”. The reasoning in Timokhina appears heavily tied to this specific FPR framework. In general civil proceedings, the stricter interpretation seen in cases like Griffiths and Baltaj Johal is more likely to apply. 

Key Takeaways for Practitioners:

  1. Be Proactive: Always address costs at the conclusion of any hearing or in written submissions for paper determinations. Don’t assume the judge will deal with it unprompted.
  2. Seek Clarity in Orders: Ensure any order accurately reflects the judge’s decision on costs. If an order is drafted and is unexpectedly silent, raise it immediately.
  3. Understand the Limits: The “slip rule” (CPR 40.12) is for accidental omissions, not for introducing a costs order that was never made or considered.
  4. Advise Your Clients: Explain the risk that if an order is silent on costs, those costs may be irrecoverable from the other side.
  5. Adjournments are New Opportunities (for those specific applications): If an application is adjourned, ensure costs for that application are dealt with when it is finally heard. Don’t assume the silence of a previous, broader order covering the initial hearing will dictate the costs of the subsequently heard adjourned matter.

The default position under CPR 44.10 is unforgiving. Vigilance and proactivity are your best defences against the unintended financial consequences of a court order’s silence.

Disclaimer: This blog post is for general information purposes only and does not constitute legal advice. You should seek specific legal advice on any particular matter.

The Unseen Expert | Can You Recover The Costs Of A Report You Didn’t Serve?

In the complex world of civil litigation, instructing expert witnesses is a common and often necessary step. Experts provide vital opinions on technical, medical, or other specialist matters that lie outside the knowledge of the judge. But what happens when you instruct an expert, pay their fee, receive their report, and then, for whatever reason, decide not to serve it on the other side or rely on it in court? Can you still recover those costs from the losing party?

This is a frequent dilemma in costs assessment, and the answer, particularly on the standard basis, is far from straightforward. It highlights a key tension between the reasonableness of a decision made at the time and the proportionality of the cost viewed retrospectively.

Drawing on the principles under the Civil Procedure Rules (CPR), we explore the recoverability of costs incurred for expert reports that remain “unseen” by the court and the opponent.

The Starting Point: Standard Basis Assessment

When a court orders one party to pay the costs of another, these costs are usually assessed on the standard basis. CPR 44.3(2) sets out the core test: the court will only allow costs that are:

    1. Reasonably incurred: Was it a reasonable step to incur the cost at the time?
    2. Reasonable in amount: Was the sum paid for the work reasonable?
    3. Proportionate to the matters in issue: Does the cost bear a reasonable relationship to the value, complexity, and other factors of the case (as outlined in CPR 44.3(5))?

Crucially, under the modern standard basis, proportionality can override reasonableness. CPR 44.3(2)(a) states that “Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred.”

Furthermore, the burden of proof is on the party seeking to recover the costs (the receiving party) to demonstrate that they meet these tests. And, importantly, if the court has any doubt about whether the costs were reasonably and proportionately incurred or were reasonable and proportionate in amount, that doubt must be resolved in favour of the paying party (CPR 44.3(2)(b)). This is a significant hurdle compared to the indemnity basis where doubt favours the receiving party.

Hurdle 1: Was it Reasonable to Instruct the Expert at the Time? (The Francis Principle)

The first question is whether the decision to instruct the expert was reasonable when that decision was made. A key principle here comes from cases like Francis v Francis & Dickerson, which establishes that the reasonableness of incurring a cost is assessed based on the circumstances and knowledge reasonably available at the time, not with the benefit of hindsight.

So, if based on the information you had (the pleaded case, client instructions, available evidence), it was reasonable for a competent solicitor to believe that expert evidence was potentially required to investigate or support a relevant issue in the case, the cost of obtaining that initial report might be considered reasonably incurred under this test. The fact that the report ultimately didn’t help your case, or the issue it related to was dropped, doesn’t automatically make the initial decision unreasonable.

The court will look at factors like:

      • The nature and complexity of the issues requiring expert input.
      • The apparent need for specialist knowledge at that stage.
      • The suitability of the chosen expert.

Contemporaneous records (attendance notes, letters of instruction) justifying the instruction are vital here.

Hurdle 2: Is the Cost Proportionate Given the Outcome? (The CPR 44.3(5) Test)

Even if instructing the expert was deemed reasonable at the time (passing the Francis test), the cost must also be proportionate. This is where the fact that the report was not served or used becomes a major issue.

Proportionality is assessed by looking at the cost in relation to:

      • The sums in issue in the proceedings.
      • The value of any non-monetary relief.
      • The complexity of the litigation.
      • Any additional work caused by the opponent’s conduct.
      • Any wider factors.

The paying party will argue, often persuasively, that a cost incurred on an expert report that provided no positive contribution to your case, was not used to advance your arguments, and did not assist in resolving the dispute, cannot be considered a proportionate expense to recover from them. While the Francis principle discourages hindsight for reasonableness, hindsight is very much applied when assessing proportionality against the ultimate context and outcome of the case.

The lack of utility of the unserved report weighs heavily against its proportionality, regardless of how reasonable the decision to instruct was initially. It’s hard to argue that a cost which yielded no benefit to the successful prosecution (or defence) of the claim bears a “reasonable relationship” to the CPR 44.3(5) factors when viewed at the end of the case.

The Role of CPR Part 35

CPR Part 35 governs expert evidence. While you need the court’s permission to rely on expert evidence (CPR 35.4), you don’t necessarily need permission to instruct an expert for advice or investigation. The recoverability issue primarily falls under CPR 44, not whether CPR 35 permission was obtained (as permission wouldn’t be sought for an unserved report). However, CPR 35.4(4) does give the court the power to limit the recoverable amount of expert fees, which, if exercised, would cap recovery regardless of proportionality.

The Impact of Costs Budgeting

If the case was subject to costs management under CPR 3, the existence (or absence) of an approved budget covering the expert’s fee is critical.

If the cost for instructing this expert was included within an approved phase of your costs budget, CPR 3.18 states that the court will not depart from that approved budget amount unless there is “good reason” to do so. This provides a strong presumption of recoverability for budgeted items, shifting the burden onto the paying party to show a “good reason” why the budgeted amount should not be allowed.

Conversely, if the expert fee was not budgeted for, or significantly exceeded the budgeted amount without approval, recovery becomes extremely difficult on the standard basis.

Practical Considerations for Recovery

To maximise the chances of recovering costs for an unserved expert report:

      • Document Everything: Keep clear records showing why the expert was instructed at the time, based on the information available then.
      • Justify the Need & Choice: Be prepared to explain the complexity of the issue requiring expert input and the suitability/reasonableness of the chosen expert and their fee.
      • Address Proportionality: Acknowledge that the report wasn’t used but argue why the cost remains proportionate in the context of the overall case, perhaps emphasizing the complexity of the issue even if the report didn’t provide the hoped-for answer.
      • Rely on the Budget: If the cost was within an approved budget, this is your strongest point.

The paying party will inevitably focus on the lack of utility and the proportionality argument, asking: why should we pay for an expensive report that didn’t even help your case?

Conclusion

Recovering the costs of an expert report that was instructed but ultimately not served on the standard basis is an uphill battle. While the initial decision to instruct the expert might satisfy the Francis test of reasonableness (judged at the time), the modern proportionality test under CPR 44.3 is a significant hurdle.

The fact that the report provided no positive contribution to the litigation process makes it vulnerable to challenge as being disproportionate to the overall value, complexity, and outcome of the case.

Your best prospect of recovery, assuming the initial instruction was genuinely reasonable, lies in demonstrating that the cost was included within a court-approved costs budget, triggering the protection offered by CPR 3.18. Without budget approval, you must persuade the court that, despite its lack of use, the cost remains proportionate in the broader context of the litigation – a difficult argument against an opponent keen to resolve doubt in their favour.

Navigating these issues requires a detailed understanding of costs principles and persuasive advocacy at assessment.