Carr J: “On a detailed assessment on a standard basis, the costs judge is bound by the agreed or approved cost budget, unless there is a good reason to depart from it.”
The Civil Procedure (Amendment No. 4) Rules 2015 have been published and come into force (with exceptions) on 1 October 2015. The amendments provide, amongst other things, for the provision of a “a breakdown of the costs claimed for each phase of the proceedings” to accompany a bill of costs in all cases where a costs management order has been made.
The purpose of the change is to bring the assessment procedure into line with the requirements of costs management, to enable instant comparison between the costs being claimed and the receiving party’s last approved budget. For the present, the requirements for the format of the bill itself remain unchanged. However, this is only temporary.
The Jackson Review EW?UTBMS Development Steering Committee, chaired by Alexander Hutton QC, is shortly due to make detailed recommendations to the Rules Committee for a new format bill of costs which will be “informative and capable of yielding information at different levels of generality“. A pilot is expected to run from April 2016.
In his recent Harbour Lecture, Lord Justice Jackson, said…
“The new scheme will work as follows. The J?Codes are designed to be compatible with commercial time recording software. Participating solicitors will adapt their time?recording systems by using the following codes. A number with J as prefix denotes a task (i.e. the subject matter of the work). A number with A as prefix denotes an activity, i.e. what you are doing within that subject matter. For example, if you wish to record your time drafting a witness statement as a result of an earlier meeting with the witness, you would select your Task Code as JG?10, defined as “Taking, preparing and finalising witness statement(s)” and then select your Activity Code as A103, namely “draft/revise”. There is therefore no need to select a Phase Code, only a Task Code and Activity Code as the Task Code always includes the Precedent H phase within it (in the above example, JG?10 relates only to Witness Statements). Thus all time?recorded work is assigned to the Precedent H phases. You can then additionally enter manually on the time recording system for that same entry as detailed a description as you wish of the particular work done, such as “drafting the Claimant’s witness statement, including…”
These are radical changes and practitioners are being urged to plan ahead in order that they are not caught out.
Other amendments include…
- amending rule 3.1 (court’s general powers of management) to make it clear that the court’s powers include hearing an Early Neutral Evaluation;
- inserting a new rule 3.1A making provision for the way in which the court is to approach case management in a case where at least one of the parties is unrepresented;
- inserting in Part 5 a cross-reference to provisions which disapply, or apply with modifications, provisions in that Part about access to court documents;
- amending rule 7.4 to ensure that the claimant not only serves particulars of claim on the defendant, but also files them;
- inserting a new rule 52.15B covering appeals in planning statutory reviews; and
- inserting a new Part 63A to introduce a new specialist list called the Financial List, to handle the more complex and important financial markets cases.
The decision in Long v Value Properties Ltd & Anor [2014] EWHC 2981 (Ch) establishes that a short delay in serving additional liability information during detailed assessment proceedings constitutes neither a serious nor significant breach. Paying parties who exploit such oversights rather than cooperating to remedy them engage in opportunistic conduct that detailed assessment and CPR 3.9 applications appropriately condemn, as established in Denton v TH White Ltd
Background
The dispute originated in approximately 2011 concerning the use of parking spaces adjoining property where the claimant, Norah Christina Long, and her late husband were lessees. The claimant’s solicitors informed the defendants, Value Properties Limited and Ocean Trade Limited, that the claimant was represented under a conditional fee agreement dated 12 October 2011 with a success fee [§2]. A notice of funding (N251) was served on the defendants in accordance with the Civil Procedure Rules [§2]. Proceedings were issued on 7 February 2013 [§3]. Following the death of the claimant’s husband, the claim continued in her name alone [§3]. The matter was settled by a consent order made on 15 August 2013, which required the defendants to pay the claimant’s costs, to be subject to detailed assessment on a standard basis if not agreed [§3].
The success fees of counsel and solicitors together totaled £48,462, forming part of a total bill of £131,937 [§8].
Detailed assessment proceedings were commenced on 17 October 2013 when the claimant’s solicitors served the notice of commencement (Form N252) and the bill of costs, as required by CPR r.47.6(1) [§4]. However, the claimant’s solicitors failed to serve the Further Information, comprising a statement of reasons for the percentage increase or a copy of the risk assessment, and a copy of the conditional fee agreement itself, as mandated by Practice Direction 47PD.32.5(1)(c) and (d) and 47PD.32.7 [§5].
On 5 November 2013, the second defendant requested a 14-day extension to serve points of dispute, and on 6 November the claimant agreed to extend time for both defendants [§6]. Points of dispute were filed on 14 November 2013 [§6]. These points of dispute raised, for the first time, the claimant’s non-compliance with 47PD.32 [§6-7]. The claimant served the Further Information on 22 November 2013 [§7] and issued an application for relief from sanctions on 28 November 2013 [§7].
The application was heard by Costs Judge Master Rowley on 13 January 2014. Master Rowley expressed “qualms” about the ease with which a breach of this requirement could occur compared with the draconian nature of the sanction, and noted the difference between this situation and the less severe sanctions for failure to serve notice of funding (N251) [§14]. Nevertheless, he found a breach of the CPR, applied the sanction under CPR r.44.3B(1)(d), and refused relief [§9]. Permission to appeal was granted [§9].
Costs Issues Before the Court | Opportunistic Conduct and CPR 3.9
The appeal raised three principal costs issues [§16]. First, whether the claimant had breached the CPR by failing to serve the Further Information at the commencement of the detailed assessment proceedings. Second, if a breach had occurred, what was the applicable sanction under the CPR, particularly whether it fell under CPR r.44.3B(1)(c) or (d). Third, if the more severe sanction under r.44.3B(1)(d) applied, whether relief from that sanction should be granted pursuant to CPR r.3.9.
Significantly, the appeal was heard before the Court of Appeal’s decision in Denton v WH White Ltd [§1], but both parties subsequently provided written submissions on the effect of that judgment in the context of the appeal [§1, §56].
The Parties’ Positions on Relief From Sanctions and Opportunistic Conduct
The claimant argued that there was no breach of the CPR because the rules did not explicitly require the Further Information to be served at the commencement of detailed assessment proceedings; it could be served at any time during the proceedings [§36]. In the alternative, if a breach was found, the applicable sanction was under CPR r.44.3B(1)(c), which imposed a graduated disallowance for the period of default, rather than the “all or nothing” sanction under r.44.3B(1)(d) [§42-44]. The claimant further submitted that, even if r.44.3B(1)(d) applied, the breach was trivial or, in all circumstances, relief should be granted under CPR r.3.9 [§55]. The claimant relied on the lack of prejudice to the defendants, the prompt rectification of the omission, and the defendants’ opportunistic conduct in not notifying the claimant of the oversight earlier [§7, §68-70].
The defendants contended that the Further Information was required to be served at the commencement of detailed assessment proceedings by necessary implication from the structure of the CPR and Practice Direction [§26-31]. They argued that the applicable sanction was under CPR r.44.3B(1)(d), as the breach related to a failure to disclose reasons for the percentage increase [§42]. The defendants submitted that the breach was serious and significant, caused by an oversight which was not a good reason, and that relief should be refused to enforce compliance with rules and practice directions [§67]. They emphasised the tight timetable for points of dispute and the prejudice caused by having to amend them [§67].
The Court’s Decision
The court held that there was a breach of the CPR [§37-40]. It found that the obligation to serve the Further Information at the commencement of detailed assessment proceedings was implied from the interaction of CPR r.47.6, r.47.9, and Practice Direction 47PD.32 [§37-39]. This interpretation was necessary to ensure the efficiency and fairness of the assessment process, aligning with the overriding objective under CPR r.1.2 [§40]. The court referenced Middleton v Vosper Thorneycroft (UK) Ltd [§30-31] and Light On Line Ltd v Zumtobel Lighting Ltd [§32-33] in support of this conclusion.
On the applicable sanction, the court determined that CPR r.44.3B(1)(c) applied, not r.44.3B(1)(d) [§54]. The wording of r.44.3B(1)(c) addressed failures to provide information “by the time required”, imposing a graduated sanction for the period of default, whereas r.44.3B(1)(d) was intended for complete failures to disclose [§42-54]. This interpretation avoided anomalies and better served the overriding objective, particularly given the disproportionate nature of the sanction under r.44.3B(1)(d) for minor delays [§53-54].
In the alternative, if r.44.3B(1)(d) applied, the court found that relief from sanctions should be granted under CPR r.3.9 [§55-74]. Applying the three-stage Denton guidance [§57-66], the breach was neither serious nor significant [§71]. The delay of approximately three weeks was short [§67], rectified promptly once brought to the claimant’s attention [§13, §68], and caused no substantial prejudice [§13, §70].
Critically, the defendants had contributed to the length of the default by seeking an extension for service of points of dispute without notifying the claimant of the omission [§68]. The court found it unclear whether the defendants knew of the breach when the second defendant sought the extension on 5 November 2013, though they were certainly aware by 14 November when they served points of dispute [§68]. Had the defendants wished to shorten the length of default and save costs, they could have informed the claimant before preparing points of dispute and sought an extension to take stock of the Further Information when supplied – the claimant would have agreed to such a request [§68].
Instead, the defendants “preferred to take advantage of the claimant’s oversight by choosing not to inform the claimant earlier, and going ahead with service of points of dispute (after obtaining an extension of time for that purpose) which they knew would require amendment once the Further Information was received” [§69]. Thereafter they declined to cooperate with the claimant and were unwilling to amend the points of dispute to avoid the need for an application for relief [§69].
The court concluded that “in so far as there has been unnecessary cost, delay and use of the court’s finite resources in hearing the application for relief from sanctions and this appeal, this is the result of what in my view was the unreasonable, opportunistic and non-cooperative approach of the defendants to the claimant’s unfortunate oversight” [§70].
The judge found that when looked at in its context, “the breach here is properly regarded as ‘insignificant’ and therefore ‘trivial’ as those expressions are understood in the light of the guidance in Mitchell… For the same reasons I consider the breach to be neither serious nor significant in the terms of the Denton guidance” [§71]. The judge noted that Master Rowley “appears to have fallen into the error by attaching insufficient weight to the circumstances surrounding the breach as well as to the absence of any significant prejudice of any kind to anyone” [§71].
Master Rowley had also fallen into the error identified by the Majority in Denton, in that having concluded the breach was not trivial and that there was no good reason for it, he regarded the application for relief from sanctions as bound to fail, without going on to consider whether that was the appropriate outcome in “all the circumstances of the case” as required by r.3.9 [§72].
Considering all circumstances, including the nature and effect of the breach, the defendants’ conduct, the speed with which the claimant remedied the default and applied for relief, and the need to enforce compliance with rules, practice directions and orders, the just disposal of the application required complete relief from the sanction to be granted [§73].
The court added that “the defendants’ behaviour here has been precisely the kind of opportunistic, and non-cooperative conduct in litigation condemned by the Court of Appeal in Denton” [§76]. Had the defendants taken a different course, “the matter could probably have been completely resolved within the overall period of the extension of time which they applied for and were granted by the claimant, or very soon thereafter. This would have saved the parties and the court the time and expense of a lengthy hearing before the Judge and an even longer appeal hearing” [§76].
The appeal was allowed on both grounds [§75].
Setting Aside Default Costs Certificate – Denton Criteria Applied
Directly discusses Denton three-stage test for CPR 3.9 applications in detailed assessment context
Defendants Fail To Have US$3.7m Default Costs Certificate Set Aside
Application of Denton guidance to detailed assessment procedural breaches with CPR 47.12 analysis
CPR 3.14 | Late Costs Budget | Relief From Sanctions Denied
CPR 3.9 sanctions where court found persistent failure to engage – contrasts with relief granted for minor oversight
No Excuses: Relief From Sanctions Refused Following Late Filing
High Court applies CPR 3.9 refusing relief where breach serious and significant with no good reason
CPR 52.18: Applications To Set Aside Permission – Mitchell and Denton Principles
Court of Appeal confirms Mitchell strict approach – discusses sanctions regime that Denton sought to moderate
Retrospective CFAs and Success Fees in Detailed Assessment
Additional liability disclosure requirements and reasonableness of success fees
A Costs Officer conducting a detailed assessment on a standard basis was not precluded from considering whether the claimants’ costs should be limited to those recoverable under stages 1 and 2 of the Pre-Action RTA Protocol where there was a consent order in which the defendant agreed to pay the claimants reasonable costs.
Costs that are disallowed for want of retainer should not factor in the calculation of the one fifth rule.
Under the terms of a Tomlin order which provided that one of three Defendants was only to pay the Claimant’s costs which related exclusively to the action against it, and not those incurred by the Dlaimant in respect of the dispute with the other two Defendants, that Defendant was liable for any common costs which could be attributed to it by division, rather than apportionment.
A Master had been correct to dismiss an application for an assessment of costs brought under Paragraphs 10(2) and 10(3)(c) of the Community Legal Service (Costs Protection) Regulations 2000 as it was out of time.
Where a party was entitled to its costs, it had to include all of its costs on the bill for detailed assessment. If that party was entitled to recover the cost of instructing more than one solicitor, it had to include the costs of each solicitor separately in the bill and, if it failed so to do, could not claim a separate assessment in respect of the costs of the solicitor omitted.
This is an important decision concerning the recoverability of costs incurred during an inquest in later civil proceedings. It affects clinical negligence, personal injury and HRA practitioners alike. TMC were instructed by Hodge Jones & Allen in the case of Roach and attended before Master Hurst on the assessment of costs. Andrew Post of Hailsham Chambers represented them on the Claimants’ successful appeal to the High Court.
In Lahey v Pirelli Tyres Limited, the Court of Appeal addressed whether costs judges have the power to order a paying party to pay only a proportion of the assessed costs at the outset of a detailed assessment. The claimant had accepted a Part 36 offer, becoming entitled to his costs. The defendant argued that the costs judge could reduce the recoverable costs by a percentage based on the parties’ conduct. The Court held that costs judges do not have jurisdiction to prospectively limit the proportion of assessed costs payable, as they are bound by the deemed costs order following Part 36 acceptance. Unreasonable conduct should be addressed through the line-by-line assessment process, not by imposing a percentage reduction at the outset.