The Senior Courts Costs Office’s decision in St Francis Group 1 Limited and others v Kelly and another [2025] EWHC 125 (SCCO) addresses the standard of particularity required of Points of Dispute in a detailed assessment and the consequences, in costs terms, of failing to meet it.
Background
The assessment arose from a contractual indemnity contained in a Claim Waiver executed by the first defendant in connection with a management buy-out completed in March 2017. Under the Claim Waiver, the first defendant irrevocably waived any claims against the claimants and agreed to indemnify them against all losses, defined broadly to include all reasonable and properly incurred professional costs and expenses and costs of enforcement.
Notwithstanding the Claim Waiver, the first defendant brought proceedings in 2020 against the claimants’ former directors, alleging breach of fiduciary duty and fraud. The fraud claim failed entirely following a judgment of Mrs Justice Cockerill in July 2022. The counterclaim for an indemnity under the Claim Waiver succeeded, Cockerill J concluding that the indemnity was apt to cover any losses, including legal costs, of the defendants in circumstances where they had not breached any duty.
The claimants sought reimbursement of two categories of costs under the Claim Waiver: costs incurred in providing disclosure in the fraud proceedings, and the cost of time spent by their in-house counsel, Mr Adrian Kennedy. The first defendant consistently denied any entitlement beyond what had already been paid under an earlier order of Jacobs J and engaged only slowly and reluctantly with the claimants’ attempts to resolve matters.
The claimants issued a CPR Part 8 application before Master Pester. The first defendant initially opposed it, promised evidence in response, and never filed any. A hearing was listed for 8 August 2023. The day before the hearing, the first defendant sent a proposed consent order. Most issues were agreed in the discussions that followed, with the remainder resolved before Master Pester on 8 August 2023.
Master Pester’s order declared that the claimants were entitled to an indemnity from the first defendant in respect of all reasonable and properly incurred costs in relation to the fraud claim, including both external and in-house legal costs and costs not incurred as a direct participant in the fraud claim, such as those arising from the disclosure exercise. The order further provided that in-house legal costs were only recoverable insofar as they constituted true legal costs for work of a type recoverable if performed by external solicitors, with arguments on that question reserved to assessment. The first defendant was ordered to pay those costs on the indemnity basis in accordance with CPR 44.5, to pay interest at 2% above base rate from the date of payment to the date of the order, and to pay £175,000 on account.
The Bill and Points of Dispute
Notice of commencement of detailed assessment proceedings was served on 8 November 2023. The claimants’ bill, in electronic spreadsheet form, totalled £468,687.15 following corrections made in response to an indemnity principle point raised by the first defendant. The bill comprised 1,103 items, of which 20 were disbursements. One disbursement represented 270.6 hours of Mr Kennedy’s time at £69,003, detailed in a separate schedule.
The Points of Dispute fell into two parts: twelve preliminary points in standard Precedent G format, and item-by-item objections inserted into column BB of tab 14 of the spreadsheet bill. The bill contained 1,083 timed items in total, of which three related to bill preparation and were addressed by preliminary point 12. Against every one of the remaining 1,080 timed items (the judgment at paragraph 74 refers to 1,081 items, an apparent minor internal inconsistency), without exception, the first defendant inserted identical wording: “See PP1, 6, 7, 8, 9 and 11. Unreasonable time claimed, reduction sought as per Ds offer and grade.” Each item was then met in column BC with a suggested time allowance calculated at a uniform 22% of the time claimed. The effect was that for all 312 items claimed at 6 or 12 minutes, no visible offer was made at all; a subtotalling exercise revealed a cumulative offer of 11.044 hours, representing 22% of the 50.2 hours claimed across those entries.
The claimants argued in their Replies that the item-by-item objections were inadequately particularised and should be dismissed, relying on Ainsworth v Stewarts Law LLP [2020] EWCA Civ 178 and O’Sullivan v Holmes and Hills LLP [2023] EWHC 508 (KB). A preliminary hearing was listed for a 2.5-hour slot on 8 October 2024 to address preliminary points 1 to 4 and the Ainsworth argument, with three days listed from 12 November 2024 for the detailed assessment itself. The preliminary hearing proved insufficient and was adjourned part-heard to a further 2.5-hour hearing on 22 October 2024. The three-day assessment hearing was adjourned to 18 March 2025, pending the outcome of the Ainsworth argument.
The Legal Framework
The assessment was governed by CPR 44.5, which provides that where costs payable under a contract are assessed, those costs are presumed to have been reasonably incurred and reasonable in amount, with that presumption being rebuttable. The first defendant therefore bore the burden of rebutting the presumption in respect of each item he challenged.
CPR 47.14(6) provides that on an assessment between parties, only items specified in the Points of Dispute may be raised at the hearing unless the court gives permission. Paragraph 8.2 of Practice Direction 47 requires Points of Dispute to be short and to the point, to identify any general points or matters of principle requiring decision before individual items are addressed, and to identify specific points stating concisely the nature and grounds of dispute.
In Ainsworth, the Court of Appeal upheld the decision of Senior Costs Judge Gordon-Saker to dismiss a client’s objections to a solicitor’s schedule of document time where those objections were expressed in wholly generic terms without identifying the specific entries challenged or the grounds of challenge. Asplin LJ held that Points of Dispute must be drafted in a way that enables the parties and the court to determine precisely what is in dispute and why, and that specific points must be made by reference to the items in the bill to which they relate, making clear in each case why the item is disputed.
In O’Sullivan, HHJ Gosnell confirmed that the word “item” in the Ainsworth principles applies to individual entries in a documents schedule, not merely the summary in the body of the bill. He also observed that where a paying party chooses to challenge every single item in a schedule, it is the paying party who adopts a disproportionate course of action to which the receiving party must be able fairly to respond.
Costs Judge Leonard agreed with the analysis of Deputy Costs Judge Roy KC in Wazen v Kahn [2024] EWHC 1083 (SCCO) that the Ainsworth principles apply to inter partes assessments, but that the standard of particularity required is less demanding than in solicitor-client assessments, given that a paying party in an inter partes assessment will not have had the opportunity to inspect the receiving party’s files. The judge identified three fundamental principles common to both types of assessment: the receiving party must have an adequate opportunity to understand which items have been challenged and on what grounds; there must be no element of surprise or ambush at the hearing; and Points of Dispute must be prepared in a way that ensures the assessment can be managed in a fair, just, and proportionate way.
The Item-by-Item Objections
The judge found that the insertion of identical wording against all 1,080 timed items was plainly a cut-and-paste exercise rather than a considered determination of which preliminary points applied to which entries. The absurdity of the approach was illustrated by several features: every item, including time spent on the disclosure exercise, was said both to fall outside the scope of Master Pester’s order and to represent irrecoverable work, yet the first defendant had nonetheless offered over 166 hours against those same items; 41 items claimed at grade D were objected to on the basis that they should have been delegated to a grade D fee earner; the same objection was taken to 115 items offered by the first defendant at grade A; and the identical pro forma objections of excessive time and inappropriate fee earner grade were applied to item 211, which was a disbursement.
The consequence was that the item-by-item objections added nothing to the preliminary points themselves. The claimants and the court were left in the same position as if column BB of tab 14 had been left entirely blank.
The Preliminary Points: Outcomes
Preliminary points 2, 3 and 4 all concerned the indemnity principle. The judge found that any indemnity principle issues had been fully resolved by the amendment of the bill, and that there was no real issue justifying either disclosure of retainer documentation or putting the claimants to the election provided for at Practice Direction 47, paragraph 13.13.
Preliminary point 1 contended that the claimants’ involvement in the fraud claim was limited to the provision of disclosure and that costs beyond that scope were irrecoverable. The judge rejected this as a point of principle, finding that it ran entirely contrary to the declarations already made by Master Pester, whose order expressly extended the indemnity to costs not incurred as a direct participant in the fraud claim. The first defendant’s argument amounted to an attempt to reopen findings already made. The judge also rejected the submission that Mr Kennedy’s costs should be disallowed in their entirety on the basis that his work was undertaken for the benefit of the former directors rather than the claimants, accepting evidence that the interests of the former directors and the claimants were for practical purposes indistinguishable in the context of the fraud claim. Preliminary point 1 was struck out save for two specific examples of Mr Kennedy’s work identified as allegedly falling outside the scope of Master Pester’s order, which could be considered at the assessment hearing.
Preliminary point 6 argued that the claimants had paid for a service whose cost exceeded what was reasonable even on the indemnity basis, describing the overall costs as “unusually high” and invoking Kazakhstan Kagazy PLC v Zhunus [2015] EWHC 404 (Comm). The judge struck it out on two grounds. First, there is no principled basis for reducing overall costs claimed on an indemnity basis assessment other than proportionality, which the first defendant himself accepted had no application. Second, the point was necessarily general and had no application to any individual item: either a given item is reasonable in amount or it is not, and the court cannot reduce individual items on the basis that overall costs are “unusually high”. The judge also noted that Kazakhstan Kagazy is concerned with reasonableness and proportionality on the standard basis and was therefore of no assistance.
Preliminary point 7 raised three discrete objections: failure to delegate simple tasks to grade D fee earners, excessive time, and duplication between fee earners. The judge found that the delegation and excessive time limbs were sufficiently particularised by the entries in columns BC and BD of tab 14, which identified the first defendant’s position on grade and time for each item. Those challenges could therefore be heard at the assessment, subject to the first defendant bearing the burden of rebutting the CPR 44.5 presumption on each item. The judge expressly held that it must be open to a paying party to argue that every single timed item in a bill of costs is excessive, should they see fit, and that if that approach proves to be manifestly unreasonable and to take up a disproportionate amount of court time, then there may be adverse consequences for the paying party. The judge noted that the first defendant might wish to consider carefully the risks of maintaining all time objections on an indemnity basis assessment, where the 22% formula applied across the board would be difficult to justify. The duplication limb was struck out as wholly unparticularised.
Preliminary point 8 raised three further objections: claims for non-fee earner or administrative work, claims for considering incoming correspondence, and claims for work of a solicitor-client nature said to be irrecoverable between parties. The point identified a limited number of specific examples but purported to extend to “numerous instances” not identified, on the stated basis that identifying them would consume court resources. The judge was unimpressed. The outcome of that approach, if permitted, would be that the claimants were left entirely in the dark as to which items were objected to and on which grounds, with the first defendant revealing his case for the first time at the hearing. The specific examples identified were sufficiently limited to be considered at assessment. The remainder of preliminary point 8 was struck out.
Preliminary point 9 largely replicated the excessive time and duplication complaints already raised at preliminary point 7 and the incoming correspondence complaint from preliminary point 8. Save for eight specific items identified as allegedly duplicative, no attempt was made to identify the items to which each objection applied. Preliminary point 9 was struck out except for those specific items.
Preliminary point 11 raised three propositions: that the combined costs of the claimants and the former directors’ solicitors were unreasonable in total; that Pinsent Masons had mismanaged the disclosure exercise; and that comparison with the former directors’ bill would reveal duplication. The judge struck out all three limbs. The combined costs of different parties are irrelevant on an indemnity basis assessment of the claimants’ costs alone. The mismanagement allegation was wholly unparticularised: if excessive costs were said to have been incurred through poor management, the first defendant was required to identify the items that would not have been incurred had the exercise been properly managed. The duplication allegation similarly required identification of the specific items in both bills said to demonstrate unnecessary overlap. No attempt had been made to do either.
Significance for Detailed Assessment
The decision reinforces that the Ainsworth principles are not confined to solicitor-client assessments. They apply with equal force to inter partes assessments, subject only to a calibration of the required standard of particularity to reflect the paying party’s lack of access to the receiving party’s files. That calibration does not, however, permit a paying party to insert identical boilerplate objections against every timed item in a bill, cross-referencing a series of preliminary points without identifying which applies to which entry.
The decision also illustrates the interaction between the Ainsworth requirements and the CPR 44.5 presumption. Where costs are assessed under a contractual indemnity, the paying party bears the burden of rebutting the presumption of reasonableness on each item challenged. A paying party who applies a uniform 22% formula across all 1,080 timed items, including disbursements and items already claimed at the lowest grade, has not engaged with that burden in any meaningful way.
Critically, the judgment confirms that it is legitimate for a paying party to challenge every item in a bill, provided the challenges are properly particularised. The judge expressly held that “it must be open to a paying party to argue that every single timed item in a bill of costs is excessive, should they see fit.” What is impermissible is the blanket application of unparticularised objections. The judge made clear that adverse costs consequences may follow where such an approach proves manifestly unreasonable and takes up a disproportionate amount of court time. This is not an implicit warning but an express statement of the costs risks attending a scattergun approach to assessment.
For practitioners preparing Points of Dispute in inter partes assessments, the judgment confirms that offers identifying time and grade can, where genuinely considered, constitute sufficiently particularised item-by-item challenges. The difficulty arises where, as here, those offers are the product of a mechanical formula rather than any genuine evaluation of the work done. The court will look at the substance of what has been done, not merely its form. Where the substance reveals that identical objections have been inserted against every timed item without regard to their content, including items claimed at the lowest grade and disbursements, those objections add nothing and will be struck out as meaningless.
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