Success at Detailed Assessment does not automatically mean entitlement to all costs of the assessment itself.

The Claimant’s bill of costs in Milbrooke Construction Ltd v Jones [2021] EWHC B20 (Costs) was reduced by such a significant level that Costs Judge Brown departed from the general rule, set out in CPR 47.20, that the receiving party is entitled to their costs of the detailed assessment.

CPR 47.20 provides that:

(1) The receiving party is entitled to the costs of the detailed assessment proceedings except where-

(a) the provisions of any Act, any of these Rules or any relevant practice direction provide otherwise; or

(b) the court makes some other order in relation to all or part of the costs of the detailed assessment proceedings.

(3) In deciding whether to make some other order, the court must have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) the amount, if any, by which the bill of costs has been reduced; and

(c) whether it was reasonable for a party to claim the costs of a particular item or to dispute that item.

Background

The underlying litigation related to a low-value, but relatively complex, construction dispute. The matter settled when the Defendant accepted the Claimant’s Part 36 offer. The Claimant’s bill of costs was claimed at approximately £135,000 and split over 30 separate parts to reflect the interim statute bills raised to the client.

The detailed assessment proceedings were particularly prolonged. In total three full days and two half days of the courts time were taken up, beginning before a regional costs judge in Bristol before being transferred part-heard to the SCCO.

Following a line-by-line assessment the bill was reduced to around £90,000, the costs judge concluded that this figure was disproportionate and reduced it by a further £7,000.

The Claimant’s bill of costs was therefore assessed at £81,950 (a 39% reduction) and as the Defendant failed to make a successful offer they would ordinarily have been ordered to pay all of the costs of the assessment. However, due to the significant reductions to the bill Costs Judge Brown reduced the Claimant’s assessment costs by 30%. Costs Judge Brown reserved Judgment from the detailed assessment on 6 October 2021 in order to properly set out the reasoning behind his decision due to the matters of principle raised by the Claimant.

Claimant’s Position

The Claimant sought to rely on Deputy Costs Judge Campbell’s decision in Mullaraj v Secretary of State for the Home Department [2021], that the amount by which the bill of costs had been reduced should not be the basis for any different order from that provided for in CPR 47.20 (1). The Claimant consequently requested an order in its favour for all costs of the detailed assessment proceedings.

Defendant’s Position

The time spent on Documents was spread over 33 schedules within the bill of costs and collectively 'Document time' was the most substantial category of items. Consideration of the claim took a substantial amount of court time and would have taken a substantial amount of the parties' time in preparation for the hearings. Therefore, it was the Defendant’s position, one ultimately accepted by the Judge, that the costs claimed in the bill were highly excessive and unreasonable.

The Defendant requested that this should be reflected in the order as to costs of assessment, and that they should either get an order in their favour, there should be no order or, in the further alternative, the Claimant's costs should be reduced by a percentage.

Decision

In making his decision Costs Judge Brown provided the following:

“The terms of r47.20 appear to me to be clear. In the circumstances which arise here the court is required to have regard to the amount, if any, by which the bill of costs has been reduced in deciding whether to make any other order. The words are "must have regard…" (my emphasis). Since the court is required to consider the matter when considering whether to make a different order then it follows, it seems to me, that the reduction on the bill may, when considering all the circumstances, be a basis for a 'different order'.

Needless perhaps to say, that does not mean that it must impose a different order; the court must always have regard to all the circumstances of the case. Small reductions in circumstances where sums are reasonably claimed are not likely to be enough. But it does seem to be that it is not open to a court simply to disregard the reduction in the bill as a factor in determining costs without more.”

He went on to confirm that, in contrast to Deputy Costs Judge Campbell’s stance in Mullaraj, 47.20 did not require for there to have been some fraud or other misconduct in play. CPR 47.2 (3)(c) provides, in deciding whether to make some other order, the court must have regard to whether it was reasonable for a party to claim the costs of a particular item. This implies an objective standard and not simply the presence of the deliberate misleading of the court or of an opponent. In this regard the Judge outlined:

“Importantly there are, it seems to me, good reasons why a claim for costs which is overstated, such that the bill has been reduced substantially, is in itself a circumstance that Parliament intended could result in a 'different' order as to costs even assuming no misconduct.”

Costs Judge Brown also stated:

“I think there is a legitimate concern that an overstated claim makes it more difficult for a receiving party to take a view as to the reasonableness of the costs claimed. Unlike normal litigation, a receiving party does not see all the underlying documents upon which a claim is determined; it must rely to a significant extent upon the description in the bill in making an offer.”

Essentially, if a claim for costs is considered to have been inflated this is likely to increase the assessment costs due to the lack of capability for settlement and the inevitably protracted assessment proceedings.

This decision is in contrast to Mullaraj v Secretary of State for the Home Department [2021], where it was determined that a paying party who fails to protect its position by making a reasonable offer cannot generally expect the court to deprive the receiving party of any of the costs of assessment unless there was ‘fraud or other skulduggery’ involved.

It is clear from Costs Judge Brown’s judgment that he has applied the terms of rule 47.20(3)(b) in allowing the departure from the general rule that the successful party are entitled to all of their costs of the assessment. However, the impact of this is that a paying party who fails to make any offers throughout the detailed assessment process could be in a better position than a paying party who does make an offer but one which is just short of the amount allowed by the court. Thus, parties not complying with the principle that every effort should be made to try to resolve disputes, could be at an advantage over one who has. This could lead to parties sitting back, deliberately making no offers and hoping for a successful challenge at assessment. This doesn’t seem to be a fair and reasonable manner in which to conduct the detailed assessment process.