COSTS—ASSESSMENT—DETAILED ASSESSMENT

Court of Appeal, Civil Division
Sir Anthony Clarke MR, Arden and Dyson LJJ and Senior Costs Judge Hurst sitting as an assessor
14 February 2007

A costs judge has no jurisdiction, at the outset of a detailed assessment of costs, to order that a paying party has to pay only a proportion of the costs that are ultimately assessed to be payable.

Jeremy Roussak (instructed by Hough, Halton & Soal) for the claimant.
Judith Ayling (instructed by Costs Advocates Ltd) for the defendant.
The claimant issued proceedings for personal injury. He accepted a CPR Pt 36 payment by the defendant and thereby became entitled to his costs of the proceedings up to the date of serving notice of acceptance on the standard basis. Costs were not agreed, and so the claimant brought proceedings for a detailed assessment of costs before a district judge.

At the outset of the hearing the defendant asked the district judge to order, before embarking on the detailed assessment, that the claimant should be only awarded 25% of the assessed costs. The district judge considered the point as a preliminary issue. He held that he had no jurisdiction to order any such reduction. The defendant’s appeal was dismissed and it appealed to the Court of Appeal. It contended that, in determining whether costs had been “unreasonably incurred or are unreasonable in amount” (within the meaning of CPR 44.4(1)), the court was not constrained only to look at items of costs individually. It might conclude that a whole stage of the proceedings was unreasonable. It could look at the conduct of the parties in the round and not only by reference to specific items of costs.

LORD JUSTICE DYSON (giving the judgment of the court):

His Lordship could not accept the defendant’s submissions. The effect of CPR 36.13(1) and (4) and 44.12(1)(b) was that, upon acceptance of the Pt 36 payment, “a costs order [was] deemed to have been made on the standard basis” (CPR 44.12(1)(b)). That meant that the claimant was entitled to 100% of the assessed costs, that was, the amount that the costs judge decided was payable at the conclusion of the detailed assessment. The district judge had no power to vary that order and decide that the claimant would only be entitled to 25% of the assessed costs. The ability of the court to vary an existing order was given by CPR 3.1(7), “a power of the court under these rules to make an order includes a power to vary or revoke the order”. But the power to vary or revoke an order given by CPR 3.1(7) was only exercisable in relation to an order that the court had previously made, and not to an order that was deemed to be made by operation of the rules.

There was a real distinction between:
(i) carrying out an assessment and deciding as part of the assessment to reduce the bill by a percentage; and
(ii) deciding in advance of the assessment that the receiving party would only receive a percentage of the assessed costs.

The figure that resulted from (i) represented 100% of the assessed costs. In deciding as part of the assessment to reduce the bill by a percentage, the costs judge was giving effect to an order that the successful party was entitled to his costs, to be assessed if not agreed. The figure that resulted from (ii) represented less than 100% of the assessed costs. In deciding in advance of the assessment that the receiving party would only receive a percentage of the assessed costs, the costs judge was not giving effect to an order that the successful party was entitled to his costs, to be assessed if not agreed.

CPR 44.3 gave a judge jurisdiction to make a type (ii) order. There was no doubt that at the end of a hearing, the judge might make an order of the kind that the defendant had sought from the district judge in this case. In such a case, the judge was not purporting to vary an order if he disallowed the successful party a proportion of his costs. He was making the order. He did not have the advantage accorded to the costs judge of having a detailed bill of costs. He could not, therefore, carry out a detailed assessment. But he usually had the benefit, denied to the costs judge, of knowing a good deal about the case, and was often in a good position to form a view about the reasonableness of the parties’ conduct. When carrying out a detailed assessment, the costs judge was not making an order for costs. His position was quite different from that of a judge exercising the jurisdiction given by CPR 44.3.

It was quite unnecessary to give the costs judge the jurisdiction for which the defendant contended. The premise on which its argument was based was that, without such a power, the costs judge could not arrive at a fair result in certain situations. The claimant conceded (rightly) that in an appropriate case, the costs judge could disallow entire sections of a bill of costs. If the costs judge considered that the claimant had acted unreasonably in refusing an offer to settle made before proceedings were issued, he was entitled to disallow all the costs post-issue on the footing that they were costs “unreasonably incurred”: CPR 44.4(1). Similarly, where he decided that a party was unreasonable to an issue, the costs judge would be entitled to disallow the costs relating to that issue on the grounds that they were unreasonably incurred.

The appeal would therefore be dismissed.

His Lordship added a comment about CPR 44.14. He endorsed the view of Lord Justice Longmore in Loucas Haji-Ioannou v Ioannis Frangos [2006] EWCA Civ 1663, [2006] All ER (D) 72 (Dec). The powers given to the court by CPR 44.14 included powers similar to those available to a judge making a wasted costs order. The word unreasonable in the Supreme Court Act 1981, s 51(6) had been construed quite narrowly. It should be given a similarly narrow meaning in CPR 44.14(1)(b).