Negotiation & Costs of Assessment Proceedings
Surely it is better for the parties in detailed assessment proceedings to do all they can to negotiate and settle costs rather than to proceed to a provisional assessment?
Advantages of settling costs without a provisional assessment
The advantages are pretty obvious: settling costs as quickly and efficiently as possible will result in the receiving party obtaining payment of costs without delay, assisting in a firm’s management of cashflow and avoiding the need to use the court’s valuable resources.
Disadvantages of settling costs without a provisional assessment
Unfortunately, it’s often not that simple to settle costs quickly and efficiently. While sensible offers are often put forward by a paying party at the outset, there are many cases where a paying party puts forward unrealistic proposals and negotiations become protracted. Just to illustrate my point, while in the midst of writing, I received an offer of £7,150 against a claim for costs of just under £20,000.
So, you might think that if a paying party is going to unreasonably increase costs of assessment by its conduct in negotiations then it would have to pay for those costs. Unfortunately, this is not necessarily the case.
Pursuant to CPR 47.15(5) the maximum amount the court will award to any party as costs of the assessment (other than the costs of drafting the bill of costs) is £1,500 together with any VAT and court fees.
There is a lot of work to try to squeeze into the £1,500 cap. A receiving party needs to:
- prepare an N252 and documents to commence assessment proceedings
- prepare a Precedent Q (if a case management order has been made)
- assess and advise a solicitor client on likely recovery
- enter into negotiation, consider offers, obtain instructions, consider Points of Dispute
- prepare Replies to Points of Dispute (this may include liaison with other parties such as Counsel, an ATE provider and medical agency)
- prepare documents for a provisional assessment including a statement of costs, Precedent G (annotated Points of Dispute/Replies), statement of the parties and N258
- consider the papers following assessment, calculate the assessment figures, agree the figures with the opponent, and
- lodge the completed bill and calculate interest.
All this work will probably be carried out by a Costs Draftsman and then there is the additional time spent by the solicitor client in considering offers, advices, checking and approving Replies etc.
Inevitably there are a large amount of costs where the work required exceeds profit costs of just £1,500.
What about making a Part 36 Offer I hear you cry?! You might think that you could make a good Part 36 Offer in respect of costs which is bettered on assessment and escape the maximum allowance with costs of assessment awarded on indemnity basis pursuant to CPR 36.17(4)(b). Sadly, this is not the case.
W Portsmouth and Company Ltd v Lowin  EWCA Civ 2172
The provisional assessment took place in February 2016. The receiving party had bettered its Part 36 Offer and the Costs Judge, in accordance with CPR 36.17(4), ordered the costs of detailed assessment proceedings to be assessed on the indemnity basis. However, the Costs Judge reduced those costs from £6,091.20 to £2,805 referring to CPR 47.15(5).
On appeal, Mrs Justice Laing reversed this decision holding that there was a conflict between CPR 36.17 and CPR 47.15 but concluded that if the Rules Committee had intended that the cap would remain then the provisions in Part 36 would have been modified. The costs of assessment were then assessed on the indemnity basis without the costs being capped.
However, the Court of Appeal overturned this decision concluding that costs of assessment proceedings even on an indemnity basis are subject to the cap of £1,500. Lady Justice Asplin concluded that there was nothing in the rules that suggested that CPR 47.15(5) should be disapplied or modified.
In a statement, the Association of Costs Lawyer said:
“There will be plenty of cases where the paying party does not accept a Part 36 offer and instead causes the other side to spend significantly more than £1,500 in dealing with costs issues.
“We call on the Civil Procedure Rule Committee to consider the impact and fairness of this ruling – making this exception seems at odds with the thrust of the whole Part 36 scheme.”
It seems unfair to me that all the Part 36 consequences of bettering an offer on assessment of costs should not be awarded to a receiving party. This would be a real incentive to a paying party to settle the matter quickly and efficiently. The reality is that a receiving party cannot afford to become embroiled in protracted negotiations resulting from unrealistic offers from a paying party. This results in more cases having to proceed to provisional assessment and involve the court’s valuable resources.
My view is that the cap of £1,500 is insufficient to cover the work required in the majority of cases. Either the receiving party accepts an unreasonably low offer or proceeds to assessment resulting in a deficit in costs recovery. Who pays?
This article was written by Melanie Homersham who is an experienced Costs Lawyer, and leads Burcher Jennings’ Bath office as Practice Manager. She has worked for over 15 years in costs litigation, mostly in the South West. Melanie provides a bespoke, high-quality service; she understands clients’ needs, having worked in-house and externally, and for both Claimants and Defendants.