Assessment Costs not restricted where settlement less than Provisional Assessment limit
Posted on 26th September 2022 at 12:21
By Sean Linley, Costs Draftsman
In UK Sovereign Investments Ltd v Hussain  EWHC 2390 (SCCO) (07 September 2022) the Court was asked to consider whether where a costs claim settled below the £75,000.00 provisional assessment cap, the costs of assessment should be limited in accordance with CPR r47.15 which caps at assessment costs at £1,500.00 plus VAT and Court Fee. Assessment costs of over £19,000.00 were claimed with the Defendant seeking a limitation to £1,500.00 plus VAT and Court Fee (£3,456.00). The Court rejected the Defendant's arguments and allowed total assessment costs of £12,456.00, with the profit costs allowed 6 times higher than the PA cap. Interest was also ordered. An expensive day out for the Defendant.
A Bill of Costs had been prepared by the Claimant in the sum of £83,425.18. The costs claim eventually compromised in the sum of £59,000.00 including interest, leaving only the costs of assessment to be resolved. The Claimant sought assessment costs of £19,755.24, over 5 and a half times higher than the applicable Provisional Assessment cap.
The Defendant argued that the Claimant's bill only exceeded the £75,000 cap because "it had been “grossly exaggerated” with “unreasonable conduct” which had removed the assessment from the “provisional regime” in CPR 47.15, and into the “detailed regime” in CPR 47.14 (for want of better descriptions)."
The Defendant submitted that "the eventual recovery of £59,000 of which £4,023.04 was accrued interest, is indicative that the original claim in the bill was grossly excessive and disproportionate." It was summarised by the Defendant that "it would be unreasonable for detailed assessment costs rather than provisional assessment costs to be visited on the paying party, where, but for the exaggeration and the unreasonable conduct, this would have been a bill for under £75,000. In that eventuality, the bill would have been subject to provisional assessment, thereby limiting the defendant’s liability to £1,500, plus VAT, plus the court fee. In these circumstances, the claimant should not be permitted to recover costs in excess of that figure."
The Claimant disagreed. It averred the settlement was reached to avoid the expense and inconvenience of a hearing, to reflect the risk that some of the Defendant's points of dispute may have gone in their favour, that the Provisional Assessment scheme was self-contained and therefore not relevant and that in any event without assessing the Bill the court was not and could not be in a position to make any determination about the alleged exaggeration.
The Court's Decision
Deputy Costs Judge Campbell rejected the Defendant's arguments, holding that the assessment costs were not limited or capped for the following reasons:
"i) Without having carried out a detailed assessment of the bill, after hearing full argument, I am not in a position to make a finding that the figure advanced in the bill was one that was exaggerated, and that the Claimant’s conduct had been “unreasonable conduct”.
ii) In this context, I do not regard the fact that the bill was claimed £83,000 odd, but the matter settled for £59,000 leads to an irrebuttable inference that the costs claimed must, accordingly, have been exaggerated. There may have been many reasons why the Claimant was willing to discount the bill about which the court does not know and will never be told. However, it is reasonable to surmise that this would be for one or more of the following reasons:
a) to reflect a discount for risk, since a receiving party rarely, if ever, recovers every pound claimed;
b) that the Claimant wanted accelerated receipt of the money to be able to use it now, for example, to pay down a debt or loan;
c) that the Claimant merely wanted finality;
d) or simply, that the solicitors had advised that the points of dispute were arguable and if things went the Defendant’s way on the day, an offer of £42,500 inclusive of interest and costs of assessment made on 27 July 2021, might not be beaten, thereby putting the claimant at risk as to costs.
Taking these factors into account, I am not persuaded that the Claimant’s costs should be limited to £1,500, plus VAT, based upon an allegation of exaggeration and misconduct about which the court can make no finding because the matter settled.
iii) I regard it as a factor in favour of the Claimant and against the Defendant that the former accepted in settlement, a figure much closer to its own Part 36 offer of £60,000 made on 25 July 2022, than the sum of £42,500 inclusive of interest and costs advanced by the Defendant. Put another way, it was within the Defendant’s gift to make a realistic Part 36 offer at an early stage which would have put the Claimant at risk at to costs going forward, were the sum allowed at detailed assessment to be less the offer. As it seems to me, what the Defendant is trying to do now is to have a second bite of the cherry, having failed to make an offer under Part 36 which could have achieved exactly what he is asking the court to do now, namely to make a different order to the default order to be found in CPR 47.20.
iv) I agree with the Claimant that rule 47.15 is self-contained in the sense it does not say what the Defendant wants it to say, namely that if a bill is brought in for assessment at over £75,000 but is allowed at less than that figure, it means that it was obviously exaggerated, so provisional assessment costs must apply. On the contrary, the rule says no such thing, in circumstances where it would have been open to the rule makers to provide that where a bill was reduced under £75,000, the receiving party would only be entitled to provisional assessment costs rather than, as here, to detailed assessment costs."
It is patently the correct decision, as parties cannot begin to approach a matter as a Detailed Assessment and the additional work this entails with the threat of hindsight seeing the Provisional Assessment cap applied. The Court will, in any event, retain a discretion over what level of costs are reasonable. Here the Court found that the costs claimed of over £19,000.00 were "strikingly high". The hourly rate for the Costs Lawyer was reduced from £270 claimed to £225 in line with what the Defendant claimed. The Court allowed £9,000.00 plus VAT and the Court Fee of £1,656 giving a total of £12,456 with interest to run on the figure. This profit costs figure still sits 6 times higher than the Provisional Assessment cap.
Arguments as to injustice are understandable, particularly given there are costs claim under the Provisional Assessment cap which settle for more than the case at hand, however, these are the rules.
That said the Court have here left the door open to arguments at assessment about whether a costs claim was exaggerated and it remains possible under the Court's discretion that if a costs claim was held to be exaggerated that it could restrict costs to the Provisional Assessment cap, not award assessment costs at all or even award adverse costs. Clearly, the threshold to prove an exaggerated claim will be high and parties would have to have a high degree of confidence in such an argument, given the cost of failure will be significantly higher, as it was here.
The Court has also reiterated the point that paying parties' can use offers of settlement to protect its position on costs. It's a reminder that paying parties should be making realistic offers of settlement and where they don't they shouldn't be surprised by the later costs consequences.
A side point for practitioners is that the White Book Q & A suggests that the £75,000.00 Provisional Assessment limit does not include VAT and refers to the total profit costs and disbursement sum. This could actually be an alternative argument and is something parties should think about when dealing with costs claims where the total figure claimed net of VAT is less than £75,000.00. This was not an issue raised in the current case but it is highly relevant. Tactically having adverse costs capped at £1,500.00 and no need for an oral hearing may well have its attractions but if you are the receiving party who pushes on to a Detailed Assessment and it is later argued it should have been Provisional Assessment on the basis the PA limit excludes VAT could lead to interesting outcomes.
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