Summary Costs Procedures revealed by CJC
Posted on 22nd August 2023 at 13:51
By Sean Linley, Senior Costs Draftsman
The Civil Justice Council's (CJC) Final Report on Pre-Action Protocols has now been published and it reveals details for a new Summary Costs Procedure which it proposes "to resolve costs disputes over matters where the substantive aspect of the dispute was settled at a pre-action stage." Our article on the interim report is available here.
The proposals could lead to significant changes to how costs litigation operation in pre-issue cases.
The intention of the procedure is two-fold:
1. To address liability for costs pre-action (i.e. who has entitlement costs, if at all?)
2. To address quantum (amount of costs payable)
The first issue largely arose because of complaints from public lawyers that Defendants were acknowledging their legal obligations upon receipt of a Letter of Claim but subsequently denying that any pre-action legal work was necessary to force them to comply with that obligation and thus dispute any claim for costs.
The CJC have proposed to:
1. Streamline existing Part 8 procedures for costs quantum disputes.
2. Introduce a new procedure for determining pre-action costs liability disputes.
The procedure is intended to be independent of Part 8. The CJC are extremely clear that the new procedure would "neither expand nor contract the circumstances in which costs for pre-action legal work would be recoverable." This is an important statement as it makes clear that this will not impact when costs are recoverable and instead the mechanism of how they are recoverable.
The key points are as follows:
1. Allow parties to request summary or provisional assessment with Part 8.
2. Possible introduction of 'stocktakes' for pre-action costs claims.
3. A second report on a new procedure for addressing liability for pre-action costs to be undertaken.
4. The liability for costs procedure will be limited to specific litigation types (such as housing and possibly Judicial Review claims). The second report will consider litigation types but once introduced it could be extended to other types of litigation.
5. The liability only procedure may require primary legislation. Unclear at this stage what exactly this would entail.
6. No plans to change where or when pre-action costs are recoverable, only how.
Proposals for Quantum Disputes
With respect to quantum only disputes, there is consideration into allowing parties to consent to summary assessment of the costs claimed with the Part 8. This would require an N260 and could be dealt with on paper (without a hearing). It is unclear whether the summary assessment procedure would work for post-issue claims. Indeed, there will be matters where such a procedure is not appropriate.
The CJC have set out proposals to allow parties to combine the Part 8 Claim Form with the Request for Assessment, paving the way for Provisional Assessment to be undertaken at the same time as the Part 8. The CJC's view is that paying parties would have an opportunity to respond to the costs claim when responding to the Part 8. The notion is that this avoids the procedural delay where receiving parties on pre-issue cases have to seek an order for costs before they can request assessment.
Practically speaking, the CJC envisage parties will do a stocktake report of the issues between them and that this could be filed with the Part 8 and Request for Assessment. It will be a matter for the CPRC to devise the operation of the procedure but this could replace Points of Dispute & Reply. The CJC are clear that the rules should clarify that the court has the power to summarily assess costs without a hearing and that parties should be given the option of being able to request summary or provisional assessments when filing Part 8 forms.
Proposals for Liability Disputes
The procedure for determining entitlement to costs pre-action will (initially at least) be targeted towards areas of litigation where it is felt such a procedure is required. This will include housing and could include Judicial Review as well. It is suggested a second report will be required to finalise what claim types the procedure will be suitable for.
It is said that once the claim types are known, action can then be taken to determine how the procedure will work to ensure that the same cannot be subject to abuse. Once initially implemented the CJC have not ruled out extending the procedure to other types of litigation.
Hidden in the report is something potentially significant. The CJC have recommended primary legislation be looked at support the court procedure it to decide costs disputes in relation to claims which are not formally commenced in court. This is noteworthy as depending upon the scope of any primary legislation it could alter the recoverability of pre-action costs. At this stage it's too early to say what the shape of any primary legislation will take but it could have significant consequence. Notably the CJC say the procedure should be limited to instances where the relevant pre-action protocol expressly allows claims for pre-action costs.
At this stage the procedure to determine liability for costs will require a second report, though the CJC have intimated that it would need to be an alternative to Part 8 or the Part 8 procedure would require amendment to allow such proceedings to be commenced without an order for costs from the court or agreement between the parties as to who should pay costs.
Other Costs Issues
The Pre-Action Protocol report also floats some other proposals:
1. Adverse costs order where parties fail to comply with the Pre-Action Protocol. This will include ability of court to defer question of non-compliance to a later stage in the claim.
2. Directions Questionnaires should contain a question about PAP compliance.
3. Costs sanctions for an unreasonable failure to engage in ADR at the Pre-Action stage. This could include the introduction of a 'good faith obligation' to seek to resolve or narrow the dispute.
4. The possible introduction of costs sanctions on a defendant for materially altering its defence from that set out in the its Letter of Response (as per the Professional Negligence PAP). The CJC have decided against bringing this in wholesale but has reflected that "there may be a case for introducing this proposal in specific areas of litigation."
Sanctions could range from an adverse costs order for the costs of part or all of the proceedings, an indemnity basis costs or an order depriving a Claimant interest for a specific period or awarding interest at a lower rate.
There is a clear desire to reduce the cost of costs litigation and to speed up the process. The notion of summary assessment will be welcomed for some cases which should see a swifter resolution to costs matters. It's not clear whether parties would have the opportunity to seek a review of any summary assessment or whether the same would be binding (bearing in mind such a right exists under provisional assessment). Combining Part 8 with summary & provisional assessment procedures is welcomed as it would, in principle, speed up the resolution of costs claims.
The key issue will be weighing up when such a fast track scheme is likely to be beneficial. Another issue is whether summary assessment could impact how the court approach rates bearing in mind in very broad terms Guideline Hourly Rates are meant for summary assessments. Perhaps parties could agree some issues and have outstanding issues dealt with on a summary assessment basis? These are issues which will have to be worked through and considered.
Introducing a scheme to establish liability for costs in applicable pre-action claims is to be welcomed, though this appears to be some way off yet given a second report is required.
On the issue of Pre-Action Protocols costs sanctions for non-compliance would be welcomed and would hopefully encourage parties on all sides to ensure compliance with the same.
Where recommendations have been made it will be up to the CPRC to work out how such recommendations will work. We will of course keep an eye on developments.
Should you want to discuss this or any other issues, please call our friendly team on 01482 534 567 or email firstname.lastname@example.org.
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