Practical Law

When Kain Knight was in its infancy 40-something years ago, there were no such things as points of dispute. The protagonists would arrive for a taxation, as detailed assessment was then known, largely in ignorance of the arguments which would be raised. With nothing electronic in those days, the receiving party’s files would be lodged in advance for the taxing master’s clerk to read. That would involve a painstaking counting up of letters and the reading of attendance notes, with any discrepancies being tagged for the master’s attention. The taxation would then proceed at a leisurely pace with a red pen being wielded to disallow any items which had not been necessary and proper for the attainment of justice. Quaint though it may seem, the system worked pretty well.

Times changed. Individual taxing masters’ clerks passed into history to be replaced by Rules of Court and Practice Directions (see below) which required parties paying costs to identify any item in the bill with which they wished to take issue at detailed assessment, within 21 days of its service. Failure to do that would in all likelihood result in being shut out from advancing the challenge at the assessment itself. Should that be a “big ticket” item, such as hourly rates or time spent on documents, such an oversight could cost thousands, even tens of thousands of pounds.

True it is that there is a safety net because points of dispute (PODS, the term used to describe these challenges) can be amended without the permission of the court, but that is still to risk the wrath of the costs judge (as the taxing master is now called), who may nonetheless refuse to allow the changes. It is plain, therefore, that PODS are very important. Mess them up, and it can cost the paying party a King’s ransom.

How, then, should PODS be formulated to be effective?

The answer lies in Practice Direction 47.8, which is headed “Points of dispute and consequences of not serving: rule 47.9”. It provides:

“8.2 Points of Dispute must be short and to the point. They must follow Precedent G in the Schedule of Costs Precedents annexed to this Practice Direction, so far as practicable. They must:
(a) Identify any general points or matters of principle which require decision before the individual items in the bill are addressed; and
(b) Identify specific points, stating concisely the nature and grounds of dispute.
Once a point has been identified it should not be repeated but the item numbers where the point arises should be inserted in the left hand box as shown in Precedent G.”

Precedent G follows a format similar to a Scott schedule; the left hand column contains numbered points which are described, for example, as “Point 1 General point”. The box to the right contains the short complaint, namely:

“Rates claimed for the assistant solicitor and other fee earners are excessive. Reduce to £158 and £116 respectively plus VAT.”

There is space underneath for the receiving party’s reply and the costs judge’s decision.

Another example is Point 5, which says:

“The total claim for work done on documents by the assistant solicitor is excessive. A reasonable allowance in respect of documents concerning court and counsel is 8 hours, for documents concerning witnesses and the expert witness 6.5 hours, for work done on arithmetic 2.25 hours and for other documents 5.5 hours. Reduce to 22.25 hours.”

Further guidance about PODS being short and to the point can be found in McDaniel & Co v Clarke, per Hickinbottom J at paragraph 31:

“I would simply remind the parties of the requirement of the CPR to deal proportionately with all matters, including of course those relating to costs themselves. Here, the costs of the detailed assessment were driven up by the length of the Points of Dispute which had scant regard for the obligation under para 8.2 of CPR PD 47 that these ‘must be short and to the point’. Where that happens, the inevitable consequence is that the other party feels compelled to serve lengthy Points of Reply, thereby generating even higher costs.”

Given these rules, practice directions and judicial entreaties, it might be thought that “short and to the point” should mean just that. Be brief.

Perhaps a degree of sympathy should therefore be extended to the claimant in Ainsworth v Stewarts Law LLP (judgment, 20 February 2020), in which Mr Ainsworth was in dispute with his former solicitors about fees and had issued proceedings for detailed assessment under the Solicitors Act 1974. For their work between 17 October and 23 November 2017, the firm had billed Mr Ainsworth over £200,000 of which £115,000 was for profit costs. In accordance with usual practice, Stewarts served a breakdown of their bill to which Mr Ainsworth was invited to present his objections; in law-speak, his PODS.

No issue arose in respect of Points 1 to 9. Point 10 presented the following challenge.

“Items 40 – 45 Documents Time
The Claimant requests the court to note that over a period of 11 working days the Defendant seeks to claim 46.8 hours of work which is equivalent to approximately 4.3 hours of time every single day. It is the clear opinion of the Claimant that under any stretch of the imagination, the level of time expended can in no way be justified and against the relevant test, the time expended, and its subsequent cost must be deemed to be unusual in nature and amount.
As with the timed attendances upon the Claimant, the Claimant is mindful of the requirements of the Civil Procedure Rules as to the need to keep Points of Dispute brief and succinct. It must therefore be stated that all entries are disputed. By way of general indication however, the Claimant can confirm the main issues with the document time are as follows:
1. Significant duplication between fee earners
2. Wholly excessive time expended by fee earners reviewing documentation provided by the Claimant
3. Too much time claimed generally in relation to preparation
4. An excessive level of time claimed in relation to drafting of communications
5. Unnecessary inter-fee earner discussions arising due to the duplication
6. Excessive time spent collating documentation
7. Significant preparation time claimed in relation to meetings with the Claimant.
It can be confirmed that the above stated list is not exhaustive of the issues but provide a general overview as to the reason why the time claimed is unusual in nature and/or amount. The Claimant reserved (sic) their position generally.”

Stewarts Law’s Points of Reply in relation to each of Items 40-45, stated:

“The defendant cannot provide any meaningful reply to this general point. In the absence of itemised points of dispute being served (permission to rely on the same being a matter for the court and the Defendant’s position will be reserved), the Court will be asked to dismiss this point.”

The battle lines were thus drawn. Were these PODS which were “short and to the point” and thereby PD 8 compliant, or were they so lacking in detail that Stewarts could not understand the nature of the challenge in precise terms, so Point 10 should be dismissed?

In the courts below, both the senior costs judge and HHJ Klein held that the PODS had failed to provide the level of detail required under CPR 47.7, nor had they followed Precedent G, so Point 10, worth £64,000, was disallowed in its entirety. The Court of Appeal agreed. Holding that the procedure for PODS under CPR 47 applies in a Solicitors Act assessment just as much as it does in one between the parties, the court continued that specific points should be made stating concisely the nature and grounds of dispute to enable the receiving party to be able to reply to the complaints. In undertaking that task, Asplin LJ stated:

“37. … 47PD.8 para 8.2 is directly relevant. It makes it absolutely clear that points of dispute should be short and to the point and, therefore, focussed. Furthermore, sub-paragraphs (a) and (b) leave no doubt about the way in which the draftsman should proceed. General points and matters of principle which require consideration before individual items in the bill or bills are addressed, should be identified, and then specific points should be made “stating concisely the nature and grounds of dispute.”…
38.Common sense dictates that the points of dispute must be drafted in a way which enables the parties and the court to determine precisely what is in dispute and why. That is the very purposes of such a document. It is necessary in order to enable the receiving party, the solicitor in this case, to be able to reply to the complaints…
42. … Points of Dispute 10 was general in nature and stated that all items were disputed, that the list provided was not exhaustive of the issues but provided a general overview and that Mr Ainsworth reserved his position generally. It did not contain cross references to the numbers of the items disputed on particular grounds. In fact, it was accepted that it did not state why any item in the bill was disputed. In my judgment, therefore, it did not comply with 47PD.8 para 8.2, nor, for that matter, did it take the form of Precedent G.”

It followed that the potential to challenge £64,000 of Stewarts Law’s work was lost in its entirety. A disaster for Mr Ainsworth who, accordingly, could not avoid paying the costs of the Solicitors Act assessment under the “one fifth” rule, an additional £18,000, plus the costs of two failed appeals.

To the man on the Clapham omnibus, carrying out a comparison between Mr Ainsworth’s Point 10 and the wording of the Point 5 in Precedent G, a reasonable conclusion for him to reach, might be that the former had provided at least as much detail as the model wording in the latter; indeed that in doing so, Mr Ainsworth had studiously heeded the caution given by Hickinbottom J in McDaniel about the need for PODS to be short and to the point. After all, his PODs had identified why the time spent on documents was excessive and, having separated the items under challenge into groups, for example, “excessive time on collation of documents”, it ought to have been a straightforward task for the parties to work out the exact time taken on those matters merely by totting up the hours claimed in the breakdown for each such task.

It might also be thought that Mr Ainsworth’s points were refreshingly succinct, since they avoided the bane of the lives of costs judges, namely paying parties quoting lengthy parts of the Civil Procedure Rules (CPR) in their PODS, as well as long tracts of the relevant case law, thereby creating a document with pages by the score when a bakers’ dozen would do.

Although it is not easy to see, how, in these circumstances, it could be argued against Mr Ainsworth, that he had failed to alert his one-time solicitors exactly to what his grievances against them were, no less than five judges have found against him. Little wonder, therefore, were he to feel that he has been between the devil and the deep blue sea. Too much information and his PODS would have infringed against PD 47.8.2(a). Not enough detail (as the courts found), and the ability to advance any objection to the documents item, was curtailed completely.

The challenge for costs lawyers such as Kain Knight going forward in the aftermath of Ainsworth (who, it should be made clear, were not instructed in the case), will be to achieve the right balance between “short and to the point” and drafting the PODS in a way which enables the parties and the court to determine precisely what is in dispute and why. Fail in that task and paying parties will end up significantly and unnecessarily out of pocket as the unfortunate Mr Ainsworth has found to his cost.