Case won with costs? What happens next?
Step one is to try and agree the costs. Usually, the starting point for that is a schedule showing the work done and time spent, but if that fails, a formal bill of costs will be required, which needs to be served within three months of the date of the costs order (CPR 47.7). The winner then has a further three months to start proceedings for detailed assessment, that is to say the formal quantification of the costs by a judge, assuming that the paying party has served objections to amounts claimed by formal points of dispute (CPR 47.14). That is what the CPR says, but in any sensible world, what the protagonists should do before that stage is reached, is to consider Alternative Dispute Resolution, the most well-known form of which is costs mediation (see Alternative dispute resolution versus having your day in court: another round to ADR (Part 2)).
Suppose, however, that mediation has not been tried. In these circumstances, the winner will need to set the detailed assessment ball rolling by lodging the bill at court so that the dispute about who owes what, can be resolved by a judge. In order to do so, PD 47.13.2 and PD 47.13.3 to CPR 47.14 sets out the pre-requisites:
“13.2 The request for a detailed assessment hearing ….must be accompanied by—
(c) the document giving the right to detailed assessment” (see PD 47.13.3 below).
13.3 states that the document giving the right to the detailed assessment is a judgment or order of the court giving that right, a PD 3B notice striking out the case, a Part 36 acceptance or a notice of discontinuance under CPR 38.
As mentioned above, the table showing the period for commencing detailed assessment proceedings is set out in CPR 47.7:
| Source of right to detailed assessment | Time by which detailed assessment proceedings must be commenced |
| Judgment, direction, order, award or other determination. | 3 months after the date of the judgment and so on. |
| Discontinuance under CPR 38. | 3 months after the date of service of notice of discontinuance under CPR 38.3. |
| Acceptance of an offer to settle under Part 36. | 3 months after the date when the right to costs arose. |
So far so good, but suppose that the route to victory has involved the following: judgment has been obtained on liability after a long fight for damages to be assessed. The bill has been served relying upon the judgment as the source of the right to detailed assessment under CPR 47.7. What can go wrong?
This can. In the points of dispute filed before the assessment takes place, the paying party raises the following: “The action has not reached its conclusion: the costs cannot be assessed until the quantum of damages has been resolved: please see CPR 47.1.”
CPR 47.1 states that “the general rule is that the costs of any proceedings or any part of the proceedings are not to be assessed by the detailed procedure until the conclusion of the proceedings, but the court may order them to be assessed immediately”.
It follows, so the opponent’s argument goes, that there can be no assessment of the liability costs until the damages have been resolved either by agreement or court order. Until that has happened, which maybe years in the future, there is no entitlement to any costs because there has been no “conclusion” of the proceedings, notwithstanding that there has been a judgment which is a source of the right to an assessment.
The argument does not stop there. Consider the following scenario. Instead of there being one defendant, two defendants have been sued, with summary judgment being obtained against defendant 1 (D1) under CPR 24. That means that the case against D1 has ended, but is continuing against defendant 2 (D2) so the proceedings have not reached their conclusion. Must the claimant wait until everything has been settled with D2 before a penny piece can be extracted from D1, even though the result against D2 may take years to resolve, by which time D1 may have disappeared into the ether?
Or what about this scenario, when the boot is on the other foot? The claimant sues D1 and D2. After much to-ing and fro-ing involving considerable expenditure, there is an admission of liability by D2 and D1 is released from the action, upon the claimant serving a notice of discontinuance under CPR 38, subject to a Bullock order (D2 must indemnify the claimant for the costs due to D1). Next up is a bill from D1 for the costs of the action, the source of the right to detailed assessment being the CPR 38 notice.
“Not so fast”, pipes up D2. “You have no entitlement to an assessment because there has been no “conclusion of the proceedings”: the action against me is continuing: you will have to wait until the claimant and I have finished the case before I have to pay you a penny!”
Whatever is the correct answer (see below), there is one certain way in which in scenario one, the claimant would not have to wait, and likewise D1 in scenario two could have his costs now, which is that the court makes an order for the costs to be assessed “immediately”. It follows that wherever possible, successful parties should ask the court to order that the losing party pays costs “to be assessed and paid forthwith” meaning that there can be an assessment straightway, without having to wait until the proceedings as a whole have been concluded.
However, a “forthwith” order is not automatic. The court may decline to make one, the successful may party forget to ask, or, as in the case of a Part 38 discontinuance, does not have a chance to do so, nor any opportunity to seek a payment on account under CPR 44.2(8). That is also the position where a Part 36 offer is accepted against one party, but the case goes on against the others. Where that happens, must the party entitled to the costs simply have to grin and bear it until the case is over, or can reliance be placed on CPR 47.7 even though the proceedings have not reached a conclusion?
Anecdotal evidence at first instance level is that the judicial cookie crumbles both ways. One school of thought views the source of the right to an assessment as the starting point. Accordingly, if you have a judgment on liability or CPR 38 discontinuance notice, or a Part 36 acceptance, not only do you have an entitlement to an assessment, but also the three-month time limit is running against you. On the other hand, there is a second school of thought, which takes the view that the conclusion of every bit of the proceedings is the determinative factor, meaning that parties with favourable costs orders must be patient, possibly for years, and sometimes with no way of knowing how or when the proceedings will reach their conclusion, before they can have their costs assessed.
Most recently supportive of the second school of thought is ABA v University Hospitals Coventry and Warwickshire NHS Trust, in which the claimant had obtained judgment on liability with damages to be assessed in a clinical negligence claim. A bill for £827,406.85 then followed with a notice of commencement of detailed assessment proceedings, which the NHS Trust applied to set aside on the grounds that, in the absence of an order for an immediate assessment, it was premature.
That argument prevailed, the court holding that where a claimant has succeeded on issues such as liability and causation and the claim has then moved on to quantify damages, for the purposes of CPR 47.1, only one part of the overall proceedings has been resolved. The assessment of damages is continuing and absent an order for an immediate assessment of the liability costs, the claimant cannot commence detailed assessment proceedings for those costs. In reaching its decision, the court cited the judgment of David Richards LJ in Khaira v Shergill.
“The matters in issue in the claim are not finally determined until the court at first instance has finally ruled on them…”
(Paragraph 35, judgment.)
Rightly or wrongly, it does not appear that in ABA the court was referred to CPR 47.7, nor to the fact that where, as was the case, the claimant has a judgment, that is a source of the right to a detailed assessment. Had the court had the benefit of a submission on CPR 47.7, there are compelling reasons why a different conclusion should have been reached.
In the first place, there is no reason why a claimant who has a judgment with costs should be kept out of their money for any longer than is absolutely necessary (Mars UK Ltd v Teknowledge Ltd). In ABA, the effect of the decision is to defer any payment possibly for years whilst the damages are worked out (in that case, a 10-day trial is envisaged), with the double-edged sword that throughout this period, interest will be clocking up at 8% against the NHS Trust under the Judgments Act 1837 on any unpaid costs, around £65,000 a year!
There is then the position of a defendant against whom the action has been discontinued, but with the case continuing against other parties. In these circumstances, it is hard to see why such a defendant against whom the action is concluded, should have to wait until the claimant and the remaining defendants have settled their differences before obtaining an assessment of their costs, or being paid anything for their expenditure. If those differences take years to resolve or the parties keep the “successful” defendant in ignorance of them, how will the latter ever achieve justice for their outlay?
The same point can be made for a claimant who has obtained summary judgment or has a Part 36 acceptance against one defendant whilst the action continues against another. What possible reason can there be for keeping the claimant out of their assessment, save that the decision in ABA is wrong? The just outcome ought to have been that CPR 47.7 trumps and prevails over CPR 47.1. The sooner that there is a definitive High Court judgment to make that clear, the better justice there will be for parties entitled to receive the costs where they have obtained a judgment, have a CPR 38 notice or a Part 36 acceptance, but the proceedings as a whole have yet to reach a conclusion.
