REUTERS | Yusuf Ahmad

When can costs be assessed? Remember to ask the question!

A simple question but one to which, until now, there has not necessarily been a simple answer.

The starting point itself is simple. At the end of a hearing or a trial, the court can make a costs order directing one party to pay the costs of the other party. If the proceedings have been concluded, for example by a judgment or settlement agreement, the costs can be quantified by detailed assessment straightaway (CPR 47.1). Alternatively, the court can order an immediate assessment by directing that “the costs be assessed and paid forthwith”. Absent such a direction, the receiving party must wait until the proceedings have concluded before any entitlement to have the costs assessed arises.

Wherein lies the difficulty?

The answer to that is in relation to costs orders made by the Court of Appeal, which dispose of finally, a discrete or self-contained issue that has arisen in ongoing proceedings. Plainly, if the court makes a “to be assessed and paid forthwith” order, the receiving party can start detailed assessment proceedings straightaway. Often, too, the court will make a summary assessment of the costs which become payable within 14 days under CPR 44.7, but where neither happens, those anxious to have their money from the paying party tend to serve bills when, strictly speaking, no right under CPR 47.1 to apply to the court for an assessment has arisen.

Their justification for doing so is usually based on two propositions:

  • Where the Court of Appeal has disposed of a discrete issue, there is finality so far as that issue is concerned. With that finality comes an entitlement to an assessment, since that aspect of the proceedings has been concluded.
  • PD 47 paragraph 1.3 permits a party served with a notice of commencement to apply to determine whether the party who served it is entitled to commence detailed assessment proceedings. The court, on hearing such an application, may order the detailed assessment proceedings to continue or to order that the notice of commencement be set aside.

Such cases have had their successes and also their champions.

In GB Gas Holdings Ltd v Accenture (UK), Hamblin J had before him “… The conduct of the proceedings generally”. He was asked to order the immediate assessment of the costs of an appeal against a decision on the trial of a preliminary issue. Agreeing to do so, he said:

“I accept that the usual practice would be for a party to ask the Court of Appeal to order immediate assessment of costs if that is what it wishes to have done. I also accept that the claimants did not do so in this case and that in those circumstances, the effect of the order is, in the light of CPR 47.1, that the costs as ordered by the Court of Appeal, as matters stand, will not be assessed until the conclusion of the proceedings. But the court may order them to be assessed immediately. In my judgment, that is an order which this court can make… It has before it a specific issue of whether it is appropriate for there to be an immediate assessment of costs. Those costs include as part of the costs of the proceedings the appeal costs. I am therefore satisfied that I do have jurisdiction to order immediate assessment of those costs and, because they are discrete costs and because they involve no great issue of disentanglement, I accept that it would be appropriate to order immediate assessment of the appeal costs”.

Similarly, in Khaira v Shergill the issue for decision was whether costs awarded to the Khaira litigants could be assessed immediately when the Supreme Court had awarded them their costs, both in that court and in the Court of Appeal, in proceedings that were continuing. Mr Richard Spearman QC held that as the Supreme Court had made a single order in relation to costs, the effect could not be that the Khaira litigants could proceed “with one lot of costs but not the other”, so an entitlement to an immediate assessment of both sets of costs had arisen.

There have, however, also been failures and detractors from the Hamblin J approach. In Crystal Decisions (UK) Ltd v Vedatech Corporation, Patten J held that:

“The purpose of CPR 47.1 is to lay down a general rule that the costs of part of the proceedings are not to be assessed until the conclusion of the proceedings as a whole, unless the court orders them to be assessed immediately, which the court of appeal did not… The only Court entitled to permit a deviation from the general rule is the court making the costs order”.

Accordingly, there was no entitlement to an immediate assessment of costs in that case, where Pumfrey J had directed an immediate assessment and the Court of Appeal had simply refused permission to appeal against those orders.

The recent appeal in Khaira has resolved the dichotomy. David Richards LJ, who gave the lead judgment, was in no doubt:

“I prefer the view of Patten J… There is nothing in the Rules or elsewhere that suggests that the High Court can exercise a power that was clearly vested in the Court of Appeal… A High Court judge will have power, by virtue of CPR 2.4(a) to perform any act which, under the CPR, is to be performed by the court “in relation to proceedings in the High Court” but the appeal was not proceeding in the High Court, but in the Court of Appeal. Moreover, in my view, the natural reading of CPR 47.1 is, as Patten J said, that “the court” refers to the court that made the costs order.”

Below, Mr Spearman QC had held that the Khaira litigants were entitled to an immediate assessment of the Court of Appeal costs, not only because that was implicit in the order of the Supreme Court (see above), but also because there was no need for an express order to that effect, and that, anyway, PD 47 paragraph 1.3 permitted a costs judge to make an order for immediate assessment, as had happened.

The Court of Appeal rejected these findings and reversed the judgment on all three grounds. As stated above, the Patten J line of reasoning prevailed over the Hamblin J approach. Secondly, PD 47 paragraph 1.3 was not a general jurisdiction, but would arise (if at all) only where a paying party is served with a notice of commencement and has applied to the costs judge to determine whether the other party was entitled to commence detailed assessment proceedings: it is not envisaged that a costs judge would have a discretion to order an assessment where none had existed before. Lastly, there had been nothing to suggest that the Supreme Court had turned its mind to the costs incurred in the Court of Appeal and the Shergill litigants had had no opportunity to make submissions on the question.

The clear message given by the Court of Appeal is thus: “Hands off our orders. No one except the Court of Appeal (and the Supreme Court) is entitled to exercise any jurisdiction over costs orders we make.”

Helpfully and much more judicially than that, David Richards LJ went on to give guidance to those who have been successful in his court in an interlocutory appeal:

“All that need happen is for the receiving party to apply for an immediate assessment”.

It is, therefore, for the winner to remember to request an order not just that the costs be awarded, but also for them to be assessed and paid forthwith. That way, there will be no need to ask any other court in future to tinker with a costs order made by the Court of Appeal. If the order is made, the receiving party can apply for an assessment and be paid straightaway. If it is not, the assessment and payment must wait until the proceedings have been concluded. All clear now.

Kain Knight Colin Campbell

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