Civil Litigation >

Syllabus Area [23] Costs

4. The bases and assessment of costs

John Bates
@MrJohnBates
 Look at the Lecture/Workshop plan to see when/where we cover topics

Syllabus


04. ADR – 05. ADR – Non-
3. Pre-action 6. Commencing
1. General Matters 2. Limitation Adjudicative Adjudicative
Conduct Proceedings
Options Options


12. Default
11. Further 9. Multiple causes 8. Statements of
Judgment and 10. Amendment 7. Parties
information of action Case
Summary Judgment


16. Interim 18. Settlement
13. Case 15. Interim 17. Interim
14. Disclosure Payments and (including Offers to
Management Applications Injunctions
Security for Costs Settle)

22. Judgments,
21. Civil Trial and
24. Appeals 23. Costs Orders and 20. Expert evidence 19. Evidence of fact
Evidence
Enforcement
John Bates
@MrJohnBates
Civil Litigation >
Syllabus Area [23] Costs
Standard and indemnity costs - The differing presumptions which operate in how
costs are calculated

John Bates
@MrJohnBates
Basis of Assessment
 The basis of assessment determines the court’s approach to deciding the amount of
recoverable costs - that the paying party is liable to pay to the receiving party.
 There are two bases of assessment:
(a) The standard basis – this is the default basis of assessment.
(b) The indemnity basis.

 Where the court makes an order for costs and does not indicate the basis of the
assessment, the costs will be assessed on the standard basis.

John Bates
@MrJohnBates
The court’s control over recoverable
costs
 Whether the court is assessing costs on either the standard basis or the indemnity
basis, the court will NOT allow:
o costs which have been unreasonably incurred; or
o costs which are unreasonable in amount.
 See CPR 44.3(1)
 SO, REGARDLESS OF WHICH BASIS OF ASSESSMENT IS BEING USED,
THE TOUCHSTONE THE REASONABLENESS OF THE COSTS BEING
CLAIMED BY THE RECEIVING PARTY ARE ALWAYS A CONSIDERATION.

John Bates
@MrJohnBates
The standard basis for assessing costs
 When assessing costs on the standard basis, the court must consider whether the costs
claimed are :
o Reasonable in amount; AND
o Reasonably incurred; AND
o Proportionate to the matters in issue.
 ALL 3 ELEMENTS MUST BE MET [CPR 44.3]
 IF THE COURT FINDS THAT THE COSTS INCURRED (OR SOME OF THE
ITEMS OF COSTS) AREREASONABLY AND NECESSARILY INCURRED BUT
DISPROPORTIONATE TO THE MATTERS IN ISSUE, THOSE COSTS MAY BE
DISALLOWED OR REDUCED
John Bates
@MrJohnBates
The standard basis and
proportionality
 The concept of proportionality is a significant component of the court’s assessment of
costs on the standard basis.
 CPR 44.3(5) assists with the question of determining the proportionality of costs.
Basically, costs incurred are proportionate if they bear a reasonable relationship to
–
o the sums in issue in the proceedings;
o the value of any non-monetary relief in the proceedings;

 Furthermore, where the court has any doubt as to whether costs were reasonably and
proportionately incurred and/or whether they were reasonable and proportionate in
John Bates
amount, those DOUBTS SHALL BE RESOLVED IN FAVOUR OF THE PAYING @MrJohnBates
Measuring the proportionality of
costs
 There are factors identified in CPR 44.3(5) which assist in determining whether costs
are proportionate
 Do the costs claimed bear a reasonable relationship to –
o the sums in issue in the proceedings;
o value of any non-monetary relief in the proceedings;
o the complexity of the litigation;
o any additional work generated by the conduct of the paying party; and
o any wider factors included in the proceedings, such as reputation or public
importance.
John Bates
@MrJohnBates
The standard basis and the benefit of
any doubt
 When the court is assessing costs on the standard basis, if the court has any doubt about
whether the costs claimed by the receiving party were:
o Reasonably incurred; OR
o Reasonable in amount; OR
o Proportionate to the matters in issue
 ANY DOUBT SHALL BE RESOLVED IN FAVOUR OF THE PAYING PARTY.

John Bates
@MrJohnBates
The indemnity basis for assessing
costs
 When assessing costs on the indemnity basis, THE CONCEPT OF
PROPORTIONALITY DOES NOT FEATURE.

 So, the court instead ONLY considers whether the costs claimed are :
o Reasonable in amount; AND
o Reasonably incurred; AND
 BOTH ELEMENTS MUST BE MET [CPR 44.3]

John Bates
@MrJohnBates
The indemnity basis and the benefit
of any doubt
 When the court is assessing costs on the indemnity basis, if the court has any doubt
about whether the costs claimed by the receiving party were:
o Reasonably incurred; OR
o Reasonable in amount;
 ANY DOUBT SHALL BE RESOLVED IN FAVOUR OF THE RECEIVING
PARTY.

John Bates
@MrJohnBates
When are indemnity costs
appropriate?
 ORDERS THAT A PAYING PARTY PAY THE RECEIVING PARTY’S COSTS,
TO BE CALCULATED ON THE INDEMNITY BASIS, ARE UNUSUAL.

 Is there something about the behaviour of the paying party in the case which
justifies an order different to the usual order that they pay any costs on the
standard basis?

John Bates
@MrJohnBates
When are indemnity costs
appropriate?
 Is there something about the behaviour of the paying party in the case which
justifies an order different to the usual order that they pay any costs on the
standard basis?

 Examples include Where the conduct of the paying party (during the proceedings) has
been unsatisfactory (or which may have driven up the costs) e.g.:
o Refusing an offer to settle that then fail to beat at trial;
o Alleging fraud which they then fail to prove;
o Commencing proceedings which are struck out or dismissed on the basis that they
lack any merit.
John Bates
@MrJohnBates
Calculation: Basis of Assessment
Standard basis Indemnity basis
The court must be considered that costs claimed by the Yes Yes
receiving party are….
Reasonably incurred Yes Yes
Reasonable in amount Yes Yes
Proportionate to the matters in issue Yes No
Any doubt as to whether the relevant features of the costs The paying party The receiving party
claimed by the receiving party are met is resolved in
favour of …

John Bates
@MrJohnBates
Civil Litigation >
Syllabus Area [23] Costs
Summary and detailed assessment of costs - The mechanisms for determining the
amount of costs to be paid

John Bates
@MrJohnBates
The method of assessing costs
 After the court has decided:
o Whether to order one party to pay any other party’s costs; and, if so
o Whether any costs payable should be for:
 Any particular period (including any recoverable costs before litigation was
started);
 Any particular percentage or proportion;
 Any particular issues; and
o The basis of assessment - either on the standard basis or the indemnity basis);
The court must then decide which method is to be used to decide the actual amount of
recoverable costs to be paid by the paying party to the receiving party John Bates
@MrJohnBates
The methods for assessing costs
 There are two methods of assessing the amount of recoverable costs that the paying
party should pay to the receiving party:
o SUMMARY ASSESSMENT  a relatively straightforward procedure where the
judge who heard a trial or application assesses the costs at the end of the
trial/application
o DETAILED ASSESSMENT  a potentially complex procedure, similar to separate
litigation about costs, where the amount of costs payable is decided by a costs judge
after the parties have completed various further procedural steps after the end of the
substantive litigation

John Bates
@MrJohnBates
Summary assessment of costs
 Summary assessment is the normal (arguably default) method of assessment of costs in:
o Hearings of interim applications (e.g. an application for specific
disclosure/summary judgment/set aside default judgment/relief from sanctions etc..)
WHICH LAST FOR LESS THAN 1 DAY;
o Fast track trials;
o Multi-track trials where the trial LASTS FOR LESS THAN 1 DAY.

John Bates
@MrJohnBates
Summary assessment of costs
 Summary assessment may be much more straightforward where:
o the parties have agreed the amount of costs that should be payable by the paying
party to the receiving party; or
o The amount of any recoverable costs is already (largely) predetermined by rules
which provide for fixed costs fixed (under CPR 45 – NOT PART OF THE
SYLLABUS).

John Bates
@MrJohnBates
How does summary assessment of
costs work?

At the hearing The paying

the judge party then The judge
Each party
decides whether makes any summarily
prepares, files
a party should representations The receiving assesses costs
and exchanges The judge then
be entitled to on any party then payable, gives
their costs considers the
their costs in deductions that makes any reasons; and the
schedule at least costs schedules
principle (or should be made representations costs are
24 hours before
whether another from the payable in 14
the hearing
order would be receiving party’s days.
appropriate) schedule

John Bates
@MrJohnBates
How does summary assessment of
costs work?

At the hearing The paying

the judge party then The judge
Each party
decides whether makes any summarily
prepares, files
a party should representations The receiving assesses costs
and exchanges The judge then
be entitled to on any party then payable, gives
their costs considers the
their costs in deductions that makes any reasons; and the
schedule at least costs schedules
principle (or should be made representations costs are
24 hours before
whether another from the payable in 14
the hearing
order would be receiving party’s days.
appropriate) schedule

John Bates
@MrJohnBates
The contents of a statement of costs
for summary assessment
 The parties will have filed at court and exchanged between themselves their statements
of costs (‘costs schedules’) AT LEAST 24 HOURS BEFORE THE HEARING which
identifies
o the name and grade of legal representative who undertook the work;
o The hourly charging rate of the legal representative;
o A breakdown of the work undertaken for the application/trial to which the statement
relates, including:
 the number of routine communications (letters/telephone calls/emails/messages) –
calculated on a unit basis (6 minutes’ each is the norm)

John Bates
@MrJohnBates
The contents of a statement of costs
for summary assessment
 the number of longer communications (letters/telephone calls/emails/messages) –
calculated on a time-charge basis (6 minutes’ units is the norm)
 Time spent on attendances, including meetings with clients, witnesses, and others
 Time spent on documents, such as drafting application notices, witness statements
in support
 Conferences with counsel
 Time spent at the hearing, including travelling, waiting, and appearance in court
 Disbursements (such as application fees, other court fees, counsel’s fees)

John Bates
@MrJohnBates
How does summary assessment of
costs work?

At the hearing The paying

the judge party then The judge
Each party
decides whether makes any summarily
prepares, files
a party should representations The receiving assesses costs
and exchanges The judge then
be entitled to on any party then payable, gives
their costs considers the
their costs in deductions that makes any reasons; and the
schedule at least costs schedules
principle (or should be made representations costs are
24 hours before
whether another from the payable in 14
the hearing
order would be receiving party’s days.
appropriate) schedule

John Bates
@MrJohnBates
How does summary assessment of
costs work? 2
o At the end of the hearing of the trial or application, the successful party (the 'winner'
of the trial/application) will usually ask the judge to award them their costs;
o It is at this point that the parties may make representations about whether the normal
‘loser pays’ principle should apply or whether another order would be more
appropriate….

John Bates
@MrJohnBates
Common issues about departing from
the normal ‘loser pays’ principle
 Some arguments about whether the 'winner' should receive their costs in principle
include:
o Where there is a Part 36 offer that has been beaten/not beaten at trial, e.g.
 Where the successful party has beaten their own Part 36 offer made at some point
before trial’;
 Where the successful party has failed to beat a Part 36 offer made by an opponent
at some point before trial’
And the court has to summarily assess each of the parties’ costs for the periods for which
they are entitled to receive them (and perhaps applying any different standard/indemnity
basis, and any enhanced interest on costs, enhanced interest on damages and additional
damages, where appropriate) John Bates
@MrJohnBates
Common issues about departing from
the normal ‘loser pays’ principle
 Some arguments about whether the 'winner' should receive their costs in principle
include:
o Where the claimant has 'won' the case, but the defendant persuades the court that the
claimant unreasonably refused to enter into ADR prior to the commencement of
proceedings – in such a situation, the court may decide, as a matter of principle, that
the claimant should recover only a proportion of their costs (which will then still have
to be assessed); or not recover their costs for a period for which they unreasonably
refused to engage with ADR.

John Bates
@MrJohnBates
How does summary assessment of
costs work?

At the hearing The paying

the judge party then The judge
Each party
decides whether makes any summarily
prepares, files
a party should representations The receiving assesses costs
and exchanges The judge then
be entitled to on any party then payable, gives
their costs considers the
their costs in deductions that makes any reasons; and the
schedule at least costs schedules
principle (or should be made representations costs are
24 hours before
whether another from the payable in 14
the hearing
order would be receiving party’s days.
appropriate) schedule

John Bates
@MrJohnBates
How does summary assessment of
costs work?
o If the judge agrees that they should receive their costs (known as awarding a party
their 'costs in principle'), the judge will then proceed to summarily assess the
amount of those costs.
o The parties will make submissions about costs; and
o The costs will be assessed by the judge who heard the trial/application at the end of
the hearing;

John Bates
@MrJohnBates
Representations by the paying party
about costs to be summarily assessed
 The judge will consider the receiving party’s schedule of costs and will then invite the
paying party to make representations as to any deductions that should be made.
o Representations tend to focus on the work done not being reasonably incurred, or being
unreasonable in amount or (where on the standard basis) costs are disproportionate.

John Bates
@MrJohnBates
Representations by the paying party
about costs to be summarily assessed
 Typical representations by the paying party include that:
o The grade of fee earner used is too senior (i.e. the preparation for the application
could have been undertaken by a more junior fee earner, charging a lower hourly
rate);
o the hourly charging rate is too high in any event [There are guideline hourly rates for
different courts and different grades of fee-earners, across England and Wales);
o too many letters or telephone calls were made – i.e. a disproportionate or
unreasonable amount of work was undertaken by way of preparation;

John Bates
@MrJohnBates
Representations by the paying party
about costs to be summarily assessed
o too much time was spent attending the client (i.e. speaking to the client/writing to the
client) or others (too much time spent chasing counsel or witnesses etc..)
o too much time has been spent on documents – the solicitor is claiming to have spent 4
hours working on documents, yet the application form is very brief and there is one
very short witness statement);
o Disbursements e.g. counsel‘s fees) are too high.

John Bates
@MrJohnBates
How does summary assessment of
costs work?

At the hearing The paying

the judge party then The judge
Each party
decides whether makes any summarily
prepares, files
a party should representations The receiving assesses costs
and exchanges The judge then
be entitled to on any party then payable, gives
their costs considers the
their costs in deductions that makes any reasons; and the
schedule at least costs schedules
principle (or should be made representations costs are
24 hours before
whether another from the payable in 14
the hearing
order would be receiving party’s days.
appropriate) schedule

John Bates
@MrJohnBates
Representations by the receiving
party about costs to be summarily
assessed
 The judge will may then turn to the receiving party to ask them for any response to the
paying party’s representations.

John Bates
@MrJohnBates
How does summary assessment of
costs work?

At the hearing The paying

the judge party then The judge
Each party
decides whether makes any summarily
prepares, files
a party should representations The receiving assesses costs
and exchanges The judge then
be entitled to on any party then payable, gives
their costs considers the
their costs in deductions that makes any reasons; and the
schedule at least costs schedules
principle (or should be made representations costs are
24 hours before
whether another from the payable in 14
the hearing
order would be receiving party’s days.
appropriate) schedule

John Bates
@MrJohnBates
The decision on summary assessment
 The judge will then give a brief decision on the amount of costs that they are awarding
(setting out where they are making deductions to the receiving party’s schedule of costs
and why).

 ANY COSTS THAT ARE SUMMARILY ASSESSED SHOULD BE PAID BY THE

PAYING PARTY TO THE RECEIVING PARTY WITHIN 14 DAYS OF THE
DATE OF THE ORDER (UNLESS THE JUDGE SPECIFIES A DIFFERENT
DATE)

John Bates
@MrJohnBates
The detailed assessment method for
assessing costs
 The second method of assessing the amount of recoverable costs that the paying party
should pay to the receiving party is…
o DETAILED ASSESSMENT  a potentially complex procedure, similar to separate
litigation about costs, where the amount of costs payable is decided by a costs judge
after the parties have completed various further procedural steps after the end of the
substantive litigation

o THE SYLLABUS DOES NOT REQUIRE YOU TO KNOW THE INS AND
OUTS OF A DETAILED ASSESSMENT (AND THE PROCEDURE FOR
ARRANGING ONE) John Bates
@MrJohnBates
The detailed assessment method for
assessing costs
 A detailed assessment is a much more thorough assessment of the winner’s costs.

 At the end of a trial (or an application), the judge may determine who the 'winner' is for
the purposes of awarding them their costs in principle (i.e. the trial judge will decide
who is to be the receiving party and who is the paying party).

 However, the assessment of the amount of the costs will be adjourned for detailed
assessment at a later date, using a separate procedure, by a costs judge.

John Bates
@MrJohnBates
The detailed assessment method for
assessing costs
 Detailed assessment includes several components:
o The receiving party prepares a detailed ‘bill of costs’ which itemizes the work
done and time spent on the dispute, including any disbursements, to which they claim
to be entitled to payment from the receiving party – this is a very detailed, very
lengthy, narrative document;
o The receiving party serves the bill of costs on the paying party;
o The paying party files and serves their ‘points of dispute’ about the bill of costs,
identifying which aspects of the bill of costs are agreed or disputed, and giving
reasons for any disagreement
o The receiving party may choose to file and serve a ‘reply’ which responds to any
points of disagreement identified by the paying party in their points of dispute; John Bates
@MrJohnBates
The detailed assessment method for
assessing costs
o Parties make offers about the ultimate amount of costs to which the receiving
party will be entitled at the conclusion of the matter (similar to Part 36 offers)
o If there is no agreement about the amount of costs, the matter will be decided by
a costs judge
o The costs judge will usually have a bundle of papers agreed by the parties, which
will include the file of papers for the solicitor for the receiving party in order that
the judge conducting the assessment can look at it to see if (for example) the number
of letters written were reasonable and proportionate…
o The court will convene a hearing at which the parties’ legal representatives will
attend and make submissions; there may be complex submissions about the law
of costs
John Bates
@MrJohnBates
The detailed assessment method for
assessing costs
o The judge will determine, on a line-by-line basis, for each item of costs claimed
where the paying party disputes the receiving party’s entitlement, whether the
costs should be allowed as claimed; reduced or disallowed.

ONCE THE COURT HAS CONDUCTED THE DETAILED ASSESSMENT AND

HAS ARRIVED AT A FIGURE THAT THE PAYING PARTY MUST PAY, THE
PAYING PARTY MUST PAY THOSE COSTS WITHIN 14 DAYS FROM THE
DATE OF THE CERTIFICATE (ISSUED AT THE END OF THE DETAILED
ASSESSMENT) WHICH STATES THE AMOUNT OF THE COSTS.

John Bates
@MrJohnBates
The detailed assessment method for
assessing costs
 Detailed assessments usually take place at the very end of proceedings (i.e. after
judgment in a trial, or when the case has come to an end in some other way e.g. by being
stayed using a Tomlin order). BUT they can also be ordered immediately at any time
during a case.

 The detailed assessment process can take A LONG TIME TO COMPLETE –

USUALLY MONTHS (during which the receiving party is kept out of any costs to
which they are entitled, unless the court makes an order for the interim payment of
costs pending detailed assessment)

John Bates
@MrJohnBates
Interim payments of costs pending
detailed assessment of costs
 To address this delay, when the court orders that a party shall pay costs that are to be
subject to detailed assessment,
'…[the court] will order that party to pay a reasonable sum on account of costs, unless
there is good reason not to do so.’ [CPR 44.2(8)]

John Bates
@MrJohnBates
The detailed assessment method for
assessing costs
 The detailed assessment process is NOT STAYED PENDING AN APPEAL UNLESS
THE COURT SO ORDERS.

John Bates
@MrJohnBates
Civil Litigation >
Syllabus Area [23] Costs
The special powers of the court to deal with misconduct and costs

John Bates
@MrJohnBates
The court’s jurisdiction about costs
and misconduct
 The court has powers in respect of costs where there has been some misconduct BY A
PARTY OR THEIR LEGAL REPRESENTATIVE [CPR 44.11] including:
o Misconduct in connection with a detailed or summary assessment, or failing to
comply with a rule or Practice Direction; and
o Unreasonable or improper conduct during (or before the hearing)

John Bates
@MrJohnBates
The court’s jurisdiction about costs
and misconduct
 Where the court takes the view that there has been some misconduct/unreasonable
conduct/improper behaviour, the court may:
o DISALLOW SOME OR ALL OF THE COSTS OF THE RECEIVING PARTY;
o ORDER THE MISBEHAVING PARTY (OR THEIR LEGAL
REPRESENTATIVE) TO PAY THE COSTS INCURRED BY ANOTHER
PARTY AS A RESULT OF THE MISBEHAVIOUR

 There is an obligation on A LEGAL REPRESENTATIVE to notify their client of any

such adverse orders where the client is not present at the making of the order [CPR
44.11(3)]
John Bates
@MrJohnBates
Civil Litigation >
Syllabus Area [23] Costs
What happens about costs where a dispute is resolved using ADR?

John Bates
@MrJohnBates
Costs and ADR
 ADR can be relevant to costs in a number of contexts, including:

o Where parties to a dispute settle their dispute by way of ADR; and

o
o Where parties to a dispute DO NOT settle their dispute by way of ADR, and the court
needs to decide the outcome of the dispute

John Bates
@MrJohnBates
Costs where the parties settle using
ADR
 Where parties to a dispute settle their dispute by way of ADR:

o The expectation is that they will each pay their own legal costs ('each party bears its
own costs’);

o This is because a negotiated or mediated settlement is not really supposed to produce

a 'loser’.

o It is perfectly possible for the parties to agree that one of them will pay the other
party’s costs (usually agreeing to contribute a proportion/percentage towards them) –
that agreement becomes just another clause in the settlement agreement.

John Bates
@MrJohnBates
Costs where the parties settle using
ADR
 Where parties to a dispute settle their dispute by way of ADR:

o where the parties use an adjudicative form of ADR their agreement gives power to the
neutral third party to award costs (e.g. arbitration).

John Bates
@MrJohnBates
Costs and ADR where the parties do
not settle
 Where parties to a dispute do not settle their dispute by way of ADR, the court might
take into account how the parties have engaged (or not) with ADR, for example:

o Costs consequences for an unreasonable failure/refusal to engage with ADR (see

Halsey and PGF II));

o Part 36 offers and the payment of costs where the offer is accepted within the
relevant period.

See Jackson, at paragraph 10.03

John Bates
@MrJohnBates
Costs and ADR where the parties do
not settle
o Where parties settle a case and the claimant then discontinues the case, the rules state
that the claimant is then liable to pay the other party‘s costs. The claimant could
discontinue on the basis of a consent order which stipulates that there be no order as
to costs, but it is better to simply record the settlement in some other sort of consent
order rather than applying to discontinue.

John Bates
@MrJohnBates
Civil Litigation >
Syllabus Area [23] Costs
4. The bases and assessment of costs

John Bates
@MrJohnBates
 Look at the Lecture/Workshop plan to see when/where we cover topics

Syllabus


04. ADR – 05. ADR – Non-
3. Pre-action 6. Commencing
1. General Matters 2. Limitation Adjudicative Adjudicative
Conduct Proceedings
Options Options


12. Default
11. Further 9. Multiple causes 8. Statements of
Judgment and 10. Amendment 7. Parties
information of action Case
Summary Judgment


16. Interim 18. Settlement
13. Case 15. Interim 17. Interim
14. Disclosure Payments and (including Offers to
Management Applications Injunctions
Security for Costs Settle)

22. Judgments,
21. Civil Trial and
24. Appeals 23. Costs Orders and 20. Expert evidence 19. Evidence of fact
Evidence
Enforcement
John Bates
@MrJohnBates