The High Court has recently handed down a significant decision in respect of CPR r47.20 which has resolved conflicting decisions on how the courts should approach the costs of a detailed assessment. In TRX v Southampton Football Club  EWHC 3392 (KB), Stacey J was concerned with three principal issues, two of which raised questions of contractual interpretation. The third issue, and the issue with the widest ramifications, concerned the costs of a detailed assessment.
The starting point when considering the costs of a detailed assessment is CPR r47.20 which provides (insofar as is relevant for present purposes) that:
(1) The receiving party is entitled to the costs of the detailed assessment proceedings except where –
(a) the provisions of any Act, any of these Rules or any relevant practice direction provide otherwise; or
(b) the court makes some other order in relation to all or part of the costs of the detailed assessment proceedings.
(3) In deciding whether to make some other order, the court must have regard to all the circumstances, including –
(a) the conduct of all the parties;
(b) the amount, if any, by which the bill of costs has been reduced; and
(c) whether it was reasonable for a party to claim the costs of a particular item or to dispute that item.
(4) The provisions of Part 36 apply to the costs of detailed assessment proceedings with the following modifications –
(a) ‘claimant’ refers to ‘receiving party’ and ‘defendant’ refers to ‘paying party’;
(b) ‘trial’ refers to ‘detailed assessment hearing’;
(c) a detailed assessment hearing is “in progress” from the time when it starts until the bill of costs has been assessed or agreed;
(d) for rule 36.14(7) substitute “If such sum is not paid within 14 days of acceptance of the offer, or such other period as has been agreed, the receiving party may apply for a final costs certificate for the unpaid sum.”;
(e) a reference to ‘judgment being entered’ is to the completion of the detailed assessment, and references to a ‘judgment’ being advantageous or otherwise are to the outcome of the detailed assessment.”
The general position is that the receiving party should receive its costs of the detailed assessment: CPR r47.20(1). Costs Judge Brown, at first instance, departed from this position. In doing so, he principally had regard to the following factors:
- There had been a dramatic and exceptional reduction in the bill assessed, namely a circa 65% reduction;
- The conduct of the receiving party, which included mis-certification (although this was not described as misconduct); and
- The Claimant’s solicitors had unreasonably claimed for costs in a number of categories.
One of the issues on appeal was therefore whether it was open to Costs Judge Brown to depart from the presumption under CPR r47.20(1).
The Claimant’s position (relying on Fox v Foundation Piling Ltd  EWCA Civ 790) was that a paying party’s failure to make an effective Part 36 offer should be afforded preeminent if not exclusive weight and should ultimately result in a receiving party being awarded all their costs of the assessment. This seemed to be the view of Deputy Costs Judge Campbell in Mullaraj v Secretary of State for the Home Department  EWHC B5 (Costs), where he emphasised that a paying party who failed to protect their position through a Part 36 offer must be liable for the receiving party’s reasonable costs, except where there is evidence of “fraud or other skulduggery” by a receiving party.
Conversely, Costs Judge Brown in Milbrooke Construction Limited v Jones  EWHC B20 (Costs) concluded that, whilst a Part 36 offer was important and (if successful) likely to be determinative in respect of the costs of a detailed assessment, it was not the sole factor. The mere absence of a Part 36 offer did not render the additional factors at r.47.20 irrelevant.
In view of the conflict between Mullaraj and Milbrooke, Stacey J provided some clear guidance on when it may be appropriate to make an order in different terms to that envisaged by CPR r47.20(1). In summary, she concluded that:
- The lodestar is the wording of CPR r47.20, with the starting point being that a receiving party is prima facie entitled to the costs of detailed assessment;
- Whilst CPR r47.20(3) provides specific factors that the court must take into account, this list is not exhaustive and the court is required to have regard to “all the circumstances” of the case;
- A Part 36 offer is a relevant factor to be taken into account when considering all the circumstances of the case. However, it was not necessarily the most important or only relevant factor;
- CPR r47.20 is a clear and comprehensive code and it would not be right to formulate a gloss to be applied to this code;
- It would be wrong to lay down guidance which could fetter the discretion of costs judges beyond the provisions of CPR r47.20. Further, each case was fact-sensitive and it would not be sensible to “try to lay down any hard and fast rules”; and
- Where there has been no successful Part 36 offer made by the paying party, it may be unusual to make no order as to costs. However, such an order may be justified after the court has considered “all the circumstances” of the case.
The court’s decision, in refusing to add a gloss on CPR r47.20 or fetter the discretion of costs judges, is welcome. It recognises that costs judges are best placed, in the individual case, to identify relevant factors and reach a decision accordingly.
Further, the decision provides clarity for practitioners on how Part 36 offers will be treated in the context of detailed assessment proceedings. It goes without saying that negotiations, offers and settlement should be encouraged. However, it is clear that a court will not treat the absence of a Part 36 offer as a “trump card”. Part 36 offers are relevant and may sometimes be determinative. But that is not the end of the story. The facts and circumstances of each individual case will be instructive as to whether the presumption under CPR r47.20(1) should be rebutted.
So, is it really necessary to look beyond CPR r47.20 when determining the approach to costs of a detailed assessment? Well, not too far – CPR r47.20 is a comprehensive code and tells us what we need to know.
Read the case report here.