The 53rd update to the Civil Procedure Rules brings about a number of changes relating to costs issues. The most significant of these is the paper assessment pilot scheme, which is being tested from 1 October 2010 to 30 September 2011 in three county courts - Leeds, Scarborough and York.
The scheme promises much, particularly in the way of costs savings. With assessment costs in simple matters routinely being claimed as high as £10,000, and with detailed assessment hearings providing an ever-expanding strain on court time, it is no surprise that a more cost-effective and streamlined approach would be sought, but how will the scheme work in practice?
The new proposals provide that paper assessments will be undertaken in all matters where base costs total £25,000 or less and detailed assessment is commenced on or after 1 October 2010. Base costs are generally taken to be profit costs and disbursements, but not VAT or additional liabilities, so in reality, bills where the overall total is far in excess of £25,000 could be subject to paper assessments.
- When a receiving party files a request for a detailed assessment hearing on any matter that falls within the pilot scheme, they will be required to file an extra copy of the bill and a statement of the costs they are seeking for the detailed assessment. The court will then automatically undertake a provisional paper assessment.
- If the court considers the matter and determines that it is not suitable for a paper assessment, they will direct that the matter be listed for a hearing and the assessment will proceed as normal.
- Once the assessment has been undertaken, the court will send out the assessed bill and a notice to both parties. Both parties then have the option to request a hearing on any aspect of the assessment within 21 days of receipt of the notice.
Unless the court orders otherwise, the costs of any oral hearing will be awarded to the paying party if:
- The amount allowed at the oral hearing is 80% or less than the sum which had been provisionally assessed; or
- The oral hearing was requested by the receiving party and the amount allowed is not increased to 120% or more than the sum which had been provisionally assessed.
Likewise, costs will be awarded to a receiving party if:
- The amount allowed is increased to 120% or more than the sum which had been provisionally assessed; or
- The oral hearing was requested by a paying party and the amount allowed is not reduced to 80% or less than the amount by which the bill was provisionally assessed.
However, in instances where both parties request that there be an oral hearing, there will be no order for costs of the hearing, or any associated costs, if the amount is greater than 80% but less than 120% of the amount allowed on the provisional assessment.
For example, take a situation where a bill is submitted for a provisional assessment totalling £40,000, and is assessed at £30,000, the paying party objects and the parties attend an oral hearing. If the bill is increased to £36,000 or more, then the receiving party will be awarded the costs of assessment. However, if the bill is reduced to £24,000 or less, then the paying party will be awarded their costs.
If both parties requested a hearing, then the amount awarded would have to be in excess of £36,000 for the receiving party to obtain costs, and lower than £24,000 for the paying party to obtain costs. If, at the oral hearing, they were assessed anywhere between £24,000 and £36,000, then there will be no order for costs.
It is intended that a provisional assessment will be undertaken within six weeks and will take around 45 minutes. This would be much quicker than the current system, where it can take months to get a listing, which is normally at least three hours in length. However, there are concerns that the proposed system would put less incentive on the parties to reach a compromise, and may lead to an increase in the number of assessments being put before the court.
Good news for the courts, however, is that, with the significant result required in the oral hearing for a party to achieve their costs, it is likely to preclude most parties from arguing the outcome of the provisional assessment.
It will remain to be seen, however, whether the system will work as smoothly in practice as it would appear to on paper.