Factual and Procedural Background
The claim arose from a personal injury sustained by the Plaintiff during employment with the Defendant. Prior to proceedings, the Defendant offered £5,000 in settlement, which was not accepted. Proceedings were issued, with the claim quantified at approximately £150,000. The Defendant subsequently made Part 36 payments of £2,000 and then £4,000, the latter of which the Plaintiff accepted. This acceptance entitled the Plaintiff to costs up to the date of acceptance on a standard basis if not agreed.
The Plaintiff's solicitors commenced detailed assessment proceedings claiming £27,029.63 in costs, including a 75% success fee. The Defendant disputed the success fee and contended that the solicitors' costs were disproportionate to the settlement figure and that the conduct of the Plaintiff's solicitor led to disproportionate costs, relying on the guidance from Lownds v Home Office.
A preliminary issue was raised before the District Judge concerning whether he had jurisdiction to order that the Plaintiff should only receive 25% of the assessed costs at the outset of the detailed assessment. The District Judge ruled he did not have such jurisdiction and proceeded with a detailed assessment, reducing the bill to £15,182.71 inclusive of VAT due to disproportionate costs. The Defendant was granted permission to appeal the preliminary issue, but the appeal was dismissed by His Honour Judge Appleton. Permission to appeal was then granted to the present court due to the importance of the point.
Legal Issues Presented
- Whether a costs judge has jurisdiction at the outset of a detailed assessment of costs to order that a paying party must pay only a proportion of the ultimately assessed costs.
- Whether rules 44.4, 44.5, and/or 44.14 of the CPR provide such jurisdiction in the context of costs following acceptance of a Part 36 payment.
- The proper interpretation and application of CPR rules concerning costs orders following Part 36 payments and detailed assessments.
Arguments of the Parties
Defendant's Arguments
- A costs judge has jurisdiction under rule 44.3(6)(a) to order that a paying party pay only a proportion of the receiving party's costs.
- Rules 44.4, 44.5, and 44.14 confer jurisdiction for a costs judge to reduce costs globally and not only by reference to individual items.
- The costs judge should be able to reduce the assessed costs at the outset if a whole stage of proceedings was unreasonable or disproportionate.
- Reliance on authorities such as Aaron v Shelton, Shirley v Caswell, and Booth v Britannia Hotels Ltd to support the proposition that costs can be disallowed on a global basis for unreasonable conduct.
- Rule 44.14 provides powers to disallow costs for unreasonable or improper conduct.
Plaintiff's Arguments
The opinion does not contain a detailed account of the Plaintiff's legal arguments.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Lownds v Home Office [2002] 1 WLR 2450 |
Guidance on applying a two-stage approach to costs assessment: global and item-by-item proportionality and necessity. |
Applied to assess proportionality and necessity in detailed assessment of costs. |
| Aaron v Shelton [2004] EWHC 1162 (QB) |
Support for costs judge's power under rule 44.5 to reflect unreasonable conduct in starting unnecessary proceedings. |
Recognized but distinguished as not addressing jurisdiction to reduce assessed costs proportionally at outset. |
| Shirley v Caswell [2000] Lloyds Rep PN 955 (CA) |
Costs judge's ability to disallow costs of issues not pursued at trial. |
Assumed but did not address upfront percentage reduction jurisdiction. |
| Booth v Britannia Hotels Ltd [2002] EWCA Civ 579 |
Costs judge may award a percentage of the sum claimed after detailed assessment, not before. |
Court disapproved of upfront percentage reduction; supported assessment after detailed review. |
| Burrows v Vauxhall Motors Ltd [1998] PIQR P48 (CA) |
Predecessor to CPR 44.14; powers to disallow costs for misconduct or unreasonable conduct. |
Considered limited value due to pre-CPR context; obiter dicta not decisive on jurisdiction question. |
| Walker Residential Limited v Davis [2005] EWHC 3483 (Ch) |
Rule 3.1(7) power to vary or revoke orders applies only to orders actually made by the court, not deemed orders. |
Applied to reject jurisdiction to vary deemed costs orders following Part 36 acceptance. |
| Loucas Haji-Ioannou v Ioannis Frangos [2006] EWCA Civ 1663 |
Interpretation of rule 44.14 concerning misconduct and court's powers in costs assessment. |
Preferred narrow meaning of "unreasonable" in rule 44.14; distinguished from broader meaning in rule 44.4(1). |
Court's Reasoning and Analysis
The court examined the jurisdiction of a costs judge at the outset of a detailed assessment to order that only a proportion of assessed costs be paid. It held that the acceptance of a Part 36 payment under CPR rule 36.13(1) and (4), read with rule 44.12(1)(b), results in a deemed costs order entitling the Plaintiff to 100% of assessed costs on the standard basis. This deemed order cannot be varied by the costs judge under rule 3.1(7), which only permits variation of orders actually made by the court.
The court distinguished between (a) reducing the bill by a percentage during the detailed assessment (which reflects a reduction in the amount payable of 100% of assessed costs) and (b) deciding before assessment that the Plaintiff will only receive a percentage of the assessed costs (less than 100%), the latter being impermissible.
Rule 44.3 confers jurisdiction on a judge to make costs orders including partial payment, but this applies at the stage of making the costs order, not during detailed assessment. The costs judge, conducting detailed assessment, is not making the costs order but giving effect to an existing one.
The court found that the authorities cited by the Defendant do not support jurisdiction for the costs judge to make an upfront percentage reduction of assessed costs. The guidance in Lownds remains authoritative and allows for disallowance of costs on grounds of proportionality and necessity during assessment, but not for an upfront partial payment order.
The court also noted that the Defendant could have raised arguments during the detailed assessment to disallow costs for unreasonably incurred stages or issues, but did not do so.
Regarding rule 44.14, the court discussed its powers relating to misconduct and unreasonable conduct, preferring a narrow interpretation of "unreasonable" in this context, and concluded the appeal did not turn on this issue.
Holding and Implications
DISMISSED
The court held that a costs judge does not have jurisdiction at the outset of a detailed assessment to order that a paying party pay only a proportion of the ultimately assessed costs following acceptance of a Part 36 payment. The costs order deemed to be made upon acceptance of such a payment entitles the receiving party to 100% of assessed costs, subject only to reductions made during the detailed assessment process itself.
The direct effect is that costs judges must conduct detailed assessments in the usual manner without making preliminary orders reducing the proportion of costs recoverable. No new precedent was established beyond clarifying the limits of costs judges' jurisdiction under the CPR in this context.