One of the very many uncertainties arising from the recent rule changes concerns the maximum level of costs a judge may allow in respect of provisional assessment proceedings.
The relevant rule, CPR 47.15(5), states:
“The court will not award more than £1,500 to any party in respect of the costs of the provisional assessment.”
So, what does that cap of £1,500 include? Unhelpfully, the practice direction is silent in this respect.
One commentator, Simon Gibbs, has suggested that it includes not only base profit costs, success fee (where applicable), VAT, disbursements (including court fees) but also the costs of drafting the bill of costs (based on an examination of the CoA’s decision in Crosbie -v- Munroe). Others have suggested that the cap does not include court fees, including various judges at the Association of Costs Lawyers’ recent conference and Regional Costs / District Judge Marshall Phillips (Cardiff).
A further point that I have not heard/read comment on, but have been questioned on, is the position where the substantive claim is settled without litigation such that costs-only proceedings are necessary in the absence of agreement. Does the cap on costs of the provisional assessment embrace the costs of issuing costs-only proceedings, which facilitate detailed/provisional assessment proceedings, or are such costs to be dealt with separately?
The inclusion, or not, of court fees within the cap is understandably a significant concern for receiving parties. The current fees for requesting a detailed assessment hearing could eat up a sizeable part of the cap – for bills between £15,000 and £50,000 and bills between £50,000 and £75,000 (the upper limit of the provisional assessment regime), the fees are £655 and £980 respectively – leaving potentially little left to cover remaining costs.
Let’s start with the rules themselves. CPR 44.1(1) provides that the word ‘costs’ includes:
“fees, charges, disbursements, expenses, remuneration, reimbursement allowed to a litigant in person under rule 46.5 and any fee or reward charged by a lay representative for acting on behalf of a party in proceedings allocated to the small claims track”
To my mind, ‘costs’ in CPR 47.15(5) must therefore include court fees, which are without doubt true disbursements and are treated as such for the purposes of VAT, such that I respectfully disagree with the views of the learned judges aforementioned. Allowance of court fees in addition to the cap simply cannot lie comfortably with the definition of ‘costs’ at CPR 44.1(1).
With regard to the costs of drafting the bill of costs, I can see the logic in the ‘Crosbie argument’. However, I do not agree that the cap applies to such costs and support for a separate allowance can be found in PD 5.19 to CPR 47.6, which permits the costs of drafting a bill of costs to be included within the bill itself rather than being at large pending agreement/assessment.
What then of the costs of issuing costs-only proceedings? The decision in Crosbie is instructive in this respect – per Brooke LJ at paragraph 34:
“… the assessment proceedings cover the whole period of negotiations about the amount of costs payable through the Part 8 proceedings to the ultimate disposal of those proceedings, whether by agreement or court order.”
On that interpretation, it would appear clear that the costs of first issuing costs-only proceedings, to facilitate detailed/provisional assessment proceedings, are costs of the assessment proceedings and thus included within the cap.
In my view, the cap on provisional assessment costs as it stands (and remember that it is a cap and not a fixed allowance) includes base profit costs, success fee (where applicable), disbursements including court fees and VAT thereon but does not include costs incurred in drafting a bill of costs. I very much suspect that CPR 47.15(5) will soon be amended, or clarified by way of a revised practice direction, so as to exclude court fees from the cap. Without such amendment/clarification, the cap could easily bring about harsh results for those receiving parties whose bills total in excess of £50,000.
“(5) In proceedings which do not go beyond provisional assessment, the maximum amount the court will award to any party as costs of the assessment (other than the costs of drafting the bill of costs) is £1,500 together with any VAT thereon and any court fees paid by that party.
So, the cap just got bigger (or the head got smaller – depending on your outlook) and such clarity is most welcome. But, still no definitive word on whether or not the cap encompasses the costs of costs-only proceedings issued in order to get to such an provisional assessment. I should think that it does, however.