Fixed Recoverable Costs - The Determination of Costs in Dispute
Christopher McClure analyses the decision of Master Leonard in Nema v Kirkland  EWHC B15 (Costs) concerning the determination of costs in dispute which are recoverable under CPR r. 45, Section IIIA.
It is not unusual to encounter claimants involved in protracted arguments with their opposite number over a particular disbursement incurred, which they are now looking to recover, in a claim governed by the fixed recoverable costs regime under CPR r. 45, Section IIIA. More often than not, the argument does not concern liability for the disbursement per se but rather the amount of the disbursement in question.
The relevant law
In a case to which Section IIIA applies, disbursements may only be recovered in accordance with CPR r. 45.29I; parties are frequently concerned with r. 45.29I(2)(h), which reads:
(2) In a claim started under the RTA Protocol, the EL/PL Protocol or the Pre-Action Protocol for Resolution of Package Travel Claims, the disbursements referred to in paragraph (1) are –
(h) any other disbursement reasonably incurred due to a particular feature of the dispute.
CPR r. 45 is silent on the process which the parties must follow in the event of a dispute regarding the amount of and/or liability for costs in such a claim. No doubt for that reason it was until very recently a widely held view that the correct way to the costs determined was by way of the assessment process provided for pursuant to CPR r. 47 and the Practice Direction thereto.
The sense of this argument could be justified by reference CPR 47 PD 5.7, which envisages the assessment of bills of costs which contain disbursements only:
If the only dispute between the parties concerns disbursements, the bill of costs shall be limited to items (1) and (2) above [i.e. title page and background information], a list of the disbursements in issue and brief written submissions in respect of those disbursements.
That this approach is incorrect has been put beyond doubt by Master Leonard in Nema v Kirkland  EWHC B15 (Costs) – at least in cases where the matter has settled by way of CPR r. 36.
Nema was a very typical RTA claim which, having begun life in the RTA portal, properly exited and Part 7 proceedings were issued shortly thereafter. The defendant made a Part 36 Offer is the sum of £5,500 which the claimant accepted within the relevant period.
A schedule of costs was presented to the defendant who disputed costs relating to the Counsel and an engineer. In the absence of any agreement on these points, the claimant commenced detailed assessment proceedings by way of Form N252 Notice of Commencement and service of a bill of costs (which, in addition to the costs originally presented to the defendant, contained an addition sum for preparing the bill and ancillary documentation).
The defendant made an application to strike out the claimant’s bill of costs and the question for Master Leonard was whether the claimant was entitled to commence assessment proceedings in a case subject to the fixed recoverable costs regime.
It is important to remember that this was a case which was settled by way of Part 36 acceptance; CPR r. 36.20 applies to ex-portal costs and r. 36.20(11) provides that –
(11) Where the parties do not agree the liability for costs, the court must make an order as to costs.
In reference to his duty to give effect to the overriding objective of dealing with cases justly and at a proportionate cost, Master Leonard stated that –
CPR 36.13 and CPR 36.20 between them provide (absent agreement) for two alternative, mutually exclusive methods of determining the amount of costs and disbursements recoverable by a claimant following acceptance of a Part 36 offer. One is detailed assessment on the standard basis under CPR 36.13(3), a potentially expensive procedure quite unsuitable where CPR 45 Section IIIA applies. The alternative, suitable and specifically designed for such cases, is recovery of fixed costs and permitted disbursements under CPR 36.20.
In other words, Part 36 acceptance within a matter governed by CPR r. 45, Section IIIA is subject to a determination procedure which is conceptually different from the standard CPR r. 47 assessment process. CPR r.36.20(11) is a self-contained procedure which, in the absence of agreement between the parties, requires the court to make an order ‘which determines the amount of costs due, whether to a claimant or a defendant.’
Master Leonard allowed the defendant’s application and struck out the claimant’s bill accordingly.
Another recent case (Ivanov v Lubbe, CC (Central London; 17 January 2020)) offers practitioners obiter pragmatic guidance on the contents of an application made under CPR r. 36.20(11) in the following terms:
Applications should comprise two paragraphs, the first seeking a costs order and the second asking for costs to be assessed in accordance with the sum sought. Ideally, the application should exhibit a Form N260 (statement of costs) or at least the disbursements page.
In view of Master Leonard’s comments regarding the need for proportionality of costs, the author would add that any Application made should –
- State that the parties are not required to attend
- Provide an ELH of 30 minutes
- Enclose brief, written submissions to justify the disbursement in question
Returning to Nema for a moment, one further issue in dispute between the parties concerned the costs of assessment. Whereas the claimant contended that the normal provisions under CPR r. 47 should apply (i.e. costs capped at £1,500 plus VAT and the relevant court fee), the defendant argued that an Application Notice made under r. 36.20(11) should be treated as an interim application pursuant to r. 45.29H. In RTA and EL/PL cases, this will invariably mean profit costs of £250 plus VAT (and any application London uplift) and the relevant fee.
Whilst the decision provides some welcome clarification on an important point the author considers that the Master’s interpretation of CPR r. 36.20(11) is incorrect. Rule 36.20(11) refers only to ‘liability’ being in dispute between the parties and there is, of course, a fundamental distinction to be made between liability for costs on the one hand, and quantum of costs on the other. Indeed, CPR r. 36.13 makes this clear by using the terms ‘liability’ and ‘amount’ in their correct contexts (e.g. r. 36.13(3) and (5)).
It is, of course, accepted that neither CPR rr. 36.13 nor 44.9 provide an authority for assessment in fixed costs matters settled by way of Part 36 acceptance: r. 36.13(1) refers. But that is not a particularly unusual situation: for example, neither do non-fixed costs matters which settle by way of pre-action Part 36 acceptance benefit from a deemed authority for assessment (CPR r. 44.9(2) refers). But in that case, where the parties have agreed liability for costs but not the amount of those costs, then a receiving party would simply make a Part 8 claim for an authority for assessment under r. 46.14 to obtain an authority.
It is hard to see why, on a natural reading of the rules, parties to a claim governed by the fixed costs regime should not follow the same process where liability is agreed but amount is not.
Nor would arguments regarding (dis)proportionality appear to be watertight support for the Master’s interpretation of CPR r. 36.20(11). As alluded to in this article, the full assessment process is the avenue which parties in non-fixed costs matters are required take even where the only outstanding issue between the parties is the amount payable in respect of a particular disbursement – the very avenue Master Leonard considered disproportionate for resolving arguments over the amount payable in respect of disbursements in fixed costs cases.
Of course, where liability cannot be agreed, then CPR r. 36.20(11) cannot be overlooked. The wording is perfectly clear. But the author’s point is simply that where liability is agreed and the parties are simply at odds with the amount of costs to be paid, it is difficult to reconcile the Master’s decision with CPR r. 47 and a natural reading of r. 36.20(11).
As a final point, what is the situation where a fixed costs matter –
- Settles pre-issue by way of Part 36; or
- Settles post-issue by way of consent order
In this writer’s opinion, in the first situation Nema requires that CPR r. 36.20(11) must apply. Of course, an Application cannot be made to the court given that there are no existing proceedings. It would therefore appear that the receiving party would be required to issue Part 8 proceedings for an Order for costs, a determination as to the same and an Order that costs of the Part 8 claim be costs in the determination.
The second situation should simply involve a Part 23 Application to the court within the existing proceedings for a determination as per Ivanov.
LLB (Hons), PG Dip (BVC)
Friday 14th February 2020