England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHICHESTER COUNTY COURT
(HIS HONOUR JUDGE COLTART)

		Royal Courts of Justice Strand, London, WC2A 2LL
		6 November 2013

1. LADY JUSTICE SHARP: These are second appeals brought against the order of His Honour Judge Coltart on 25 February 2013 in which he dismissed each of the defendants' appeals against the orders of Deputy District Judge Starke of 4 July 2012, by which he awarded the claimants the costs of their Part 8 claims and summarily assessed those costs.
2. The cases were dealt with together before the deputy district judge and the judge because the issue that arises in each is, for all practical purposes, identical: it is whether the court can award a claimant its costs of what are known as costs-only proceedings brought under CPR Part 8 in accordance with the procedure set out in CPR rule 44.12A where a default costs certificate has been obtained, as the claimants contend; or is a claimant in those circumstances limited to the amount of the costs specified in the default costs certificate, as the respondents contend? Is the default costs certificate the end of the matter, in other words.
3. The Civil Procedure Rules which apply to the claims have since been amended on 1 April 2013, but it is common ground that the changes to the rules made after that date are immaterial to the issue the court has to decide and the result will be the same whichever regime is in place.

The claims, the hearings below and the judge's reasons

4. Both claims in this case were low-value personal injury claims for damages following a road traffic accident and settled for modest sums without proceedings being issued. The parties agreed in writing that the claimants were entitled to the reasonable costs of their claims. However, they could not agree on the amount to be paid for the claimants' after the event (ATE) insurance policy premium. The defendants, whose actions were being dealt with by their insurers, refused to pay the amount asked for. The claimants put the defendants on notice that if the amount was not agreed by a certain date, then Part 8 costs-only proceedings pursuant to CPR rule 44.12A would be issued, and, in the absence of any response from the defendants after several months, then issued them. Under the details of claim, the claimants asked that the Part 8 costs should be considered at the hearing.
5. The defendants failed to respond to the issue of those proceedings either, and the court duly made orders for the detailed assessment of the claimed costs. The claimants' solicitors then served notice of commencement of detailed assessment proceedings, accompanied by a bill of costs limited to the premium sum in dispute which was £371 in each case. Each notice of commencement said:

"If I have not received your points of dispute by the above date, I will ask the court to issue a default costs certificate for the full amount of my bill (see above) [that is the bill of costs of £371] plus fixed costs and court fee in the total amount of £511."

6. The sum of £511 was made up of the £371 claimed in the bill of costs, plus the fixed fees for issuing a default costs certificate and for the solicitors' costs payable on its issue, that is £60 and £80 respectively.
7. The defendants failed to respond to the notices. The claimants then applied for, and obtained, a default costs certificate. Each certificate said:

"As you have not raised any points of dispute on the claimant's bill of costs, the costs of the claim have been allowed and the total sum of £511 is now payable."

It was at this point the defendants paid the sum of £511 in full.

8. On the claimants' case, this left outstanding the costs of the Part 8 proceedings themselves and they issued application notices claiming them. The application notices asked for "an order that the Part 8 costs be summarily assessed and paid by the Defendants."

It continued:

"After the issue of Part 8 proceedings a default costs certificate was received for the ATE premium, leaving solely the issue of Part 8 costs outstanding. Although a schedule of Part 8 costs was sent to the Defendant's solicitors on 11.05.12 a settlement could not be agreed."

9. The application was opposed by the defendants on the basis that no further costs were due once the payment of £511 payable under the default costs certificate had been made.
10. The deputy district judge decided the claimants were entitled to their costs of bringing the Part 8 costs-only proceedings, which he summarily assessed in the sum of £1,614.60 for Gabriele Bartkauskaite and £1,400.76 for Karim Tasleem. She held that CPR rule 47.11(3) dealt with the fixed costs recoverable by a party for the commencement of detailed assessment proceedings, but did not cover costs of issuing the Part 8 claim in the first place.
11. The judge agreed with the deputy district judge. He said in summary that the introduction of rule 44.12A was not intended to restrict the costs allowable in the way the defendants had contended for, and that fairness dictated that the claimants should not be out of pocket for having to use the procedure that is provided for under the rules.

The contentions on these appeals

12. Mr Marven, for the appellants, submits the costs of Part 8 costs-only proceedings fall within the rules governing the costs of commencing detailed assessment proceedings because they are costs incurred "in taking a step" to commence detailed assessment proceedings, "commencement" being a term which, he says, should be broadly construed. He said this construction is in keeping with the purpose of the relevant rules which were intended to be and are a complete and self-contained code for what is payable by a paying party upon the issue of a default costs certificate: that is a sum for the bill of costs, plus court fees and fixed solicitors' charges. This enables a paying party to know what its liability will be if, whether deliberately or through inadvertence, it does not dispute the amount claimed in the bill and the matter goes by default. A payment of the amount due under the default costs certificate is intended to conclude matters between the paying and the receiving party, he says, and it would be surprising if use of this simple procedure, which requires only the minimal extra cost of issuing Part 8 proceedings (an additional court fee of £45) gave rise to the additional complexity of an additional layer or category of costs, which, absent agreement, requires assessment by the court. It is not a system, he says, which engages the merits in any way. It is designed as a procedural shortcut (see the procedure set out in CPR rule 44.12A(4)).
13. We have not called upon Mr Mallalieu to respond on behalf of the respondents to this appeal, but in his written arguments it is clear that he does not quarrel with the proposition that when there is an underlying claim followed by a notice of commencement of detailed assessment proceedings and a default costs certificate, the recoverable costs are limited to those in the default costs certificate. In such a case, the costs specified in it are apt to cover the additional costs the receiving parties incurred by using the procedure, subject only to the cap of the fixed costs regime. But, he says, there is a material difference where a claimant has issued a Part 8 costs-only claim. In such circumstances, the costs of bringing the Part 8 proceedings cannot obviously be included in the bill of costs which are the subject of the Part 8 proceedings, nor in the additional costs relating solely to the default costs certificate regime. There is, in other words, an extra layer of costs simply not catered for by the rules.

Discussion

14. The scheme of the relevant Civil Procedure Rules and of the Costs Practice Direction, whether pre- or post-amendment on 1 April 2013, is easy to comprehend. For the sake of completeness, I should mention the changes that have been made. After 1 April 2013, the rules relating to costs-only proceedings differ from the earlier rules in only two respects: first, it is mandatory to use the Part 8 mechanism in respect of claims to which it applies; and secondly, in the event the claim is opposed, the court is not required to dismiss the proceedings, but can instead give directions in accordance with CPR rule 46 PD para 9(10). The provisions relating to detailed assessment, notice of commencement and default costs certificates remain the same, albeit some of the rules are differently numbered.
15. In general terms, detailed assessment proceedings are commenced by the receiving party serving on the paying party notice of commencement in the relevant practice form, and a copy of the bill of costs (see CPR rule 47.6). The notice of commencement must be completed to show separate items, total amount of costs claimed in the bill, and the extra sum which will be payable by way of fixed costs and court fees if a default costs certificate is obtained (see CPD para 32.8). If a paying party fails to respond to the notice of commencement, after 21 days the receiving party may file a request for a default costs certificate. The default provisions are contained in CPR rule 47.11, which provides that:

"(1) Where the receiving party is permitted by rule 47.9 to obtain a default costs certificate, that party does so by filing a request in the relevant practice form.

(2) A default costs certificate will include an order to pay the costs to which it relates.

(3) Where a receiving party obtains a default costs certificate, the costs payable to that party for the commencement of detailed assessment proceedings will be the sum set out in Costs Practice Direction."

Those costs are, as I have said, fixed costs of £80 payable in respect of solicitors' charges on the issue of the default costs certificate (see CPD para 37.8) and the £60 fee for issuing a default costs certificate itself (see the Civil Proceedings Fee Order 2008 schedule 1 para 5.3).

16. The rules relating to costs-only proceedings are contained in CPR rule 44.12A, which was introduced on 3 July 2000 by article 17 of the Civil Procedure (Amendment No.3) Rules 2000 as subsequently amended. The material part of the rule provides:

"(2) Either party to the agreement may start proceedings under this rule by issuing a claim form in accordance with Part 8.

(3) The claim form must contain or be accompanied by the agreement or confirmation.

(4) Except as provided in paragraph (4A), in proceedings to which this rule applies the court –

(a) may

(i) make an order for costs to be determined by detailed assessment; or

(ii) dismiss the claim; and

(b) must dismiss the claim if it is opposed..."

17. Paragraph 17.8 of the Costs Practice Direction provides:

"17.8(1) An order for costs made under this rule [CPR 44.12A] will be treated as an order for the amount of costs to be decided by a detailed assessment to which Part 47 and the practice directions relating to it apply."

18. In my view, the simple point based on a construction of the rules, upon which the deputy district judge and the judge below decided this case in favour of the respondents, is correct. The bringing of Part 8 costs-only proceedings is not the commencement of, or part of, the detailed assessment proceedings, albeit it is a necessary preliminary to that process if there are no underlying proceedings in existence. This is because detailed assessment proceedings are distinct from the proceedings whether under part 7 or Part 8 which have given rise to the costs order (see CPR rule 47.6(1)). Nor are the costs of Part 8 costs-only proceedings dealt with by the default costs certificate: "The costs to which it relates" under CPR 47.11(2) are the fixed sum of £60 for the 'commencement of the detailed assessment proceedings' plus the issue fee of £80: see CPR 47.13(3), CPR 47.11(3) and CPR 47 PD 37.8. The costs of issuing the Part 8 costs-only proceedings do not therefore fall within the costs regime, the rules for those two distinct steps, and fall to be dealt with by the court in accordance with the broad discretion on costs given by section 51 of the Senior Courts Act 1981.
19. I do not think that this interpretation of the rules is contrary to the approach of the Court of Appeal in Crosbie v Munroe [2003] EWCA Civ 350, [2003] 1 WLR 2033, as Mr Marven contends. In that case, the court had to consider whether, in a case where detailed assessment was commenced under Part 8, an offer in respect of costs made pursuant to CPR 47.19 offer to settle without prejudice save as to costs of the detailed assessment proceedings, did or did not include the costs of the Part 8 proceedings. The defendants contended that it did. The court, however, held it did not because the costs of the proceedings within CPR 47.19 referred to the costs of the substantive claim up to its disposal by the agreement by the defendant to pay damages and costs. Brooke LJ said this at paragraph 34:

"By this route it is easy to see that even when Part 8 proceedings have to be commenced in order to obtain a court order for detailed assessment, the 'costs of the proceedings' within the meaning of CPR 47.19 still relate only to the costs leading up to the disposal (on this occasion by agreement) of the substantive claim. They are 'the proceedings which gave rise to the assessment proceedings', and 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."

20. That the costs of the Part 8 proceedings did not form part of the substantive costs contained in the bill of costs, which is the issue the court addressed, seems to me, with respect to Mr Marven, to be a point which assists the respondents rather than the appellants. Certainly the court did not consider, still less decide, the costs of the Part 8 proceedings formed part of the "costs of the detailed assessment" for the purposes of CPR 47.11 and the default costs certificate or otherwise.
21. I should add that I do not consider there is anything irrational or unfair in the court retaining its discretion in respect of the costs of the Part 8 costs-only proceedings or in the costs order made in this case, subject to a point I address in relation to what may happen in the future, below. The defendants failed to respond to the claimants at every stage. The claimants were therefore entitled to use the mechanism provided by the rules to recover costs in dispute and should not be "out of pocket", as the judge below put it, for having done so.
22. I take Mr Marven's point that the costs of bringing such Part 8 proceedings may be, or should be, relatively minimal. Whilst a claimant who commences costs-only proceedings should not be worse off than one who uses the detailed assessment and default procedure where there are underlying proceedings, he should not be better off if he does so either. Care should therefore be taken to ensure that matters properly encompassed within the detailed assessment and default regime are not claimed as part of the Part 8 costs-only process. But that is a matter which should be sorted out by the summary assessment process in the event that the parties cannot agree those extra costs.
23. The problems which this may give rise to (that is, that there is no fixed costs regime for Part 8 costs-only proceedings) is a matter which may merit examination by the Civil Procedure Rules Committee in due course.
24. For these reasons, in my opinion, the appeals should be dismissed.
25. LADY JUSTICE HALLETT: I agree.
26. THE CHANCELLOR OF THE HIGH COURT: I also agree.