Provisional Assessment: Tactics and Pitfalls

Sun, 24 Feb 2019

Those reading this article will undoubtedly be familiar with the concept of provisional assessment since its introduction in 2013. Although initially proposed for cases where the costs claimed did not exceed 25,000 the limit imposed was in fact 75,000. A substantial number of cases that fall outside the scope of the fixed costs regime are now subject to provisional assessment.

Anyone who has been through the process of provisional assessment will know that the process follows a very similar course to detailed assessment. However, it ultimately concludes with the assessment taking place on the papers in the absence of oral submissions from the parties.

Although the judge undertaking the assessment will record their written comments in respect of their decisions and return these to the parties, the inability to actively engage with the judge at an oral hearing can sometimes be a frustrating process. Parties will therefore have to consider their actions at each stage of the process very carefully.

This article briefly explains the key pitfalls of the provisional assessment process and brief points to consider as to how costs lawyers and solicitors will want to go about conducting these cases.

In particular the article looks at:

1.      Replies to Points of Dispute

2.      The Costs of Assessment and Part 36

3.      Review

Reply to Points of Dispute

Replies are optional in the course of detailed assessment (CPR 47.13(1)). The same rule applies to provisional assessments. Given that provisional assessment takes place in the absence of the parties, solicitors and costs lawyers will be concerned as to whether to plead replies and the extent to which they need to plead those replies.

The temptation for a receiving party in such circumstances may be to plead their replies in as much detail as possible so as to try and replicate exactly the extent of the submissions that could have been made orally at a hearing. However, receiving parties need to be careful as to the extent and precision of the pleading of the replies. Replies to points of dispute must be limited to points of principle and concessions only. They must not contain general denials, specific denials or standard form responses (Practice Direction 47 Paragraph 12.1).

Where there is non-compliance with the rules the reply can be struck out. This very situation occurred in the case of Kellett v Wigan and District Community Transport [2015] 9 WLUK 313. In that case, a reply was pleaded to three pages in length on one specific point. The reply was considered to be vague and far too long. The judge struck out the reply and found in favour of the paying party without giving consideration to the receiving party’s position altogether. Although on appeal it was held that the judge should have given proper consideration to the receiving party’s position, the case stands as a good example of the time and money that can be wasted as a result of replies that are not compliant with the rules.

Parties would clearly be well-advised to make sure that replies are submitted in respect of the points of dispute. These will act to some extent as the representative’s voice at the hearing and will ensure a fair assessment takes place. However, any replies must be pleaded in accordance with the rules. They will need to be cogent and coherent to avoid the risks of strike out. It is also worth remembering that the costs of assessment are capped (as set out below) and so time spent pleading exhaustive replies may not be time well spent.

The Costs of Provisional Assessment and Part 36

The costs of provisional assessment are limited to 1,500 + VAT and any court fees in any case which does not go beyond provisional assessment (CPR 47.15(5)). This does not include the costs of drafting of a Bill. Parties need to bear in mind that this is a cap and not a sum of fixed costs that will be awarded irrespective of the actual time billed in respect of the costs of assessment.

The ability of a party to recover more than the capped costs above is likely to be extremely limited. Parties have previously sought to use the provisions of Part 36 to circumvent the costs cap. Where a party beats their own Part 36 offer, that party will usually be entitled to the costs of assessment on the indemnity basis from the last date for acceptance specified in the offer. Those costs may well exceed the costs cap for provisional assessment.

Nevertheless, the Court of Appeal held in Lowin v W Portsmouth and Co Ltd [2017] EWCA Civ 2172 that where the costs of assessment have been assessed on the indemnity basis the provisions of the costs cap will apply. Parties that have their costs of assessment on the indemnity basis because of a Part 36 offer will therefore be unable to escape the costs cap.

This does not mean that Part 36 offers are of no use at all. Where a receiving party beats a Part 36 offer, it will ordinarily be entitled to an uplift of 10% on the assessed costs and a higher rate of interest.

It would therefore be prudent to consider making such offers and consider the risks in not accepting them. At the same time parties need to be cautious as to the level of costs incurred in the provisional assessment process. There is little value in racking up costs which ultimately are not recoverable.

To Review or not to Review?

If a solicitor is unhappy with the amount of costs awarded on the provisional assessment, the first remedy in the Court is a review of the provisional assessment. This has to be requested within 21 days unless the Court finds there to be exceptional circumstances.

The Tribunal on Review

The decision to review is one that needs to be taken carefully. The review will often, though not always, be undertaken by the judge who undertook the initial assessment. Although they may make concessions on certain points of principle when their attention is drawn to case law, they may be more reluctant to make substantial changes to the assessment. In particular, it is likely to be difficult to persuade a judge that their assessment as to the recoverable sums on document time and other profit costs is in need of substantial adjustment. Failing to understand the way in which the review is conducted is likely to lead to disappointment – particularly in light of the further issues set out below.

The Costs of Review of Provisional Assessment

The usual position concerning the costs of review is set out at CPR 47.15(10), which provides:

Any party which has requested an oral hearing, will pay the costs of and incidental to that hearing unless:

(a) it achieves an adjustment in its own favour by 20% or more of the sum provisionally assessed; or

(b) the court otherwise orders.

This is supplemented by paragraph 14.5 of Practice Direction 47 which states that the Court will take into account the conduct of the parties and any offers made when considering whether to depart from the rule at 47.15(10)

Achieving an adjustment of 20% is not easy. As previously noted, the judge hearing the case is likely to be the same the judge who carried out the initial assessment. Although concessions may be made by the judge, this is a difficult process. The party seeking the review will therefore need to take a realistic view as to the costs they will incur in running the review against the additional costs that are likely to be recovered.

Parties who achieve an adjustment of 20% or more often assume that the other party will be ordered to pay their costs for the successful review. It is important to be aware that the drafting of the rules does not entitle the party that requested the review to their costs. The rule only states that a party achieving a less than 20% adjustment will pay the costs of and incidental to that hearing.

It is possible that a court will make no order as to costs on the review itself unless the 20% figure is substantially beaten. Alternatively, a party might be ordered to pay the costs of review where the other party betters an offer that was made early in the review process.

Parties need to consider their positions carefully after provisional assessment. Unless very substantial adjustments are likely to be made on review, it may be worth accepting the result.

For those parties who do decide to embark on review, they would be well advised to make sensible offers to see if the matter can be settled without review. Once the review has been requested, the costs of the review are ticking. There is always a risk that the costs incurred in running that review to its end may substantially reduce the benefit in running the review.

Summary

The provisional assessment regime has been designed to reduce the time spent on the assessment of costs and, in particular, to reduce the costs of assessment. In the absence of an oral hearing, parties may feel that their full position on costs has not properly been considered. However, parties need to be cautious in the ways that they try to counter this. Offers need to be used sensibly and the cost-effectiveness of the assessment always needs to be borne in mind.

Eamonn Hurley-Flynn is available for in-house training at any of No5's offices or Counsel can come directly to your offices.  Please contact us to discuss your training requirements.

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