In legal disputes, after a judgement or settlement has been reached, one of the critical follow-up matters is the assessment and recovery of legal costs. Costs proceedings play a significant role in determining which party is responsible for paying legal fees and how much they must pay. However, delays in initiating these proceedings can create complications, impacting both parties involved.

For claimants, such delays can result in reduced recoverable costs, financial strain from accruing unpaid legal fees, and complications in managing their legal expenses. For defendants, delays can lead to increased financial liabilities due to prolonged exposure to interest on costs, potential for heightened legal costs in responding to extended disputes, and the strategic disadvantage of facing unresolved cost issues.

Courts generally encourage prompt action to avoid these pitfalls, often setting clear time limits for when such proceedings must be initiated.

Bi v Tesco Underwriting Limited 

Bi v Tesco Underwriting Limited is a relevant case when considering the impact of delays in issuing costs proceedings. The claimant was in a car accident on August 19, 2022, but wasn’t injured. A claim was made for car hire charges.

In Bi v Tesco Underwriting Limited, while the primary dispute was settled, the parties faced disagreements over the quantum of costs, and delays ensued as the claimant’s legal team sought to recover their costs.

On April 5, 2023, the defendant made a Part 36 offer as follows:

“Inclusive of general and special damages and net of liability, we formally offer to your Client the gross sum of £3,555.36 in full and final settlement of the hire, storage and recovery elements of the claim…The offer is made pursuant to Part 36 r 36.5(1) of the CPR. If the offer is accepted within 21 days of the date of this letter, we will be liable for the Claimant’s costs in accordance with Rule 36.13 or 36.20 of the CPR…”

The claimant accepted this offer on April 11 2023, but nothing was mentioned about costs in the acceptance.

In October 2023, the claimant served an informal bill of costs on the defendant which sought costs on the standard basis, but started costs-only proceedings when the defendant did not agree. The District Judge made a court order that the defendant pay the claimant’s costs on the standard basis. However, the defendant challenged this.

The defendant argued that, since the case was started after new rules on fixed costs came into effect in October 2023, the costs should be assessed under the new rules, which could reduce the amount to zero.  Readers will be aware that on 1 October 2023, reforms were introduced to expand fixed recoverable costs into the majority of all civil disputes up to £100,000 in pleaded value (unless allocated to the Multi Track), and that for non-PI related claims, the transition date for the new reforms was the date of issuance of proceedings.  Therefore had this been a personal injury dispute, the accident date would have had to have been on or after 1 October 2023 for the new fixed costs rules to apply.

Mr. Hogan, for the defendant in the subject matter, stated that the costs claim was part of the larger case and should follow the new rules. Mr. Meehan, for the claimant, argued that the claimant had already secured certain rights under the previous rules when the Part 36 offer was accepted, and those rights shouldn’t be affected by the new rules.

The judge ruled that the defendant hadn’t promised to pay costs on any specific basis in their offer, and the offer didn’t include a contract for specific cost payments. The judge found that the general rules in effect at the time of the claim would determine the costs. Since the claimant delayed proceedings until after the rule change, the new fixed costs rules applied, and as a result, the costs were reduced to zero. The judge also emphasised that the rule change was meant to simplify and benefit the system.

“I conclude that the Part 36 offer did not prescribe the basis upon which costs were to be paid. The offer was made and accepted on the basis that the costs would be determined in accordance with the Rules. The Rules were changed in order to implement an extension of the fixed recoverable costs regime. Because the claimant did not issue her costs-only proceedings until after the amendments to the rules came into force, the costs of her claim for damages fall to be determined under the amended Rules.”

“It appears that the parties agree that, upon the view I have taken, the fixed costs allowed should be nil.”

The case of Bi v Tesco Underwriting Limited illustrates the significance of timely costs proceedings and the potential consequences of delays. Courts expect parties to act with efficiency and transparency in resolving costs disputes.

It is also important to note that Bi also sets out that Part 8 proceedings for costs, will constitute the date of issue under the post-1 October 2023 fixed costs rules.  This is somewhat peculiar, in that, could it then be argued that issued fixed costs should apply, rather than pre-issue costs?

This case highlights the need for both claimants and defendants to be vigilant about time limits and procedural deadlines in costs disputes, and to address any delays as quickly as possible to avoid negative outcomes.

The consequences of a delay in issuing costs proceedings

In England and Wales, the consequences of a delay in issuing costs proceedings are governed by specific costs provisions, primarily under the Civil Procedure Rules (CPR).

Whilst for a pre-issue settlement, the clock does not start ticking to commence any assessment procedure, once Part 8 proceedings are issued, there are likely to be directions given to abide by in relation to fixed costs cases, for submissions to be made (soon to be dealt with under the Precedent U fixed costs assessment process).

For detailed assessment proceedings (in relation to standard/hourly rate costs), the CPR dictates timescales for drafting and service of the Bill, and commencement of the detailed assessment process:

In accordance with CPR 47.7, a detailed assessment must be initiated within 3 months of a judgment, direction, order, discontinuance under Part 38, or acceptance of a Part 36 offer. Additionally, once the receiving party commences detailed assessment proceedings and are served with the points of dispute, they must request a detailed assessment hearing within 3 months (CPR 47.14(1)).

If costs proceedings are not commenced within these time limits, and the receiving party fails to comply, the paying party may apply for an order that no costs be allowed, or the court may refuse to assess the costs altogether.  Consequences of any order for a delay in issuing costs proceedings/commencing assessment could have consequences as set out below

1. Strike out of costs claim

If there is a significant delay in commencing detailed assessment proceedings, the court may strike out the costs claim. This would result in the party entitled to costs losing the right to recover any part of the costs from the other side. 

2. Consideration for an application for an extension

The court has discretion, when considering any application for an unless order to serve a bill of costs, to allow an extension of time for commencing costs proceedings under CPR 3.1(2)(a) if the delay can be justified with good reasons. However, the longer the delay, the more difficult it will be to convince the court to grant an extension. 

3. Reduction of costs award

Courts can exercise their discretion to reduce the amount of costs awarded as a penalty for a delay. If the delay is deemed unreasonable or unjustified, the court may take this into account and limit the amount of recoverable costs.

4. Disallowance of Interest on Delayed Costs

Delays in issuing costs proceedings can also have financial consequences in the form of interest on costs. Under the law in England and Wales, interest can accrue on unpaid costs from the date of the judgment or settlement. If the claimant delays the initiation of costs proceedings, it could either limit the period over which they can claim interest or expose the defendant to higher interest liabilities. 

5. Adverse costs orders

The party causing the delay might face an adverse costs order for any additional costs incurred by the other side due to the delay. The court may order the delaying party to agree to pay costs related to the assessment proceedings if the delay causes unnecessary expenses. 

6. Impact on negotiations

A delay in issuing costs proceedings may impact negotiations for an offer to settle. The paying party may take advantage of the delay to negotiate a lower amount, knowing that the receiving party risks losing its right to claim if the proceedings are not issued promptly. 

7. Prejudice to the paying party

A delay can be seen as prejudicing the paying party, particularly if it causes difficulties in assembling the necessary documents or evidence to challenge the costs claimed. This might lead to the court being more lenient towards the paying party’s objections.

Delays may arise from various factors, including administrative oversights, disputes over the quantum of costs, or strategic considerations. Regardless of the cause, the impact of such delays underscores the importance of timely action in costs proceedings.

How can ARC Costs assist?

ARC Costs are expert Costs Draftsman and Costs Lawyers that regularly assist both receiving and paying parties in resolving costs disputes in the jurisdiction of England and Wales. We assist in the negotiation of the settlement of legal costs and throughout detailed assessment procedures. We pride ourselves on our excellent success rates and can ensure that our knowledge will help to provide the best results within your case.

Our team can also assist by drafting a Bill of Costs and negotiating costs with the other side. If you have received a legal costs order against you, we can also help with Points of Dispute.

For further information or to discuss your query, call one of the team or 01204 397302, or email one our experts at info@arccosts.co.uk. Alternatively, you can contact us via submission of our contact form, and one of the team will give you a call back to provide free initial advice.

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