Summary – The work undertaken in preparing a Bill of Costs is a specialist task which should not be left to an individual lacking the relevant expertise, failing which allegations of misconduct for any defective Bill may be raised under CPR 44.11.  Allowing a defective Bill to be served, and failing to rectify it when challenged as to the errors, will lead to potential sanctions if misconduct is established by the Court on assessment.  Consequences could lead to disallowance of costs, either in part or in their entirety.

What are the Potential Consequences of Litigation Misconduct in Costs Proceedings?

Credit is given to the recent article by Costs Lawyer, Simon Gibbs, whom has drawn attention to the growing importance of litigation misconduct arguments under CPR 44.11 in detailed assessment proceedings, with another decision recently handed down in Hyder v Aidat-Sarran & Aidat-Sarran [2024] EWHC 3686.

Allegations of litigation misconduct under CPR 44.11 are being deployed with increasing frequency – and, as recent authorities show, with devastating consequences for those who fall foul of the rules.

In Kapoor v Johal 2024 EWHC 2853 (SCCO), a £258,583.78 Bill of Costs was assessed at £nil, followed by a referral of the receiving party’s solicitor to the SRA. Shortly thereafter, the judgment in Hyder v Aidat-Sarran & Aidat-Sarran 2024 EWHC 3686 (SCCO) emerged, revealing another example of extensive non-compliance leading to drastic sanctions. In that case, the court applied a 75% reduction to the receiving party’s Bill of Costs due to serious misconduct under CPR 44.11.

A Bill of Costs “Riddled With Errors”

When detailed assessment proceedings commenced in the subject matter, the Receiving Party served a traditional three-column paper bill instead of the required electronic bill – one containing numerous defects.

When a matter has been allocated to the Multi Track, it is mandatory that the Bill of Costs is in an electronic Precedent S format, pursuant to Practice Direction 47 para. 5.1.  Submission of a Bill in a 3 column format in its stead means that the Bill is defective, and will be rejected on assessment owing to failure to comply with the CPR, and inability to scrutinise/analyse the Bill data fully as is permitted by the electronic Excel type bill.

In respect of the 3 column Bill that was initially served, the Paying Party, represented by Mr Gibbs of Gibbs Wyatt Stone, submitted Points of Dispute outlining numerous defective elements to the Bill (aside from it being in electronic format).  The judge accepted detailed evidence of the errors, including:

• Failure to serve mandatory certificates, including a Certificate of Accuracy confirming no breach of the indemnity principle;
• Failure to produce the bill in electronic form as required by PD 47;
• No division of costs by phase, nor any distinction between incurred and budgeted work, despite a costs management order;
• Omission of fee earner names and SCCO grades;
• Claims for work where there was no order for costs or where costs had already been summarily assessed;
• References to Schedules of Documents that did not exist;
• A section totalling £72,676.52 referring to an “attached bill” that was never attached and concerned a period after the underlying proceedings had concluded.

No Points of Reply had been served to defend the position as to the 3 column Bill, and instead the Receiving Party took steps to lodge for a detailed assessment hearing.

Are Points of Reply (or Replies to Points of Dispute) Optional?

In short, yes Points of Reply are optional.  CPR 47.13 is in fact titled “Optional Reply” and failure to serve the same does not result in any sanctions (indeed there has been much debate in the past as to sanctions for failing to serve Replies within the 21 day deadline, as no such sanctions are listed in the CPR as they are for Points of Dispute).

That said, in the absence of Points of Reply, a Receiving Party’s position as to submissions raised in the Points of Dispute go undefended.  In view of this, it is always recommended that Points of Reply are prepared.  In Provisional Assessment proceedings (cases under £75,000 in value), the Bill is assessed on the papers alone (including Points and Replies), and the absence of Points of Reply is likely to hinder the amount recovered for costs.  On attended detailed assessment hearings, there is however, further ability to raise oral submissions in response to Points of Dispute.

What Happened Next? A Non-Compliant Electronic Bill Followed

When the Receiving Party later requested a detailed assessment hearing, it served an electronic bill. This bill was materially different from the original but failed to correct the earlier defects and introduced further serious breaches, including:

• Continued failure to serve Certificates of Accuracy;
• Ongoing failure to distinguish incurred vs budgeted work, frustrating proper assessment;
• Incorrect and sometimes illogical phase allocation, such as budgeting work categorised under issues, or expert evidence appearing in Disclosure or Witness Statements phases;
• Failure to report work by tasks and activities or to provide summary totals comparable to Precedent S;
• Claims for routine “letters in” amounting to £13,676.27, charged at hourly rates double those applied elsewhere;
• Claims for work subject to no order as to costs, or already summarily assessed.

Judicial Conclusions: “Serious, Persistent, Unexplained and Inexcusable”

The judge concluded:

“I am entirely satisfied that both limbs of CPR 44.11(a) and (b) are met here… I find there have been multiple compound breaches. They have been serious. They have been persistent. They are unexplained, and they are inexcusable for the most part.”

Although an application was made to strike out the bill entirely, the court – on what it described as a “very narrow balance” – declined to impose the ultimate sanction. Instead, it ordered that:

75% of the otherwise recoverable costs be disallowed under CPR 44.11 – This sanction applied to a bill originally totalling £128,452.48.

Key Takeaways for Practitioners

• CPR 44.11 is increasingly used to address costs misconduct – The courts are willing to impose substantial penalties where non-compliance or unreasonable conduct is proven.
• Defective bills can constitute misconduct – Missing certificates, improper formatting, and incorrectly phased work may go beyond technical errors and lead to sanctions.
• Electronic bills must strictly comply with PD 47 – Partially compliant or “hybrid” bills will not suffice.
• Inflated or improper claims increase risk – Claims for non-recoverable items, previously assessed costs, or excessive “routine” items may attract findings of misconduct.
• Failing to engage in the assessment process can worsen outcomes – Not serving Replies – particularly after defects are pointed out – may be viewed as unreasonable conduct.

The judgment in Hyder v Aidat-Sarran reinforces a clear trend: courts are adopting a stringent approach to misconduct in costs proceedings. Serious or persistent failures in the preparation and presentation of Bills of Costs may be treated as litigation misconduct under CPR 44.11, with substantial financial consequences.

How can ARC Costs Assist?

ARC Costs are an experienced and independent team of specialised Costs Draftsmen and Costs Lawyers. We assist both paying and receiving parties in resolving costs disputes, and are adept at preparing Costs Budgets and Bill of Costs for receiving parties, as well as providing legal costs negotiations services and preparing Points of Reply.

For paying parties, we are adept at preparing Points of Dispute, and ensuring that a proportionate level of costs is recovered. Proportionality is a subjective issue, and it is therefore important you have the right legal costs representative on your side during detailed assessment to ensure you make the most persuasive submissions on the issue.

Should you require any assistance or free initial advice, please call us on 01204 397302, or email one of our costs experts direct on info@arccosts.co.uk.

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