Costs Order Subject to Detailed Assessment: What Happens Next?

Receiving a court order stating that one party must pay another party’s costs “subject to detailed assessment” does not usually mean that the court has decided exactly how much must be paid. The costs order establishes an entitlement to costs. The amount may still need to be agreed between the parties or determined through the detailed assessment of costs procedure.

For both the paying party and the party entitled to receive costs, it is important to understand what happens next. There are deadlines to follow, documents to prepare and opportunities to negotiate before the matter reaches a costs judge.

What does “costs subject to detailed assessment” mean?

At the end of a case, or sometimes at an earlier stage, the court may decide which party should be responsible for the legal costs. The general rule in civil litigation is that the unsuccessful party pays the successful party’s costs, although the court has a wide discretion when making court orders about costs.

The court might deal with the amount of costs immediately through summary assessment. Alternatively, it may order that the costs are subject to detailed assessment. Detailed assessment is the process used to determine how much of the costs claimed by the receiving party should actually be paid by the other side.

This is an important distinction. If a party has incurred £200,000 in legal fees and receives an order for its costs to be assessed, this does not automatically mean the losing party must pay £200,000. The bill of costs can be challenged and, if the parties cannot agree, the court can determine the appropriate figure.

Who are the receiving and paying parties?

The terminology used during detailed assessment is relatively straightforward. The receiving party is the party entitled to recover costs. The paying party is the party required to pay them.

A costs order might, for example, state that the defendant must pay the claimant’s costs, such costs to be subject to detailed assessment if not agreed. In this situation, the claimant would normally be the receiving party and the defendant the paying party. The next stage involves establishing exactly what those costs payable should be.

Does every costs order lead to detailed assessment?

No. The parties can negotiate and agree costs without requiring the court to carry out an assessment. This happens quite frequently.

Once a costs order has been made, the receiving party may submit details of the costs it seeks to recover and negotiations can begin. If an acceptable figure is agreed, there may be no need for the court to assess the bill.

Part 36 can also play an important role in costs proceedings. Part 36 applies to detailed assessment proceedings with modifications, allowing both sides to make offers that can carry significant consequences depending upon the eventual outcome. Where agreement cannot be reached, however, the formal detailed assessment procedure may be required.

How are detailed assessment proceedings started?

The procedure is primarily governed by CPR Part 47. For costs payable by one party to another, commencing detailed assessment proceedings involves the receiving party serving the required documents on the paying party. These include a notice of commencement and a copy or copies of the bill of costs as required by the rules and practice direction.

The relevant notice is Form N252.

The bill sets out the legal costs that the receiving party seeks to recover. Depending upon the case, the bill of costs may contain details of solicitors’ work, hourly rates, counsel’s fees, expert fees and other disbursements. Practice Direction 47 also requires supporting documentation for certain expenditure.

The purpose is to provide sufficient information for the paying party to understand what is being claimed and decide which items, if any, it wishes to challenge.

How long does the receiving party have to start detailed assessment?

The usual deadline following a judgment, direction, order, award or other determination is three months from the relevant judgment or order. There are different triggers in some circumstances.

For example, where the right to costs arises following acceptance of an offer under Part 36, the usual period for commencing detailed assessment is three months from the date on which the right to costs arose. If the receiving party misses the applicable deadline, that does not necessarily mean the right to costs disappears automatically.

The paying party can apply for an order requiring the receiving party to commence detailed assessment within a specified period. The court can impose consequences for further failure, and delay can also affect interest.

Deadlines should therefore be considered carefully as soon as the right to costs arises.

What is a Notice of Commencement?

The Notice of Commencement formally begins the detailed assessment process. It is served together with the Bill of Costs and relevant supporting documents. The notice identifies, amongst other things, the total costs being claimed.

Once it has been served, an important deadline begins for the paying party. The paying party normally has 21 days after service of the Notice of Commencement to serve Points of Dispute.

What are Points of Dispute?

Points of Dispute set out the paying party’s objections to the Bill of Costs. Rather than simply stating that the overall bill is too high, the Points of Dispute should identify the specific issues being challenged.

Depending upon the case, objections might concern hourly rates, excessive time, duplication of work, counsel’s fees, expert fees, disbursements, proportionality or whether particular work was reasonably incurred.

The precise arguments available will also depend upon whether costs are being assessed on the standard or indemnity basis and whether a costs management order was made.

Serving Points of Dispute is an important stage because, generally, only items identified within the Points of Dispute can later be raised at the detailed assessment hearing unless the court gives permission.

The 21 days should therefore not be treated as an informal negotiation period. The paying party needs to review the Bill and prepare its position promptly.

What happens if the paying party does not respond?

Failure to serve Points of Dispute can have serious consequences. Once the 21-day period has expired without Points of Dispute being served, the receiving party may be entitled to file a request for a default costs certificate.

A default costs certificate includes an order to pay the costs to which it relates. In practical terms, this can leave the paying party liable for the amount claimed without the usual assessment taking place.

A default costs certificate can sometimes be set aside. The court must set it aside if the receiving party was not entitled to obtain it. In other circumstances, the court has discretion to set it aside or vary it where there is a good reason for the detailed assessment proceedings to continue.

However, relying on an application to set aside a certificate is clearly less desirable than responding within the original deadline.

Anyone serving on the paying party a Notice of Commencement should therefore ensure that service has been carried out correctly, while a paying party receiving one should identify the response deadline immediately.

What happens after Points of Dispute?

The receiving party may serve Replies to the Points of Dispute. Under CPR 47.13, these may normally be served within 21 days of receiving the Points of Dispute.

The parties can continue negotiating throughout the process. In many cases, detailed costs disputes settle without a final hearing. If agreement cannot be reached, the receiving party can request that the court assesses the remaining disputed items.

The documents required when requesting a hearing include the Notice of Commencement, Bill of Costs, Points of Dispute, any Replies, relevant costs orders and supporting documentation. Depending on the proceedings, the assessment may be dealt with at the appropriate court office or the Costs Office.

What happens at a detailed assessment?

At a detailed assessment, the court considers the disputed items in the Bill of Costs and decides what should be allowed. A costs judge, district judge or authorised court officer, as appropriate, may consider issues such as the time claimed for particular work, hourly rates, counsel and expert fees, disbursements and other challenges raised within the Points of Dispute.

The assessment can therefore result in the original bill being reduced. How the court approaches the assessment also depends on the basis of costs. On the standard basis, for example, costs must be reasonable and proportionate. Where costs have been awarded on the indemnity basis, proportionality does not apply in the same way and doubts about reasonableness are resolved in favour of the receiving party.

This is why the wording of the original costs order is so important.

Who pays for the detailed assessment itself?

Detailed assessment proceedings generate their own legal costs. The general rule is that the receiving party is entitled to the costs of the detailed assessment proceedings, but the court can make a different order.

When deciding what order to make, the court can consider the conduct of the parties, how much the Bill of Costs was reduced and whether it was reasonable to claim or challenge particular items.

Settlement offers can become particularly important here. The modified Part 36 regime applies to detailed assessment proceedings, meaning a well-pitched offer can have substantial consequences for the eventual costs position.

What happens once the costs have been assessed?

Once the detailed assessment process has concluded, the final amount due can be recorded in a final costs certificate. Where a detailed assessment hearing has taken place, the completed bill generally needs to be filed within 14 days after the end of the hearing.

The final certificate includes an order to pay the relevant costs unless the court orders otherwise. At that point, the uncertainty surrounding the original order for “costs subject to detailed assessment” has been replaced with a quantified amount.

How ARC Costs can help

A costs order subject to detailed assessment can be the beginning of a substantial second dispute after the underlying litigation has ended. ARC Costs acts for both paying and receiving parties throughout the detailed assessment process.

For receiving parties, we can prepare Bills of Costs, Notices of Commencement and Replies, advise on settlement and Part 36 strategy and assist through to assessment.

For paying parties, we can review the costs claimed, prepare Points of Dispute, identify potentially unreasonable or disproportionate expenditure and negotiate the amount payable.

Early involvement can be particularly valuable. The deadlines under Part 47 begin quickly, and the quality of the Bill of Costs or Points of Dispute can have a significant effect on the eventual recovery.

Receiving an order for costs “subject to detailed assessment” therefore does not answer the question of how much will ultimately be paid. It establishes the right to costs. Detailed assessment, negotiation or agreement determines the figure.

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