What is CPR 47.20?

CPR 47.20 is a provision within Part 47 of the Civil Procedure Rules (CPR), which deals with the costs of the detailed assessment procedure (sometimes referred to as “costs of the costs”). Detailed assessment is the process by which the Court scrutinises a bill of costs to determine the reasonable and proportionate amount payable in relation to the main litigation. This usually happens after a costs order has already been made — for example, when one party has been ordered to pay the other’s costs of the proceedings.

But the process of conducting detailed assessment proceedings, and quantifying/negotiating a Bill of Costs, incurs further costs in itself.  As such the question arises as to, who is responsible for paying the costs of detailed assessment?

CPR 47.20(1) provides as follows:

(1) The receiving party is entitled to the costs of the detailed assessment proceedings except where –

(a) the provisions of any Act, any of these Rules or any relevant practice direction provide otherwise; or

(b) the court makes some other order in relation to all or part of the costs of the detailed assessment proceedings.

This is a general rule which is subject to the Court’s discretion, and in essence it states that the Receiving Party can recover their costs of the detailed assessment process from the Paying Party, unless the Court otherwise orders.

The Default Position Under CPR 47.20

The default starting point is that the Receiving Party is entitled to recover the costs of the detailed assessment proceedings from the Paying Party. This includes things like the costs of dealing with Points of Dispute and Replies, conducting any negotiations, and preparing for and attending any hearings.

This default reflects the general position that, having lost the substantive case and having been ordered to pay costs, the Paying Party should not cause further financial loss to the Receiving Party by forcing them to undergo a detailed assessment unnecessarily.

When Might the Court Depart from the Default Rule?

Although the rule sets a clear default, CPR 47.20 explicitly states that the court “may make a different order”, and it would be incorrect to assume that the Court will always award the Receiving Party their detailed assessment costs. This is an important discretion, and Courts can and do regularly exercise it where appropriate.

CPR 47.2 (3) states:

“(3) In deciding whether to make some other order, the court must have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) the amount, if any, by which the bill of costs has been reduced; and

(c) whether it was reasonable for a party to claim the costs of a particular item or to dispute that item.”

Some situations where a costs judge may order differently include:

Inflated or Unreasonable Bills

If the Receiving Party has exaggerated their claim for costs or included items that are clearly unreasonable, the court may penalise the Receiving Party by ordering them to pay all or part of the assessment costs, or to waive their entitlement to any detailed assessment costs.  Generally any Bill reduced by 50% or more is flagging as one that may warrant further submissions being made to the Court to disallow detailed assessment costs.

Refusal to Negotiate

If either party adopts an unreasonable approach during the assessment process, for example by refusing to engage in settlement discussions or mediation, this can be taken into account.

Failure to Beat a Part 36 Offer (or any other Offer)

If the Paying Party makes a Part 36 Offer, and the Receiving Party fails to beat that offer at the assessment hearing, the court will order the Receiving Party to pay the costs of assessment from the date the offer expired.  Part 36 Offers have clear fixed consequences which is why they are useful tool in any litigation.

Other offers made by the Paying Party, such as a Calderbank Offer, will also be taken into account by the Court.  Generally pursuant to CPR 44.2(2)(a) the unsuccessful party will pay the successful party’s costs however, non-Part 36 Offers do not have fixed costs consequences, and therefore will not always result in the same outcome as a well placed Part 36 Offer.

Conduct During Proceedings

The conduct of the parties throughout the costs proceedings can also affect the court’s decision. If one side behaves oppressively, misleads the court, or behaves dishonestly, this may justify a different order.

Part 36 Offers and CPR 47.20

Part 36 of the CPR allows parties to make formal offers to settle, including in respect of costs. Part 36 offers are a powerful strategic tool in costs litigation.

Under CPR 47.20, if a Paying Party makes a reasonable Part 36 offer and the Receiving Party fails to obtain a better result on assessment, the Receiving Party will be ordered to pay the costs incurred after the offer expired (though unlike a Receiving Party beating their own Part 36 Offer, there is no 10% uplift on costs provided to the Paying Party). This serves as an incentive for parties to make and accept reasonable offers to avoid unnecessary hearings.

Similarly, the Receiving Party can also make Part 36 offers. If they beat their own offer at assessment, they are entitled to costs on an indemnity basis, interest at an enhanced rate, and a 10% uplift on the outcome of assessment, depending on the circumstances.

It is important to note that Part 36 Offers cannot be made in respect of your detailed assessment costs.

This issue was explored in the case of  Best v Luton & Dunstable Hospital NHS Foundation Trust [2021] EWHC B2 (Costs)in which it was determined that the benefits of Part 36 Offers could not apply to detailed assessment costs (e.g. 10% uplift, interest, etc) on the basis that CPR 47.20(7) “does not provide that the determination of the costs of detailed assessment proceedings is itself to be regarded as an independent claim”.  It would also have led to the potential for an indefinite cycle of costs claims to arise.

Case Law Guidance on CPR 47.20

There are several key cases that help clarify how CPR 47.20 should be interpreted:

Lownds v Home Office [2002] EWCA Civ 365

Although this case pre-dates CPR 47.20, it set important standards around the proportionality and reasonableness of legal costs, which influence how bills are assessed, and by extension, whether a party acted reasonably during the assessment process.

AB v CD [2011] EWCA Civ 133

This case confirmed that CPR 47.20 gives the court wide discretion to determine who should bear the costs of detailed assessment. The Court of Appeal emphasised that a mechanical application of the default rule is not appropriate — instead, all the circumstances should be considered.

Practical Considerations

Legal representatives on both sides should consider the following when dealing with detailed assessment proceedings under CPR 47.20:

• Ensure that bills of costs are realistic and justifiable. Inflated bills risk adverse costs consequences.
• Engage constructively in negotiation. A refusal to consider reasonable offers may come back to haunt a party at the assessment hearing, particularly if there is a refusal to engage in ADR upon which the Court increasingly takes a dim view.
• Make Part 36 or Calderbank offers to protect your client’s position.
• Keep clear records of conduct throughout proceedings to support arguments on assessment costs.

How can ARC Costs Assist?

ARC Costs regularly assist in Detailed Assessment of Costs. We are an experienced and independent team of specialised Costs Draftsmen and Costs Lawyers. As independent experts, we can assist either Paying or Receiving parties in resolving costs disputes.

For Receiving Parties we are adept at preparing Costs Budgets and Bill of Costs, as well as providing legal costs negotiations services and preparing Points of Reply. Ultimately we can ensure your legal costs are recovered to the maximum degree possible, and we will always advise on appropriate settlement parameters from the outset for you to determine to what degree you can expect recovery of your legal costs.

Similarly if instructed by the Paying Party, we are experts at settling legal points of concern within Points of Dispute, and conducting negotiations to reduce your exposure to legal costs.

If you would like more information on any of our services or wish to speak to a member of our expert costs team about your legal costs, then please do not hesitate to contact us. Please call one of our independent experts at 01204 397302, or email one of our costs experts direct on info@arccosts.co.uk.

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