Milbrooke Construction Ltd v Jones – Recovery of Costs of Detailed Assessment
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How the Dominos fall: the Question of Whether a Large Reduction to a Bill Necessitates a Large Reduction to the Costs of Assessment
In Milbrooke Construction Ltd v Jones  EWHC B20 (Costs) (‘Milbrooke Construction’) the Court was required to consider whether the costs of assessment should follow the event in circumstances in which the Paying Party had achieved a substantial reduction to the receiving party’s Bill of Costs on assessment. As a matter of legal principle, such costs of assessment, that being the costs of the costs proceedings from the time of service of the N252 Notice of Commencement right up until the final costs adjudication (Provisional Assessment/Detailed Assessment), belong to the Receiving Party/the party which has ‘won’ the substantive underlying action. The costs of assessment can be substantial, costs matters up to £75,000 allowing for recovery of costs of assessment in the region of £1,500 plus Court fees, plus VAT (CPR 47.15(5)), whereas bills of costs above such a level do not feature such a cap.
Before exploring the limits of the rules, it is important to consider the precise wording of CPR 47.20(1) which sets out the ‘usual position’ as to the costs of assessment:
Liability for Costs of Detailed Assessment Proceedings: CPR 47.20
(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.’ (emphasis added)
Evidently, there are exceptions to this rule, as with many other legal rules. If such an exception is sought to be invoked, for example upon receipt of the provisionally assessed bill of costs, it is incumbent upon the challenging party to make such a request within 21 days of receipt of the notice of provisional assessment (CPR 47.15(7)). Where such a challenge is made, this is necessarily guided by the criteria set out within CPR 47.20(3), the said provision listing the circumstances in which the Court may consider making ‘some other order’ as to the costs of assessment; and thus, depart from the default position set out within CPR 47.20(1),
(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.’
The Court, therefore, must consider conduct (a), the amount of any reduction made to the bill of costs (b) and whether an item has been claimed/disputed reasonably (c) in determining whether ‘some other order’, such as no order as to costs, or an award of costs in the Paying Party’s favour, or a reduction to the Receiving Party’s costs of assessment is appropriate to be made.
In Milbrooke Construction, the High Court of Justice Senior Courts Costs Office was tasked to consider whether ‘some other order’ as to the costs of assessment was necessary to be made in a claim for which the bill of costs in question had been reduced by 39%, this including a significant reduction to the documents time sections of the bill of costs. The challenge, therefore, was raised with CPR 47.20(3)(b) firmly in mind given the reduction achieved.
In the first instance, the receiving Party sought to relying on the non-binding decision in Mullaraj v Secretary of State for the Home Department  EWHC B5 (Costs) (22 April 2021) in asserting that regardless of the reduction made to the bill of costs, any such reduction could not be a proper basis for a reduction to the costs of assessment. The same issue was, therefore necessary to be considered in the first instance by the Court.
The Bill of Costs in Mullaraj was reduced by a significant margin (44.05%, para 10), however, notwithstanding this, the Court sought to view the challenge through the lens of Part 36, that is, whether the Paying Party had sought to leverage the protection afforded by the Part 36 regime, rather than simply, following a period of idleness, seeking to invoke CPR 47.20(3) following a good day in Court, the Court of Appeal decision in Global Energy Horizons Corporation v Gray  EWCA Civ 123 as cited at para 9 and 16 of Milbrooke Construction referring.
Whilst the Court acknowledged CPR 47.20(3)(b), it appeared dissatisfied with the practicality of adjudicating as to this factor. The provision, for example, would remain open to argue for Paying Parties who actively fail to make any offers whatsoever in settlement, potentially placing a considerable burden upon the Court in a multiplicity of cases in hearing disputes as to the payment of the costs of assessment.
The provision equally, throughout imprecise definition, would lend itself to further argument in terms of what magnitude of reduction would be the ‘tipping point’ between costs following the event and some other order as to those costs being made (para 25/26 Mullaraj). In sum, the factor was a troublesome one with a considerable potential to be a key battleground of satellite litigation, something which any Court may be minded to avoid promoting.
The Court in Milbrooke Construction accepted the determination in Mullaraj in respect of the expressed paramount importance of Part 36 offers (which remain equally applicable to costs cases, see CPR 47.20(4)/(7) and CPR 36.17) given the role of such offers in enabling a party to protect itself against a claim or litigation risk (para 11, 16 Milbrooke Construction). Notwithstanding the predominance of Part 36 however, it was considered that the factors set out within CPR 47.20(3) nevertheless remained of importance alongside this, paragraph 12 succinctly setting out the Court’s view
‘12. The terms of r47.20 appear to me to be clear. In the circumstances which arise here the court is required to have regard to the amount, if any, by which the bill of costs has been reduced in deciding whether to make any other order. The words are “must have regard…” (my emphasis). Since the court is required to consider the matter when considering whether to make a different order then it follows, it seems to me, that the reduction on the bill may, when considering all the circumstances, be a basis for a ‘different order’. Needless perhaps to say, that does not mean that it must impose a different order; the court must always have regard to all the circumstances of the case. Small reductions in circumstances where sums are reasonably claimed are not likely to be enough. But it does seem to be that it is not open to a court simply to disregard the reduction in the bill as a factor in determining costs without more.’
Therefore, whilst it was necessary to consider whether Part 36 protection had been sought by the Receiving Party, this was not in and of itself solely determinative of the issue, and could not otherwise limit the discretion open to the Court to consider the CPR 47.20(3) factors.
The Court extended its reasoning at paragraph 13 in clarifying that challenges under CPR 47.20(3)(b) need not involve proven or alleged misconduct or fraud, a notion which had been entertained at paragraph 26 of Mullaraj.
This was in line with judicial reasoning in relation to CPR 44.11, namely the key decision of the Court of Appeal in Gempride v Bamrah  EWCA Civ 1367 which confirmed that dishonesty cannot be considered to be precondition of a reduction on the grounds of unreasonable/improper conduct. This further mirrored the solicitor/client assessment provisions found within section 70 (9) of the Solicitors Act 1974 (para 14) which allows for liability for the costs assessment process to attach to the Receiving Party where the Paying Party client has achieved a substantial reduction.
In considering what magnitude of reduction would be required in order to achieve a CPR 47.20(3) alternative order, the Court in Milbrooke Construction shook off the hesitancy shown in Mullaraj and relatively clearly set out its stall,
‘19. I do not however accept that the Defendant should receive any order for costs in his favour, or that no order for costs is appropriate. No order for costs might have been appropriate if the extent of the recovery or success on the claim was very modest so that recovery overall was limited to substantially less than 50% of the costs claimed, in particular in cases of really dramatic or exceptional overall reductions in a bill of the order of 75% or 2/3rd where it might be difficult to say that the receiving party is the overall ‘winner’. That is not the case here. It seems to me clear, notwithstanding the large deductions made, that in all the circumstances including in particular the offers made, the Claimant achieved substantial success.
20. The parties advanced different mathematical bases for particular proposed reductions, referencing the time spent on various issues. It seems to me however, standing back and having regard to all the circumstances of the case – including in particular, the offers made, a deduction of 30% best reflects the justice of the situation.’
Therefore, where the reduction is ‘dramatic’ and in the range of 66.6% onwards, it may be considered that the costs of assessment are necessary to be either disallowed (no order as to costs) or otherwise to be awarded to the Paying Party, whom in such a circumstance may be considered the ‘victor’ given the substantial reduction achieved. Any reduction of a lesser level may still be sufficient for ‘some other order’ but this would largely turn on the facts of the individual case, alongside turning on the consideration of the additional CPR 47.20(3)(a)/(c) factors and on whether the Paying Party had sought to protect its position pursuant to Part 36.
What can we Learn from Milbrooke Construction Ltd v Jones?
In thinking about the broad-stroke learning points from the decision of the High Court of Justice Senior Courts Costs Office in Milbrooke Construction, it is to be generally noted that the Court is likely to take a more positive view of a Paying Party seeking to leverage CPR 47.20(3) if said party has made a protective Part 36 offer on costs.
If such an offer has not been made however, arguments may still be raised pursuant to CPR 47.20(3), but in doing so, the Paying Party will need to demonstrate a combination of conduct concerns, substantial reductions and unreasonable claiming/maintaining of items within the bill, CPR 47.20(3)(a)/(b)/(c) referring. The bigger the reduction, the bigger the potential benefits to be had. Nevertheless CPR 47.20(3) cannot be seen as a free for all for an embittered Paying Party because of the clear caveat that a failed adventure into the realms of CPR 47.20(3) may lead to higher costs exposure and therefore may simply act to rub yet further salt into already expensive wounds.
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