Setting Aside a Default Costs Certificate
When to Apply and Prospects of an Application
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What is a Default Costs Certificate?
Setting aside a Default Costs Certificate in a claim for legal costs can be an uphill struggle, but how are they obtained and what are the implications?
Following this, the unsuccessful paying party must then serve their Points of Dispute within 21 days of service of the Notice of Commencement.
If the paying party fails in serving their Points of Dispute within the required time scale, the receiving party should apply for a Default Costs Certificate, which allows all costs claimed within the Bill of Costs to be awarded in full, without the requirement to request a Detailed Assessment Hearing to obtain a costs order.
This type of certificate brings the Detailed Assessment process to an end and orders the paying party to pay the full amount of costs listed in the receiving party’s Bill of Costs.
The receiving party should request the certificate as soon as possible as the Court may not agree to issue the certificate if Points of Dispute are served in the meantime, even if they are late.
Setting Aside a Default Costs Certificate
In some circumstances, a paying party can apply to set aside a Default Costs Certificate. Under CPR 47.12, the Court must set aside this type of document if it was granted to a party who was not entitled to receive the same.
‘The court will set aside a default costs certificate if the receiving party was not entitled to it’
An example of this would be if the receiving party request a Default Costs Certificate prior to the 21 day deadline, if the paying party had not been served the Bill correctly, or if they had in fact served Points of Dispute.
Practice Direction 47, Paragraph 11 sets out some important requirements for applying to set aside a Default Costs Certificate:
“(1) An application for an order under rule 47.12(2) to set aside or vary a default costs certificate must be supported by evidence.
(2) In deciding whether to set aside or vary a certificate under rule 47.12(2) the matters to which the court must have regard include whether the party seeking the order made the application promptly.
(3) As a general rule a default costs certificate will be set aside under rule 47.12 only if the applicant shows a good reason for the court to do so and if the applicant files with the application a copy of the bill, a copy of the default costs certificate and a draft of the points of dispute the applicant proposes to serve if the application is granted.”
The paying party can therefore apply to set aside the certificate, even if reasonably obtained, if they can prove to the Court that there is a “good reason” for doing so.
An application to set aside a Default Costs Certificate should be made as a matter of urgency and usually within 14 days. The accompanying Points of Dispute must set out the proposed reductions sought and should have reasonable prospects of success.
There is usually a high threshold for proving a “good reason” and reasons such as administrative errors and disorganisation are not likely to be successful. The Court may consider factors under the Denton Test in setting aside a Default Costs Certificate, and a ‘good reason’ may relate to there be a serious issue of importance to be addressed in assessing the Bill, or if unavoidable circumstances prevented the paying party from filing Points.
If the paying party has filed Points of Dispute, the receiving party may be able to apply for Interim Costs Certificates on request for a detailed assessment (it is recommended payments on account are made to avoid this), or if terms of settlement can be reached, parties can approve an agreement via a Final Costs Certificate.
Our Recent Success in Setting Aside a Default Costs Certificate
We were recently instructed by a paying party in a High Court dispute to assist in setting aside a Default Costs Certificate. The receiving party had obtained a Default Costs Certificate and were subsequently awarded costs of in excess of £220,000.
We applied to set aside the certificate and were successful in doing so as it was held that there was a “good reason “under CPR rule 47.12. The “good reason” for setting aside the Default Costs Certificate in this case, was that the Notice of Commencement was incorrect in stating that the paying party was responsible for costs in excess of £600,000, when infact, they were only responsible for approximately £220,000. In addition the Bill of Costs itself was defective as it did not clearly split the costs liability for the two Defendants responsible for paying the legal costs.
We subsequently assisted in negotiations of the Bill of Costs, by preparing Points of Dispute, and follow costs negotiations we managed to reduce the bill to less than £80,000.
How Can ARC Costs Assist?
We assist paying parties in setting aside Default Costs Certificates, and can further assist in the negotiation of a Bill of Costs through drafting and serving Points of Dispute and providing representation at assessment.
We can also assist receiving parties in the enforcement of costs by drafting Bills of Costs and applying for Default Costs Certificates when the paying party has failed to serve their Points of Dispute on time.
As independent legal costs experts, we act for both paying parties and receiving parties in disputing and enforcing costs claims.
If you require any further information or would like our assistance, please contact us on 01204 397302, or via email at firstname.lastname@example.org.
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