This article on Default Costs Certificates and Interim Costs Certificates supplements another article on payments on account of costs . In that article I explained the procedure by which a successful party who is awarded costs in litigation may obtain a payment on account of costs under CPR 44.2(8), until the total amount of the costs to be paid has been determined by a detailed assessment.
It is not always possible to obtain a payment on account of costs. One such situation was highlighted in the recent case of Finnegan v Spiers [2018] EWHC 3064. Birss J held that when a Part 36 offer has been accepted, a deemed costs order arises, and there is no scope for a payment on account to be ordered, since the deemed order did not satisfy the requirement in CPR 44.2(8) “Where the court orders a party to pay costs subject to detailed assessment”.
Default Costs Certificates and Interim Costs Certificates provide further mechanisms by which the party which has been awarded costs (“the receiving party”) may obtain payment of all or part of those costs before the conclusion of a completed detailed assessment.
Detailed Assessment
The detailed assessment is started by the receiving party serving a Notice of Commencement in Form N252, with a copy of the bill of costs and, if a costs management order has been made, a breakdown of the costs claimed for each phase of the budget: see CPR 47.6.
The paying party can commence the detailed assessment immediately after costs order has been made at the conclusion of the proceedings. If an interim costs order was made during the proceedings, and these costs are to be assessed, the detailed assessment can only be commenced at the end of the proceedings, unless an order is made under CPR 47.1 for an immediate assessment. Under CPR 47.7, the time for commencing detailed assessment is within 3 months. After that, under CPR 47.8 the paying party may apply for an order requiring the receiving party to commence detailed assessment proceedings within a specified period, and the court may disallow all or part of the interest.
Default Costs Certificate
The mechanism of a Default Costs Certificate under CPR 47.11 is somewhat similar to that of the default judgment under CPR Part 12. The Notice of Commencement gives the paying party 21 days to respond by serving Points of Dispute, as specified by CPR 47.9. If the paying party does not comply with that deadline (or any extended deadline agreed by the parties) there are 2 potential consequences:
- by CPR 47.9(3), the paying party may not be heard in the detailed assessment, unless the court gives permission;
- by CPR 47.9(4) the receiving party may apply for a Default Costs Certificate.
A Default Costs Certificate essentially brings the detailed assessment to an end without needing to go through the detailed assessment hearing itself. The certificate orders the paying party to pay the amount in the receiving party’s bill of costs in full, together with a prescribed amount for the costs of commencing the detailed assessment.
It is up to the receiving party to apply to the court for a Default Costs Certificate. The procedure is set out in paragraph 10 of Practice Direction 47. It files a request at court in form N254, accompanied by a copy of the document giving the right to detailed assessment.
Setting aside the Default Costs Certificate
If the receiving party wishes to request a Default Costs Certificate, it should do so at the earliest opportunity: the court may not issue a Default Costs Certificate if Points of Dispute are served in the meantime (CPR 47.9(5)).
Once a Default Costs Certificate has been issued, the paying party may be able to apply to set it aside. Under CPR 47.12(1), the court must set it aside if the receiving party was not entitled to it (for instance if it was issued less than 21 days after the Notice of Commencement). In any other case, under 47.12(1) the court may set aside the Default Costs Certificate “if it appears to the court that there is some good reason why the detailed assessment proceedings should continue.”
There are some important requirements for making an application to set aside a Default Costs Certificate, set out in Practice Direction 47, at paragraph 11:
- the application must be supported by evidence;
- the court must have regard to whether the application was made promptly;
- generally the Default Costs Certificate will not be set aside unless 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 it proposes to serve.
In determining whether there is a good reason to set aside the Default Costs Certificate, the courts have applied the 3 stage test in Denton v T White [2014] EWCA Civ 906 which is engaged on applications for relief from sanctions, namely:
- whether the default was serious or significant;
- whether there was a good reason for the default;
- whether in all the circumstances it would be just to grant relief.
It should be noted that one High Court Judge has recently doubted whether the need to apply for relief from sanctions in engaged, in the analogous situation of an application to set aside a default judgment: Cunico Resources v Daskalakis [2018] EWHC 3382 (Comm)
A factor which will undoubtedly be significant is the court’s view of the strength of the paying party’s potential challenge to the bill of costs, so it is vital that well prepared Points of Dispute are filed with the application, to show that the paying party is serious about challenging the bill and could expect to achieve substantial reductions on the amounts claimed.
The promptness of the application is expressly listed as a factor which must be considered. It ca be determinative, as emphasised by a recent case in which I acted for the applicants, Kavuma v Hunt [2018] 12 WLUK 119.
The chronology was as follows. On 15 December 2017 trustee in bankruptcy served on the Kavumas a Notice of Commencement for the assessment of the costs of the proceedings. The notice included a bill of costs for £293,000 and provided that the applicants serve points of dispute by 8 January 2018. Around that time, Mr and Mrs Kavuma’s son was dangerously ill in a Scottish hospital with leukaemia and the applicants were granted an extension of time for serving Points of Dispute to 2 March. They failed to serve Points of Dispute and on 6 April the Trustee obtained a default costs certificate for the full amount claimed. In May the Trustee obtained interim charging orders against the Kavumas and a writ of possession in respect of the property. On 1 June the son died from leukaemia. In July the charging orders were made final. On 8 August the applicants obtained a stay of the enforcement of the final charging orders which was granted on the basis that Points of Dispute were finally served and an application was made to set aside the Default Costs Certificate by 22 August. On 16 August the Kavumas applied to stay the possession order, which was dismissed by the court as totally without merit, and on 22 August unsuccessfully applied to set aside the final charging order. The application to set aside the Default Costs Certificate was made on 26 October, supported by a witness statement with Points of Dispute.
The judge, Mark Cawson QC, dismissed the application to set aside the Default Costs Certificate. The main difficulty for the Kavumas was the gap between the Default Costs Certificate being issued on 6 April and the application to set aside the Default Costs Certificate on 26 October. The judge accepted that for some of the period the delay was excusable, given the Kavumas’ difficult personal circumstances. However, there came a point where this ceased to excuse the delay: in August they were able to engage with the court, and the real problem for them was that the court had ordered them to make the correct application by 22 August, but they then made a different application instead, and before taking 2 further months to make the correct application.
Interim Costs Certificates
If the paying party does serve Points of Dispute, the next potential option for the receiving party is to apply for an Interim Costs Certificate.
This is governed by CPR 47.16. An Interim Costs Certificate is one which orders the paying party to pay an amount of costs and is issue before the Final Costs Certificate – which is issued at the conclusion of the proceedings.
The court may issue an Interim Costs Certificate at any time after the receiving party has filed a request for a detailed assessment hearing. The rules do not specify any particular factors to be considered, or any test to be applied. However, filing a request for detailed assessment means that the court will have a copy of the Bill of Costs, the Points of Dispute and any Replies, and so should be on a position to form a view of the likely level of costs to be awarded on the assessment. When filing a request for detailed assessment the documents which the receiving party must file are listed:
- in the case of an assessment inter parties, in paragraph 13 of Practice Direction 47;
- in the case of a solicitor client assessment, in paragraph 6.10 of Practice Direction 46.
A recent decision of Master Leonard in Warren v Hill Dickinson [2019] 1 WLUK 182 is helpful in confirming that:
- an Interim Costs Certificate can be issued in a solicitor client assessment, the jurisdiction is not restricted to an inter parties assessment;
- the application for an Interim Costs Certificate can be made before the detailed assessment hearing has been requested, as long as the request has been made by the time the application is heard.
4 New Square
13 February 2019
This article is provided for information only and should not be relied on as legal advice. Always consult a specialist lawyer about the circumstances of your own case.
