Ruling clarifies court expectations on challenges raised to bill of costs

Stuart McNeill, Grace MacDonald and Robert Shrimpton of Pinsent Masons were commenting after the Senior Courts Costs Office (SCCO) – a part of the High Court of England and Wales – gave an interim judgment in the detailed assessment of costs in the context of litigation that arose in the aftermath of a management buy-out of a Birmingham-based business in 2017. Pinsent Masons acted for the group of companies behind the buy-out in the case.

The companies behind the buy-out claimed that John Kelly, whose family owned the business that was sold, was liable for costs pertaining to disclosure and in respect of management time spent responding to an unsuccessful claim Kelly had raised against two of the management team. That costs claim was filed under a claim waiver containing an indemnity that Kelly had agreed to at the time of the buy-out and was distinct from the costs he was ordered to pay by the High Court that followed the failure of his claim against the management team.

Kelly, however, disputed that he was liable for costs beyond those he had already paid in response to the costs order. This led to the claim waiver costs claim being brought before the SCCO.

In ruling on the costs dispute, however, the court provided guidance on the courts’ expectations over the way challenges against a proposed bill of costs – so-called ‘points of dispute’ – should be raised. That guidance was provided after the companies complained that they had been put to “maximum cost and difficulty” in responding to Kelly’s points of dispute whilst Kelly himself had not gone “to any real effort himself to identify the actual issues in dispute against particular items, or his real position on the amount of time which tasks ought to have taken”.

Costs Judge Leonard said there was “much force” behind that complaint, having reflected on how the rules regarding the fair assessment of costs, provided for in the Civil Procedure Rules applicable to civil litigation in England and Wales, were to be interpreted in the context of this case.

Shrimpton said: “Cost practitioners will be aware of the case of Ainsworth v Stewarts Law LLP, ruled on in 2020, in which guidance was provided by the Court of Appeal on the level of detail a party should provide when preparing their points of dispute against a bill of costs. While the Ainsworth case concerned a solicitor/client assessment, in his detailed and considered judgment published, Costs Judge Leonard has now set out that fundamental underlying principles for a solicitor/client assessment are also applicable to an assessment between opposing parties, and highlights the pitfalls of not providing enough information within points of dispute. The ruling further supports the findings in the judgment of deputy cost judge Roy in the case of Wazen v Khan last year.”

Costs Judge Leonard found that Kelly failed to adequately particularise the preliminary points of dispute; had provided only a limited number of specific examples of objection; and had used a “cut and paste” exercise rather than a considered exercise of determining which points might apply to which timed entry, so he struck out many of his objections.

Where the court allowed the assessment to proceed on certain preliminary issues, the judge noted that only the minimum amount of detail had been provided to enable an assessment and that, in fact, every item, apart from the items for preparing the bill of costs, had been challenged by Kelly. The examples given were just enough for the objection to survive in relation to those specific examples only.

Kelly’s arguments relating to delegation and excessive time were allowed to proceed for costs assessment. However, citing the case of O’Sullivan v Holmes and Hills LLP in 2023, Costs Judge Leonard made clear that whilst a party is entitled to challenge every item in a bill of costs should they see fit, it could come with adverse costs consequences if that approach is manifestly unreasonable and takes up a disproportionate amount of the court’s time.

McNeill said there were a number of key takeaways from the judgment.

“First, the receiving party must have an adequate opportunity to understand which items in their bill of costs have been challenged and the grounds of challenge, to be able to prepare a response,” McNeill said.

“Second, it is not acceptable for the parties or the court to have to spend time during a detailed assessment hearing identifying the items in the bill of costs that are objected to by the paying party, or the nature or grounds of the objection, and to expect the receiving party to respond ‘on the hoof’. This should be made clear by the paying party at the outset so there should be no element of surprise or ‘ambush’ at the hearing,” he added.

“Finally, the points of dispute must be prepared in a way that ensures that a detailed assessment hearing can be managed in a fair, just and proportionate way. It is for the paying party to raise clear and pertinent points upon which the court can adjudicate,” McNeill said.

MacDonald added: “This judgment provides further clear guidance as to the SCCO’s expectations on how points of dispute should be prepared by parties and indicates that failure to do so could lead to points being struck out and a potentially costly penalty.”