Provisional Assessment – When is a sanction not a sanction?

There has been considerable debate in recent times as to whether the allowance of a Bill of Costs at nil upon Provisional Assessment constitutes a sanction, for which relief requires to be sought, with paying parties asserting that it is. This debate now appears to have been put largely beyond further argument by HHJ Graham Wood QC in his ruling in the matter of Nirjalmit Mehmi v Richard Pincher (County Court at Liverpool; Appeal No 91/2014; Case No 3YK61991; 20 July 2015)

The claim arose out of a minor Road Traffic Accident, in which the Claimant was successful in recovering the modest sum of £2,756.00 following the issue of proceedings, giving right to an indemnity for their costs from the Defendant. The claim had been funded under a CFA and, as part of the objections to the Bill which was served, the Defendant put the Claimant to proof as to the existence of a valid retainer.

Upon filing of the Bill of Costs for Provisional Assessment, the Claimant’s solicitor made an (understandable) error in certifying the Request for Detailed Assessment (N258) in misinterpreting the reference to a dispute as to the receiving party’s “ability” to pay, as precisely that, rather than as intended, their “liability” to pay, or possibly that she believed the reference to be a requirement for disclosure and the usual procedure under Pamplin.

Due to this confusion, the Claimant’s solicitor failed to file with the other documentation and the N258 a copy of the CFA and, as a consequence of the same, the Regional Costs Judge, District Judge Woodburn, did not consider himself satisfied that the Claimant had proven the existence of a valid retainer and thus assessed the Claimant’s Bill at nil. As a result of the unfavourable outcome of the Provisional Assessment, the Claimant’s solicitor applied for an Oral Hearing and, out of an abundance of caution, also made an Application for Relief from Sanction.

Both matters came before District Judge Baker, with the Application for Relief being heard first, whereupon the District Judge declined to give the relief sought, applying the approach in Denton and thus upheld the original nil assessment.

The Claimant Appealed on the basis that the District Judge had been wrong to deal with the Application for Relief first, or at all, as the same was unnecessary; the Provisional Assessment process provided an automatic right to any party dissatisfied with the outcome of the ‘paper exercise’ to apply for an Oral Hearing on any of the issues decided and, as such, those initial decisions were not final, and thus not capable of being either a sanction nor the subject of an Appeal. On consideration of the oral arguments of the parties on the Appeal against the findings of District Judge Baker, HHJ Wood QC noted that he shared some of the concerns of the paying party that

“…giving receiving parties a ‘second bite of the cherry’ with an oral review would lead to a proliferation of unscrupulous costs solicitors who want to maximise their profit and deliberately frustrate the provisional process by failing to file documents”

but cautioned that

“While each case must be decided on its merits and it is not inconceivable that this may occur, in my judgment is highly unlikely when one considers the costs consequences of disabling a provisional assessment in this manner. It is highly unlikely that the costs of the assessment process will be recovered in full, or even substantially in part, which would defeat the purpose of such a tactic.

“It seems to me that the failures which are occurring to date arise more out of a genuine misunderstanding in respect of arguments about retainer validity, rather than a policy to costs build or a lackadaisical approach to compliance with a procedure which is in its relative infancy.”

That said and despite sharing some of the Defendant’s concerns, HHJ Wood QC concurred with the Claimant that

“It seems to me that the process involved in the provisional assessment must mirror, albeit without oral representations, that which would ensue in a detailed assessment hearing. If the costs judge had parties in front of him or her in such circumstances, but could not be satisfied as to the validity of the retainer, either because the documents had not been provided or because the receiving party elected not to disclose the retainer, would that amount to a sanction or a judicial determination? I am quite satisfied that it would be the latter, and therefore I see no difference with the paper decision.”

“There is a built-in entitlement to an oral review on any aspect of the provisional assessment. The provisional assessment is not binding if there is such a review and therefore its effect is nullified”

and therefore set aside the decision of District Judge Baker.

HHJ Wood QC then went on, to provide further clarification as to the process, finding that a nil assessment of any Bill of Costs on a Provisional Assessment did not constitute a sanction for which relief would be required, nor was it an Appeal, again concurring with the Claimant.

“Insofar as the [Provisional Assessment] procedure had been devised to be a component part of detailed assessment and was introduced by amendments to the rules and practice directions as a proportionate means of dealing with expensive hearings where bills were challenged, and was not intended to be a substitute for the detailed assessment procedure, as opposed to an alternative modified version, in my judgment the power of the judge under paragraph 13.13 [of Practice Direction 47] has not been curtailed, and when an oral hearing is requested under CPR 47.15(7), although the hearing is limited to those items in the bill which are challenged under sub-paragraph (8) and thus is circumscribed, it is in other respects a detailed assessment, in which the judge must surely have the power to direct the receiving party to produce documents to enable it to ‘reach its decision’.

“Having said that, a party who deliberately or carelessly fails to provide the necessary documentation to enable a decision to be reached will face significant costs consequences – a factor which is likely to act as a deterrent and to prevent oral reviews proceeding with material which was not previously available.”

Acknowledging the confusion caused by the current wording of the N258 and the understandable concerns of receiving parties that their CFAs or other retainers might be disclosed when filing the documents for assessment, HHJ Wood QC noted that the Regional Costs Judges in Liverpool were in the process of developing specimen Directions to deal with the same, as there was some concern that practitioners may be tempted to withhold filing necessary documents due to this misunderstanding.

However, and in the interim, HJ Wood QC has provided most helpful and clear guidance for practitioners which should, hopefully, avoid any further instances such as those in the instant matter occurring in the foreseeable future.