After a legal dispute concludes, determining who pays the legal fees is usually the next step. Cost proceedings, which allocate who pays these costs, are essential for both parties to partake in. However, delays in initiating these proceedings can have significant consequences for both parties.

Claimants may face reduced recoverable costs, financial strain from unpaid legal fees, and difficulty in managing legal expenses. Defendants, on the other hand, may incur increased financial liability due to interest on costs, potential for higher legal costs in responding to extended disputes, and strategic disadvantages from unresolved cost issues.

To try and reduce these risks, courts often impose strict deadlines for initiating cost proceedings, due to the importance of prompt action.

If you are looking for advice or assistance with your costs proceedings, our team of legal costs experts at Greener Costs will be able to assist you. Please do not hesitate to get in touch with us today.

Bi v Tesco Underwriting Limited

The case of Bi v Tesco Underwriting Limited highlights the significant consequences of delaying the initiation of cost proceedings.

In Bi v Tesco Underwriting Limited, the claimant, involved in a car accident in August 2022, pursued a claim for car hire charges but was not physically injured. On April 5, 2023, the defendant made a Part 36 offer for £3,555.36:

“Inclusive of general and special damages and net of liability, we formally offer to your Client the gross sum of £3,555.36 in full and final settlement of the hire, storage and recovery elements of the claim…The offer is made pursuant to Part 36 r 36.5(1) of the CPR. If the offer is accepted within 21 days of the date of this letter, we will be liable for the Claimant’s costs in accordance with Rule 36.13 or 36.20 of the CPR…”

The claimant accepted this offer on April 11, 2023, without mentioning costs.

In October 2023, the claimant served an informal bill of costs on the defendant which sought costs on the standard basis, but started costs-only proceedings when the defendant did not agree. The District Judge made a court order that the defendant pay the claimant’s costs on the standard basis. However, the defendant challenged this.

A dispute then arose over costs recovery. The claimant’s legal team delayed costs-only proceedings until October 2023, by which time new fixed recoverable costs rules had taken effect on October 1, 2023. These reforms expanded the fixed costs regime for most civil cases under £100,000 (except Multi-Track cases). The defendant argued that since costs proceedings were issued after this reform date, the new rules should apply, potentially reducing recoverable costs to nil.

The court agreed with the defendant’s position, determining that the acceptance of the Part 36 offer did not include a specific agreement on the basis for costs. The judge ruled that, since the claimant delayed issuing costs proceedings until after the new rules came into force, the assessment would follow the updated rules rather than those in place when the offer was accepted. As a result, the claimant’s costs were assessed at zero:

“I conclude that the Part 36 offer did not prescribe the basis upon which costs were to be paid. The offer was made and accepted on the basis that the costs would be determined in accordance with the Rules. The Rules were changed in order to implement an extension of the fixed recoverable costs regime. Because the claimant did not issue her costs-only proceedings until after the amendments to the rules came into force, the costs of her claim for damages fall to be determined under the amended Rules.”

“It appears that the parties agree that, upon the view I have taken, the fixed costs allowed should be nil.”

The Bi v Tesco Underwriting Limited case emphasises the importance of timely cost proceedings. Delays in initiating these proceedings can have significant consequences, as courts expect parties to handle cost disputes efficiently and transparently.

What does the ruling in the above case mean moving forward?

The ruling in Bi v Tesco Underwriting Limited highlights several important points regarding conduct surrounding cost proceedings:

• Timeliness in Costs Proceedings: The case emphasises the need for claimants to act promptly when seeking costs recovery. Delays can lead to substantial losses, especially if procedural rules change in the interim.
• Ambiguity in Part 36 Offers: The case also underscores the importance of clearly defining the basis for costs in settlement offers. Here, the Part 36 offer did not specify costs terms, which left the issue open to interpretation under changing rules.
• Fixed Costs vs. Standard Basis: The decision highlights that courts will apply the rules in effect at the time costs proceedings are issued, not necessarily when a settlement was reached. This can drastically impact the amount recoverable, as seen when the new rules led to costs being assessed at nil.
• Strategic Considerations: Both claimants and defendants must be vigilant about regulatory changes and ensure that costs-related disputes are promptly addressed to avoid falling under less favourable rules. This case serves as a reminder that efficiency and clear communication are key in legal cost disputes to prevent unfavourable rulings.

The consequences of a delay in issuing costs proceedings

Delays in initiating costs proceedings in England and Wales can have serious repercussions, with various consequences depending on the circumstances. Under the Civil Procedure Rules (CPR), a claimant must adhere to strict timelines, particularly in the case of detailed assessment proceedings. In accordance with CPR 47.7, a detailed assessment hearing must be initiated within 3 months of serving points of dispute, a judgment, court order, discontinuance under Part 38, or acceptance of a Part 36 offer.

If the proceedings are not started within the prescribed time, or the receiving party fails to comply, the paying party may apply for an order that no costs be allowed, or the court may impose severe penalties, including the strike-out of the costs claim:

• Strike Out of Costs Claim: A significant delay can result in the court striking out the entire costs claim, leaving the claimant with no opportunity to recover any part of the costs from the defendant.
• Extension Requests: If there is a legitimate reason for the delay, the claimant may request an extension of time. Under CPR 3.1(2)(a), the court has the discretion to grant such an extension, though the longer the delay, the less likely the request will be accepted.
• Reduction of Costs Award: Even if the claimant proceeds with the costs proceedings after a delay, the court may choose to reduce the costs award. If the delay is unjustified or unreasonable, the claimant could be penalised by receiving a lower recovery than initially expected.
• Disallowance of Interest: Interest on the costs could also be impacted by delays. Interest typically accrues from the date of the judgment or settlement, but a delay in issuing costs proceedings could shorten the period during which interest can be claimed or even result in no interest being awarded at all.
• Adverse Costs Orders: A costs order could be made against the party causing the delay, requiring them to pay additional costs incurred by the other party as a result of the delay. This may include costs related to the extended assessment process or any extra legal work caused by the postponement.
• Impact on Settlement Negotiations: Delays can also affect any ongoing negotiations for an offer to settle. The paying party may use the delay as leverage, potentially negotiating a lower settlement amount or forcing the receiving party to abandon their claim altogether due to procedural time limits.
• Prejudice to the Paying Party: A delay can also prejudice the paying party, particularly if it disrupts their ability to gather evidence or respond effectively to the costs claim. If the delay complicates the paying party’s position, the court may be more sympathetic to their objections, further diminishing the claimant’s chances of recovering the full amount of costs.

Delays in commencing detailed assessment proceedings can severely undermine a party’s ability to recover costs, either by reducing the amount of recoverable costs, forfeiting the claim altogether, or exposing the party to adverse consequences such as costs orders or loss of interest.

How can Greener Costs assist?

Greener Costs are a team of expert Law Costs Draftsmen & Costs Lawyers with in excess of 25 years combined experience in the field of legal costs. We can assist both Solicitors and Clients, and recommend the co-operation of both, to resolve legal fee disputes without the costly involvement of the Courts. Though if it progresses to that point, our team are experienced in assisting in court cases, from the county court to high court proceedings.

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We are doing this through carbon offsetting of our staff, becoming completely paperless and carbon offsetting through each instruction.

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