Social landlords who do not challenge costs are potentially overpaying by tens of thousands of pounds in some of these matters. Alex Bagnall explains how they can secure significant reductions.
An opponent recently told me that many social housing providers don’t challenge the costs which are claimed in housing disrepair matters: they simply pay the full amount claimed without demur.
This surprised me. On average, my housing clients pay around one-half of the costs claimed against them. Reductions of over 70% in individual cases are not uncommon. These outcomes are consistent with the results obtained by costs lawyers I know who act for other providers in these types of cases.
By not challenging costs, providers are paying thousands of pounds too much in every case. Worse still, they are positioning themselves as prime targets for future claims.
The process of challenging costs is relatively straightforward and inexpensive. Those who negotiate settlements with claimant representatives should have an understanding of its operation and the areas where savings can be achieved.
This article provides a high-level view of how providers can use detailed assessment to reduce their costs liability, and the things to look out for when objecting to costs.
What is detailed assessment?
Detailed assessment is the process which is followed to liquidate a costs order. The procedure is governed by CPR 47.
A deal can be struck through negotiations at any stage. However, if compromise is not possible, a judge will ultimately decide how the payable level of costs.
What is the process for challenging costs?
The authority for assessment
To commence detailed assessment proceedings, the claimant must have an ‘authority for assessment’.
If proceedings have been issued, this will be either an order made by the court or the acceptance of a Part 36 offer.
Cases which settle pre-issue
Most disrepair claims settle before proceedings are issued. Detailed assessment proceedings cannot be commenced at this stage because there is no authority for assessment.
Instead, shortly after settlement, the claimant’s solicitors will normally provide details of the costs claimed. This is the first opportunity to identify where savings can be made.
I usually recommend making a strong early offer. The offer will either be acceptable, in which case the costs claim is settled without any costs of assessment being incurred; or it will protect the provider from having to pay the costs of assessment if the matter goes to an assessment hearing.
If settlement cannot be achieved, the claimant will issue costs-only proceedings under CPR 8. Several issues can arise which may need to be addressed through a witness statement at this stage, including:
- Has the claimant issued in the correct court? Costs claims are often issued in courts which are seen as ‘claimant-friendly’. If an inappropriate court has been chosen, you may wish to try to transfer the case.
- Is a payment on account of costs sought? It can be sensible to make a payment on account to reduce interest. However, the amount claimed is often massively overstated. If so, it should be challenged.
- Does the draft order reflect the settlement? For example, if the entitlement to costs arises out of a late Part 36 acceptance, an order requiring the provider to pay all the costs of the claim would be incorrect.
Once service is acknowledged, an order will normally be made without a hearing. This order will be the claimant’s authority for assessment allowing detailed assessment proceedings to be commenced.
Detailed assessment proceedings
Detailed assessment proceedings should be commenced within three months of the authority for assessment.
If this deadline passes, the provider can apply for an order requiring the bill to be served by a specified date, failing which the bill will be assessed at £0.
If this application is not made, the court can only punish a delay in serving the bill by reducing the interest payable.
After the bill is served, the provider must serve points of dispute within 21 days. This document contains general objections (such as to hourly rates) and specific objections (such as to the number of letters sent). Only objections made within the points of dispute can be raised at an assessment hearing.
If points of dispute are not served on time, the claimant may obtain a default costs certificate for the full amount claimed.
After points of dispute are served, the claimant can respond through replies. Replies should be served within 21 days, but there is no sanction for a failure to do so.
The quantification of costs
If a settlement cannot be reached, the claimant will request a detailed assessment hearing. This should be done within six months of the authority for assessment.
As with any delay in serving the bill, an application can be made for an order compelling the request to be filed. Without such an application, the only sanction allowed is a reduction to interest.
If the costs claimed exceed £75,000, the parties’ advocates will attend a hearing to go through the issues in the points of dispute. The judge will have access to the claimants’ solicitors’ file of papers and will consider those documents when deciding how much should be allowed.
Where the costs are £75,000 or less, the bill will ordinarily be subject to a provisional assessment. This process involves a hearing without any advocates present, and the court will normally only have access to the bill, points of dispute and replies. The underlying papers will not usually be provided.
Oral review hearings
After the provisional assessment, either party can request an oral hearing for the court to review its decisions.
The party requesting the oral hearing must secure a 20% adjustment to the provisionally assessed amount, otherwise they will automatically pay the costs of the oral hearing.
The costs of assessment
There is a presumption that the provider will pay the costs of assessment. The easiest way to rebut this presumption is for the bill to be assessed at less than the amount of an early offer.
Where the bill is provisionally assessed, the costs of assessment are capped at £1,500 plus VAT and any court fee. Many courts award less than this cap.
There is no cap on the costs of any oral hearing, or in cases which are not subject to provisional assessment.
Most disrepair cases fall within the provisional assessment scheme. This means providers can proceed to an assessment hearing without facing an unlimited costs exposure.
How to value a claim for costs
Valuing a claim for costs is more art than science. An assessment hearing involves many different decisions being made, and the court has a very wide discretion when considering each point. Even the most experienced costs lawyer will be involved in cases where bills are assessed at much more (or much less) than they predicted.
However, it is possible to approximate what is likely to be allowed. The most common areas where significant reductions are achieved are as follows:
Small claims track costs
Where neither the value of the specific performance or the consequential damages exceeds £1,000, the claim should be allocated to the small claims track. If the case settled before allocation, CPR 46.13(3) allows the court to restrict costs to what would have been allowed had allocation taken place.
This rule can result in significant savings. In the recent case of Jalili v Bury Council the court disallowed all costs in excess of what would have been allowed on a small claims track basis.
Most disrepair cases are suitable for Grade D and C fee earners.
Guideline hourly charging rates are available on the gov.uk website. In a ‘National 1’ area, for example, the guideline rates for Grade C and D fee earners are £161 and £118 respectively. In October, these will increase to £178 and £126.
One firm of solicitors claims £217ph for unqualified fee earners. If the court caps this rate at the guideline of £118, this single decision can reduce the solicitors’ costs by over 45%.
A typical fee for an expert’s report should be in the region of £500-£1,000. Claims which are higher than this level should be viewed with caution.
Where experts are instructed through an agency, providers should check whether there is any commonality of ownership with the claimant’s solicitors. Such agencies add an uplift onto the fee paid to the expert – sometimes causing the fee to triple – and their use should be challenged.
It is not uncommon to see documents time reduced by 50%-75%. Items which can be easily challenged include:
- File reviews, particularly on the day the file is opened or during periods when the case is dormant.
- Preparation of standardised documents, such as the letter of claim or instructions to the expert.
- ‘Non-routine’ letters, which are sometimes just a few lines long.
- The preparation of witness statements long before they could be required.
- Costs of funding, such as drafting a CFA.
- Quantifying the claim every time offers are exchanged.