Costs, detailed assessment and misconduct

In McNamee v LB Brent [2025] EWHC 2612 (SCCO) the Costs Judge dealt with two preliminary issues in detailed assessment proceedings.

The claim arose out of a tripping accident in 2019. The Claimant (‘C’) tripped over a broken paving slab and sustained facial, dental and orthopaedic injuries. Proceedings were issued against LB Barnet (‘D1’), LB Brent (‘D2’) and Keith Bailey & Co (Travel) Ltd (‘D3’). The claims against D1 and D3 were discontinued with no order as to costs. The case against D2 was settled shortly before trial by a Consent Order which provided for D2 to pay C damages of £26,000, ‘the Claimant’s costs to be assessed if not agreed’ and for D2 to pay D1’s costs in the sum of £7,000.

Shortly following the settlement, C’s solicitors provided a Without Prejudice Costs Summary claiming costs of £208,583.76. D2 made an offer of £50,000, which was rejected. C made a counteroffer of £195,000, which was rejected. C subsequently commenced detailed assessment proceedings, with a Bill of Costs prepared by an external costs draftsman in the sum of £140,430.60.

The two preliminary issues were:

(1) Did the Consent Order allow C to recover from D2 her costs incurred against all three Defendants or just those applicable to D2?

(2) Did the pre-commencement conduct of C’s solicitors (in submitting such an exaggerated informal Statement of Costs and offer) amount to misconduct pursuant to CPR 44.11(1) and, if so, should the Court exercise its discretion to disallow part of the assessed costs pursuant to CPR 44.11(2)?

On the first issue, D2 submitted that C could not recover from D2 her costs of the discontinued claims against D1 and D3 as this would be contrary to the plain terms of the Consent Order. The claims against both D1 and D3 were discontinued with no order as to costs and that ‘meant what it says’. C submitted that the Consent Order reflected the collective intention that C should recover against D2 all of her costs against all three Defendants and the order for costs payable by D2 was unfettered and did not limit the Claimant’s entitlement to the costs incurred against D2 only.

The Costs Judge found in favour of C. The paragraph in the Consent Order for payment of C’s costs by D2 did not purport to limit or fetter her recovery in any way. The agreements to discontinue against D1 and D3 did not provide that no recoverable costs should arise, simply that D1 and D3 would bear no direct liability to C. The Consent Order was broad and clear in its intention to provide that C could recover her costs against all three Defendants from D2.

On the second issue, CPR 44.11 allows the Court to disallow all or part of the costs being assessed where the conduct of a party or their legal representative, before or during the proceedings or in the assessment proceedings, was unreasonable or improper. D2 sought a reduction on this basis of 75% of C’s costs. C submitted that no sanction was applicable.

There was an additional issue in that C’s informal Statement of Costs and settlement offer of £195,000 were marked Without Prejudice, and D2, therefore, had to establish an exception applied to the general principle that without prejudice communications are not admissible as evidence. The appropriate test was ‘unambiguous impropriety’. C disputed that this high threshold for losing without prejudice privilege was met in the circumstances of this case.

The Statement of Costs had been prepared by the solicitor with conduct of the case (‘M’) and claimed 9.3 hours for preparing it. M had claimed Grade A rates throughout, despite not being a Grade A fee earner for the whole period. The hourly rates claimed were up to 25% in excess of the rates allowable under the contractual retainer with C. The time claimed was far in excess of that actually spent. Whilst C’s solicitors accepted that the Statement of Costs represented a highly exaggerated approximation of their actual costs, they submitted this was due to inadvertent oversight as M was a solicitor with no costs training who had adopted a broadbrush approach.

Whilst accepting that informal negotiation prior to commencing detailed assessment will be underpinned by broadbrush calculations, the Costs Judge stated there are limits to this. Where a receiving party’s Statement of Costs and/or offer to settle costs exaggerates significantly the true liability, in circumstances where the inflation is incapable of reasonable explanation or justification, it is open to the Court to conclude that the receiving party was guilty of CPR 47.11 misconduct.

On the facts of this case, the informal Statement of Costs grossly exaggerated C’s true entitlement by over 60%. The Judge considered the errors were fundamental and inexplicable. D2 had demonstrated that C’s solicitor’s pre-commencement conduct satisfied the test of ‘unambiguous impropriety’ for misconduct pursuant to CPR 44.11(b) in circumstances where without prejudice correspondence was relied upon. Further, in those circumstances, the Judge was satisfied that the Court should exercise its discretion to impose a sanction under CPR 44.11(2) disallowing 50% of C’s assessed costs.

Amanda Evans is a Partner at Dolmans Solicitors.