How legal costs are assessed

In making an assessment of costs, the court must take into account the following:[1]

• the conduct of all the parties both before and during the court case, and any efforts made in trying to resolve the dispute

• the amount of money or value of property involved

• the importance of the case to all the parties

• the complexity of the issues

• the skill, effort, specialised knowledge and responsibility involved

• the time spent on the case

• the place where the work was done and the circumstances in which it was done.

There are two methods that the courts use for assessing costs: summary assessment and detailed assessment.[2]

When the court decides the amount of money to be paid under a costs order at the time the order is made, this is known as a summary assessment. For instance, at the end of an interim application, the trial judge will assess the costs to be paid as soon as the order is made.

The general rule is that at the end of any trial in a case that is being dealt with on the fast track, and at the conclusion of any other hearing that has lasted not more than one day, the court will make a summary assessment of the costs unless there is good reason not to do so.[3]

If it appears likely that there will be a summary assessment at the hearing, the parties and their solicitors have a duty to assist the court in this exercise.[4] The legal representative must be prepared to argue that the costs incurred are reasonable, and s/he should prepare, in advance, a written statement detailing the costs to be claimed. This is called a statement of costs and should contain the following information:

• the number of hours to be claimed

• the hourly rate charged

• the grade of the fee earner

• the nature and amount of any disbursements to be claimed. Disbursements are the costs spent in conducting a case, such as court fees or expert fees.

• the solicitor's costs for attending or appearing at the hearing

• the barrister's fees in respect of the hearing

• Value Added Tax (VAT) on these amounts.[5]

There is a prescribed form (Form N260), which should be followed when preparing the statement of costs, and this should be signed by the party or solicitor. The statement of costs must be filed at court and copies served on the potential paying party as soon as possible, at least 24 hours before the hearing.[6] Failure to comply with these conditions will be taken into account by the court in deciding what costs order to make.[7]

The court will not, however, make a summary assessment of costs where the receiving party, that is, the party that is getting her/his costs paid, is:

• an assisted person or a publicly funded person, or

• a child or a patient within the meaning of the Civil Procedure Rules Part 21, unless her/his solicitor has waived the right to further costs.[8]

Where a person is in any of the above categories, and s/he is the paying party, it is still possible for the court to make a summary assessment of costs. However, section 11 of the Access to Justice Act 1999 restricts awards of costs against publicly funded individuals.

A detailed assessment is a separate hearing at which a costs officer (usually a district judge in the county court) assesses the costs to be paid at the end of the court case. Where detailed assessment is ordered, the receiving party's solicitor (or costs draftsman) prepares a detailed bill, which is served upon the paying party.[9]

Detailed assessment proceedings take place in the county court that was dealing with the case when the judgment or order was made, or in the case of other courts and London County Courts, in the Supreme Court Costs Office.[10] The receiving party starts the process by serving on the paying party the following documents:

• a Notice of Commencement

• a copy of the bill of costs, which is a breakdown of all the legal costs incurred

• copies of any barrister's fee notes

• copies of any expert's bill to be claimed

• written evidence of any disbursements over £250 to be claimed

• a statement containing the names and addresses of other persons that are to be sent the notice of commencement.[11]

Service on the paying party must be within three months of the date of judgment, if the receiving party is to obtain the maximum amount of costs. The paying party then has 21 days from the date of service of notice to respond with points of dispute.[12] If there is no response from the paying party, the party to whom costs are owed can ask the court to issue a default costs certificate for the full amount of the bill, plus fixed costs and the court fee. The parties may extend the period, or the court may alter it.[13]

If the statement of costs is not served after three months, the other side may apply for an order requiring the receiving party to commence detailed assessment proceedings within such time as the court may specify.[14]

In cases where the receiving party is in receipt of public funding, the same procedure will apply, and s/he will go through detailed assessment as above. If the paying party does not pay, the assisted person's solicitor can make a claim for payment from the Legal Aid Agency, which will in turn pursue the paying party for the costs.

Where costs are to be paid by the publicly funded individual, the request is on a different form (Form N258A), [15] and is sent to the court, not to the other side. The court will then carry out an assessment of the reasonableness of the claim, before the Legal Services Commission pays out. In addition to the documents specified above, the following must also be submitted:

• copies of all the orders made in relation to costs

• all civil legal aid and Community Legal Service certificates and any amendments to them.

Dealing with a detailed assessment

Where a person finds her/himself involved in a detailed assessment, it will usually be sensible to obtain the advice of a solicitor or Citizens Advice at the earliest possible stage. Costs liabilities can be very sizeable, and the documents and procedure can be complicated and technical. An adviser may be able to find significant reductions that should be made, or assist with the negotiation of a reduced sum or payments over a period of time.

Interest is usually payable on unpaid costs orders, and interest runs from the date of the order and not from the date on which the costs are assessed. Even where the amount of costs is in dispute, it is usually sensible for the paying party to pay part of the costs payable, so as to reduce the interest payable after assessment. If the receiving party delays in beginning the detailed assessment proceedings, s/he may lose the right to recover interest.[16]