COST BITES 71: POINTS OF DISPUTE STRUCK OUT BECAUSE THEY WERE NON-COMPLIANT: PAYING PARTIES RAISING OBJECTIONS HAVE TO USE THEIR JUDGMENT

March 13, 2023 · by · in Appeals, Assessment of Costs, Costs

I am grateful to Kain Knight Costs Lawyers for drawing my attention to the judgment of HHJ Gosnell in O’Sullivan v Holmes and Hills LLP [2023] EWHC 508 (KB).  The judge allowed an appeal by a solicitor in a solicitor and own client assessment of costs. He held that the points of dispute did not comply with the rules and should have been struck out.  There is much to think about here in the way that points of dispute are drafted, and the particular considerations that a paying party has to apply.  In particular if the “kitchen sink” approach is used by the paying party then the assessment will, inevitably, be a long and drawn out process.

 

“Although the District Judge was clearly concerned that the interpretation of Ainsworth relied on by the Appellant below would mean that each and every timed entry would need to be addressed, that would only be the case where the paying party chose to challenge each and every timed entry, which is not a proportionate approach. If however he chooses to take such a disproportionate approach then the receiving party is entitled to know why each entry is challenged. This process is , after all, called a detailed assessment. A more proportionate approach would involve the Judge only considering a limited number of more valuable entries and ruling on them only. This option had clearly been open to the Respondent.”

 

THE CASE

The defendant solicitors had acted for the claimant in a personal injury case.  The case was settled. The defendant’s deducted the sum of £17,082.92 from the sum to be paid, in accordance with their retainer.

THE CLAIMANT’S OBJECTION TO THE BILL OF COSTS

The claimant instructed new solicitors who requested that the defendant file a bill of costs, with the intention of challenging the deduction from damages.  The claimant issued proceedings for an order for assessment.  A provisional assessment took place.  The defendant challenged the assessment and an oral hearing took place.

THE DEFENDANT’S POINT: THE INVALID AND VAGUE NATURE OF THE POINTS OF DISPUTE TO THE COSTS

The defendant argued that the claimant’s points of dispute to the bill of costs did not comply with the rules. The points of dispute being too vague and unparticularised.  That argument was not accepted by the District Judge at the provisional assessment or the oral hearing.  The defendant appealed.

THE DEFENDANT’S SUCCESSFUL APPEAL

The defendant’s appeal was successful.

THE POINTS OF DISPUTE

HHJ Gosnell set out the nature of the bill and the points of dispute.

    1. The Bill and Points of Dispute:
The Bill of Costs submitted by the Appellant was prepared in traditional form. There were five different fee earners who had done the work at the Appellant firm and there were four different hourly rates to be applied. There were a total of 116 items on the bill and the only two items which were the subject of Points of Dispute 7.1 and 7.2 were items 75 and 107. These were the two items which dealt with work relating to documents. By way of example item 75 looked like this:
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    1. In similar fashion dealing with the documents section in part 2 of the Bill item 107 looked like this:
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    1. Schedule 1 as referred to in item 75 was six pages long and contained 83 separate entries for tasks carried out specifying the fee earner involved, the time spent and the date the work was done. Schedule 2 ran to just over a page and contained 17 entries completed in similar fashion. This method of recording time spent by the solicitor on documents is in accordance with CPR 47 PD paragraph 5.18 which states as follows:
5.18 In respect of heads (2) to (10) in paragraph 5.12 above, if the number of attendances and communications other than routine communications is twenty or more, the claim for the costs of those items in that section of the bill of costs should be for the total only and should refer to a schedule in which the full record of dates and details is set out. If the bill of costs contains more than one schedule each schedule should be numbered consecutively.
    1. The Points of Dispute which were the subject of the hearing on 6th May and which were intended to deal with the two items above looked like this:
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    1. The Reply to the Points of Dispute was as follows:
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    1. When the Appellant referred to Point 6 above it was mistakenly referring to the reply to Point 5 of the Points of Dispute. In this section the Appellant set out a substantive objection to Point of Dispute 5 relying on the presumptions set out in CPR 46.9(3) and upon the authority of the decision of the Court of Appeal in Ainsworth v Stewarts Law
LLP [2020] EWCA Civ 178. The Appellant sought to argue that the Points of Dispute
were inadequately pleaded and did not enable the parties and the court to determine precisely what is in dispute and why. As far as Point 5 of the Points of Dispute was concerned the District Judge at the provisional assessment dismissed the Point of Dispute because she found it was inadequately formulated to enable the court to address it. She formed the same conclusion about Point 7.
    1. In relation to Points 7.1 and 7.2 however she reached a different conclusion. Her handwriting is difficult to read but I believe that it says:
” Contrary to the totally non-specific dispute set out in 5 & 7 above this dispute is confined to documents time and referenced by individual grades of fee-earner and the disputed documents schedule is available to the court. As such the court is of the view that it can properly decide the point of dispute. The time claimed is unnecessarily incurred and / or unreasonable in amount considering all relevant items both at item 74 and 106. Time allowed as annotated”
It is accepted that she was mistaken in the item number and it should have read 75 and 107. In relation to Point of Dispute 7.1 the District Judge allowed exactly what was offered in relation to the first three fee earners with a compromise figure in relation to the fourth. In relation to Point of Dispute 7.2 she allowed exactly what was offered.
  1. The Appellant requested an oral hearing limited to the District Judge’s provisional findings in relation to Points 7.1 and 7.2 of the Points of Dispute. This hearing was listed before District Judge Batchelor on 6th May 2022. At the hearing Mr Meehan for the Appellant sought to persuade the District Judge that the two Points of Dispute ought to be dismissed relying on the presumptions set out in CPR 46.9 (3) and contending that the Points of Dispute were inadequately pleaded in that they failed to state concisely the nature and grounds of dispute in relation to the two items in question bearing in mind the significant number of entries on each of the two schedules. Mr Simpson for the Respondent sought to persuade the District Judge that the Points of Dispute contained sufficient material for the Judge and the Appellant to fairly respond to them. Both counsel relied on the judgment of the Court of Appeal in Ainsworth v Stewarts Law LLP.

FINDINGS ON APPEAL (1): THIS WAS NOT AN APPEAL OF A “DISCRETION”

HHJ Gosnell held that the appeal was about an issue of construction and not the exercise of a discretion by the District Judge.

  1. The decision under appeal today is the District Judge’s assessment that the Points of Dispute as served were sufficient to comply with CPR 47PD paragraph 8.2 which is set out above. I am not convinced that this is strictly the exercise of a discretion as submitted by the Respondent. It is not a situation where a number of different responses were available to the Judge some of which might be considered objectively justifiable. The District Judge here had a binary choice. Either the Points of Dispute were sufficient to comply with the Practice Direction or they were not. I accept that the decision involved a complex evaluation of a number of factors to reach that choice but it was not strictly the exercise of a discretion. When considering such evaluative choices on appeal however it is right to give sufficient respect to the experience of the decision maker, in this case an experienced District Judge who is also a Regional Costs Judge.

FINDINGS ON APPEAL (2) THE POINTS OF DISPUTE WERE NON-COMPLIANT

The judge held that the Points of Dispute were not compliant and should be struck out.
    1. There are six Grounds of Appeal but all of them are in fact different reasons why the Appellant says that the District Judge fell into error in not dismissing the two Points of Dispute under consideration. At the end of the day the appeal can only succeed if I find that the District Judge was wrong to find that the Points of Dispute were sufficiently pleaded to comply with the Practice Direction as interpreted by Ainsworth. Accordingly, I will deal with this issue exclusively but it is likely that the arguments set out in the individual Grounds of Appeal will be taken into account.
    1. The real issue in this case is how the District Judge should have interpreted the case of Ainsworth, which she accepted was binding on her, as a decision of the Court of Appeal. Does the case mean, as the Appellant contends, that Points of Dispute, when dealing with an item like the documents section, which has a list of entries set out in a schedule, have to at least descend into some detail identifying the nature and grounds of dispute in relation to individual entries in the schedule, or, as the Respondent contends, that the receiving party is not obliged to descend into that sort of granular detail by pleading to some or all of the individual entries but can set out his challenges to the items only.
    1. I do not think it is helpful to ask whether Lady Justice Asplin knew the difference between “items” and “entries” . I have little doubt that she would have done, if the distinction was explained to her. I think it is more important to ask what she meant by her guidance which I have set out earlier in this judgment. The word “item” is usually defined as ” a thing or a unit especially in a list or collection“[1] and in that sense both items in the Bill ( which I accept is a term of art) and entries in the schedule might both be colloquially termed as “items”. There is clearly room for this conclusion as is evident from the judgment of Chief Costs Judge Gordon-Saker:
“8. In oral submissions, Mr Poole on behalf of the claimant seeks to take a broad brush approach to the document schedule and indicated that what he would like to do is to identify some particular items and explain why those are unreasonable……
It is obvious here that the Costs Judge is referring to entries on the schedule but describing them as items.
    1. In the succeeding paragraph 9 , in my view, the Costs Judge is referring to items when he means “entries” :
The difficulty with that, it seems to me, is that the claimant has not set out in his points of dispute which items he wishes to challenge and why and that does cause, as the defendant has indicated in its reply, a difficulty insofar as – in respect of items which have not yet been identified – they would need to look at the attendance notes to see what work was done and why and the context in which it was done in order to seek to explain why the time claimed is reasonable, if indeed that is the objection, or why a particular fee earner was engaged in doing it and why possibly more than one fee earner was engaged in doing it.
The point made in the last sentence can only refer to “entries” as he speaks of “doing it” which would be an individual task, not the total sum of work done by one fee earner for a whole specified period, which is all that was set out in the six items in Ainsworth.
    1. The next paragraph of his decision refers to both “items” and “entries” but there is no doubt in my mind that he is making it clear that he did expect the paying party to descend into detail to identify those entries on the schedule that are challenged and what the reasons for the challenge are:

10. The purpose of points of dispute is really to prevent that work being done on the hoof in the course of a hearing. The solicitors are entitled to know specifically which items are challenged and the reasons for the challenge. Insofar as the claimant states that all entries are disputed, it seems to me that it would be beholden on him to explain why each particular entry is challenged and whether he is asserting that no time should be allowed or reduced time should be allowed or whether the work should have been done by a different grade of fee earner. But, as pleaded, the points of dispute, it seems to me, do not raise a proper challenge to the documents items and certainly do not raise a challenge which can be properly answered by the defendant without a considerable amount of time being spent in looking at the papers to reply to that challenge and that, it seems to me, is a process, which if it is to be done, should be done in advance of the hearing rather than at the hearing.

    1. I accept that this is the reasoning of the Costs Judge rather than Lady Justice Asplin, but as she was considering on appeal whether the Costs Judge was right to reach the conclusion he did, it would have been open to her to disagree in particular with paragraph 10 of his judgment and rule that the paying party did not have to descend to such granular detail by identifying which individual entries were in dispute. Had she done so, however, it is likely in my view, that she would have granted the appeal and found for the paying party.
    1. Reading the judgment as a whole it is clear that when Lady Justice Asplin is referring to items as in paragraph 39 she is referring to entries on the schedule rather than items:
” In order to deal with matters of this kind fairly, justly and proportionately , it is necessary that both the recipient and the court can tell why an item is disputed. The recipient must be placed in a position in which it can seek to justify the items which are in dispute”
If she was referring to items then, for example the disputed item at paragraph 43 reads:” Engaged 20 hrs 6 mins (LG)” . The corresponding objection to that item is set out in paragraph 16 above which containing a significant amount of detail about the objections and it was clear which item it related to (as it related to all six items). What was not clear was which entries were challenged and on what grounds. There were seven grounds listed but also it was said that they were not exclusive and so other objections could be raised at the detailed assessment hearing. In this example the receiving party could tell why the overall item was disputed but had no way of knowing which entries were disputed, and if they were on what grounds.
    1. Similarly, when Lady Justice Asplin refers in paragraph 42 to Points of Dispute 10 she complains:
” It did not contain cross-references to the numbers of the items disputed on particular grounds. In fact, it was accepted that it did not state why any item in the bill was disputed”
In my view she is referring to entries on the schedule rather than actual items on the Bill. It could perhaps have been fairly argued that the Points of Dispute did identify why a particular item was disputed but it could not be argued that there was any cross referencing to any particular entry on the schedule.
    1. A fair reading of the judgment of Costs Judge Gordon-Saker reveals that he dismissed the Points of Dispute because they did not identify which particular entry or entries on the schedule were disputed and why. This is obvious particularly from paragraph 10. If Lady Justice Asplin had decided to dismiss the appeal but for a different reason, that the
Points of Dispute did not sufficiently identify which item was in dispute (irrespective of whether the entry could be identified) she would obviously have explained the distinction and why she came to that conclusion.
    1. If I am wrong in this interpretation it is very difficult to explain why Mr Ainsworth did not succeed in his appeal. He had clearly identified which items were in dispute and provided a list of reasons which applied to all the items (which themselves had been very briefly expressed). If he was not expected to descend into detail by identifying individual entries on the schedule and providing reasons for challenge it is hard to see how his approach could be challenged.
    1. My interpretation of this judgment appears to be shared by the editors of Cook on Costs[2]. In their explanation of the judgment in Ainsworth they explain:
” The points of dispute did not challenge any specific entries to those items notwithstanding that the solicitors file had been inspected by the former client’s costs lawyer. The replies indicated that the solicitors could not prepare to deal with such a challenge”
It is notable that they refer to the failure to challenge any specific entries, rather than items and I have confidence that the editors do know the difference between the two.
    1. The editors also seem to recognise the tension between the exhortation to keep the Points of Dispute brief as recommended by Sir Rupert Jackson and the need to provide enough material for the court to make a fair assessment[3]:

“In fact , some paying parties have used the reforms as an opportunity to keep the points of dispute brief, and not deal with the objections in detail. Whilst this means the end of long repetitive comments about the documents item in particular, it does take the parties back to a trial by ambush.

The introduction of provisional assessments militates against brevity and selectivity. The Points of Dispute are the only opportunity the paying party is going to have to influence a judge carrying out a provisional assessment. On that basis, the kitchen sink is almost bound to be pleaded along with everything else.”
    1. On the basis of my interpretation of the judgment in Ainsworth the Points of Dispute in the current case do not satisfy the requirements of CPR 47PD paragraph 8.3 in that they do not identify specific points stating concisely the nature and grounds of dispute. The receiving party cannot identify which individual units of work are disputed and why. The assertion that the time was either unnecessarily incurred or unreasonable in amount is an assertion of two alternative allegations which are actually completely different. “Unnecessarily incurred” suggests work was done which did not reasonably need to have been done at all. “Unreasonable in amount” suggests work was reasonably done but it either is recorded incorrectly or took longer than was reasonably necessary. The receiving party is entitled to know which of these two allegations applies to any unit of work challenged so that it can meet the challenge with an explanation or evidence. To allow a generic alternative challenge to stand in relation to potentially any and all entries in the schedule is clearly unfair to the receiving party.
    1. I accept the force of the submission by the Appellant that the Points of Dispute in Ainsworth which were found to be inadequate were actually significantly more extensive than the one sentence Point of Dispute in the current case. I do not think that the distinction which the Respondent seeks to draw is important. In Ainsworth each separate fee-earner’s work was allocated a separate item number. In the current appeal all of the fee earners are identified and their work quantified in the same way as in Ainsworth but they are grouped in two items with separate schedules of detailed entries. In both cases the item entries are very brief and refer to a more detailed schedule. The principles should apply similarly to both cases. The current appeal and Ainsworth were both cases where a client was challenging the bill of costs of his own solicitor. This gave him the right to inspect the solicitors file of papers. That right is not available to a litigant on a normal party and party assessment. A client is therefore in a much better position to identify which particular entries are unnecessary or unreasonable in amount than the normal paying party at the end of contested litigation.
    1. I fully accept that the District Judge had an understandable concern that she did not want to go back to the “bad old days” before 2013. She was right to record Lady Justice Asplin’s remark that “This need not be a lengthy process”. But the length of the process is in the hands of the paying party. If there is a documents section as in this case where there is a schedule with 83 timed but identifiable items it is up to the paying party how many items it wishes to challenge. A sensible paying party may make a value judgment and decide to challenge only the highest and therefore more valuable entries. If the paying party chooses to challenge every single item in the schedule then he is the one adopting a disproportionate course of action which the receiving party has to be able to fairly respond to.
    1. This perhaps begs the question what alternative courses were open to the Respondent. If the Respondent wanted to challenge some or all of the entries on Schedules 1 and 2 it could be achieved by producing a counter-schedule of document time. Another method would be to annotate the individual schedules with specific objections attached to the Points of Dispute. Alternatively, it could be achieved by grouping specific objections together under identified headings and cross-referencing these to specific document times claimed such as :
” unreasonable amount of time spent preparing witness statements – entries dated 1.1.18, 3.1.18, 4.5.18 and 7.7.18.”
” duplication of fee earners reviewing the same document: dated
2.3.18, 4.5.18 and 6.6.18″
This would give the Solicitor a reasonable opportunity to consider the objection and either concede the same or prepare a reasoned response. It is therefore possible to prepare Points of Dispute which are concise and state the nature and grounds of dispute. How many items are challenged however determines how concise the Points of Dispute can be and this is very much in the hands of the paying party.
    1. The decision by the paying party in this case to challenge the whole of both parts of the documents section was likely to produce a disproportionately long and complex detailed assessment. This is no doubt why the Respondent’s costs lawyers suggested a “broad brush” approach. This would have meant much less work for them having to actually justify grounds for objection and tactically might well have produced a better result as the Judge might have been tempted to just make a blanket deduction based on a percentage of the overall costs. This might well have been unfair however unless the Judge was satisfied that those costs were unreasonable in amount or unreasonably incurred with the benefit of the doubt going to the receiving party . A difficult task to do fairly without considering the individual entries on the schedule. Also perhaps an unfair process if the receiving party is not given the opportunity to know the case it has to meet.
    1. Although the District Judge was clearly concerned that the interpretation of Ainsworth relied on by the Appellant below would mean that each and every timed entry would need to be addressed, that would only be the case where the paying party chose to challenge each and every timed entry, which is not a proportionate approach. If however he chooses to take such a disproportionate approach then the receiving party is entitled to know why each entry is challenged. This process is , after all, called a detailed assessment. A more proportionate approach would involve the Judge only considering a limited number of more valuable entries and ruling on them only. This option had clearly been open to the Respondent.
    1. The Respondent relies on the fact that this experienced District Judge recorded that she was able to undertake the detailed assessment as she had available to her the “very detailed item by item schedule attached to the bill”. She can, of course, be forgiven for eliding items with entries. I have to accept that she did in fact carry out the assessment, although the receiving party may perhaps have grounds to complain that she merely adopted the Respondent’s offers in seven out of the eight entries. The fact that the District Judge is able to carry out an assessment is not, however, the end of the matter. The process must be fair and the interests of the receiving party must be taken into account in ensuring there is a fair process, even when the court is trying to adopt a proportionate approach. In my assessment, the Points of Dispute 7.1 and 7.2 did not give the Appellant a fair opportunity to discern the nature and grounds of the dispute in respect of the various entries in the schedule which were not identified in any way either as unreasonable in amount or unnecessarily incurred.
    1. I accept the fact that the Respondent did make offers in respect of the total time recorded by each respective fee earner. Offers are voluntary in detailed assessment proceedings but they are often helpful to the process, particularly if some of the offers are accepted by the receiving party. I am not convinced however that the offers made do anything to assist the receiving party to discern what is in dispute and why. It is aware generically that the Respondent is saying the overall totals are too high but does not know which entry in particular is considered unreasonable in amount or alternatively should not have been incurred at all .The distinction of course is important because they are two completely different concepts.
    1. An issue which has arisen on this appeal is whether the District Judge properly dealt with the assumptions set out in CPR 46.9 (3) which are set out in paragraph 5 of this judgment. Lady Justice Asplin ruled in Ainsworth that Points of Dispute should be formulated by reference to the presumptions contained in CPR 46.9(3). District Judge Batchelor found:
” It seems to me that the solicitors have done that. They have said that the time was either unreasonably incurred or unnecessarily incurred or was not reasonable in amount”
    1. In my assessment there is no engagement at all with the presumptions. There is no assertion by the receiving party that costs have been incurred with the express or implied approval by the client, or that the amount was approved by the client. There was therefore no need for the client to deny these factual assertions in the Points of Dispute. Similarly there was no assertion in the Points of Dispute that costs incurred were of an unusual nature or amount requiring a warning from the solicitor that those costs may not be recoverable. In Ainsworth there was such an assertion ( paragraph 6 of the judgment) and so it was necessary for the Points of Dispute to engage with this presumption. In law the presumptions therefore applied to the current detailed assessment proceedings but they were not actually in issue on the facts. So although the District Judge fell into error by stating that the Points of Dispute had engaged with presumptions it is not determinative of this appeal as, in my judgment, there was no requirement to do so where those presumptions were not in issue.
  1. Overall, I have concluded that the District Judge should have ruled that Points of Dispute 7.1 and 7.2 should be dismissed because they failed to adequately set out the nature and grounds of the dispute. In finding otherwise I find that she fell into error and that the appeal should be granted. I accept that this produces a rather draconian result but as explained by Lady Justice Asplin in paragraph 44 of Ainsworth the Respondent has known since receiving the Replies to the Points of Dispute that this issue would be raised. There was ample opportunity for the Respondent to seek to amend the Points of Dispute to raise the appropriate amount of detail to satisfy the test in CPR 47 PD par 8.2 but he chose not to so thus presenting the rather stark choice which the District Judge had to make.