November 2001
(amended February 2011)
The Civil Procedure Rules 1998 (CPR) came into force on 26 April 1999 and provide a code for civil procedure in the civil courts (see also Chapter 19). To coincide with the introduction of the CPR the Insolvency Rules 1996, in particular, Part 7, Chapter 6 ,were amended by The Insolvency (Amendment) (No 2) Rules 1999. The rules in part 7 cover the practice and procedure to be followed by the official receiver and other office-holders when dealing with costs and detailed assessment.
The Rules relating to costs and detailed assessment have been further amended, most recently as a result of The Insolvency (Amendment) Rules 2010 which came into force on 6 April 2010. This chapter and the note references have been amended to reflect the changes.
(amended February 2011)
Except where inconsistent with the Insolvency Rules 1986, the provisions of the CPR and any related practice directions apply to insolvency proceedings with any necessary modifications. In the matter of costs and detailed assessment CPR Part 44 (general rules about costs),and CPR Part 47 (procedure for detailed assessment of costs and default provisions) specifically apply ..
Notes: [r7.51A] ]
39.3 Definitions - Detailed assessment
Detailed assessment is the procedure by which the amount of costs payable by one party is decided by a costs officer in accordance with Part 47 of the CPR and The Costs Practice Direction which supplements Parts 43 to 48.
The process consists of scrutinising the bill of costs and applying to it the basis of assessment as ordered by the court (see also paragraph 39.10).
Notes: [CPR r43.4]
The term ‘costs’ includes fees, charges, disbursements, expenses and remuneration
Notes: [CPR r43.2]
The CPR renames some of the concepts relating to costs as follows:
|
OLD TERM |
NEW TERM |
|
Taxation |
Assessment* |
|
Taxing officer |
Costs officer |
|
Certificate of taxation |
Final costs certificate |
|
Costs in cause |
Costs in the case |
|
Each party to bear his own costs |
Each party to pay his own costs |
*Assessment may be summary assessment or detailed assessment.
Notes: [CPR r43.3] [CPR - The Costs Practice Direction, section 13]
'Summary assessment' means the procedure by which the court, when making an order about costs, orders payment of a sum of money instead of fixed costs (set amount costs as specified by CPR Part 45) or 'detailed assessment'. Whenever a court makes an order about costs, which does not provide for fixed costs to be paid, the court will consider whether to make a summary assessment of costs. The court will usually make a summary assessment of the costs at the conclusion of a fast track trial or any other hearing that has lasted no more than one day unless there is good reason not to do so.
If the official receiver intends to seek his/her costs at the conclusion of the hearing he/she must file a copy of the statement of costs at court and serve it on any party against whom an order for costs is to be sought at least 24 hours before the hearing. Where the statement of costs is served late the judge will generally be concerned as to whether the other party has suffered any prejudice thereby. If no statement of costs is produced at all a summary assessment will be impossible and the judge will have to consider whether to deprive the party in default of their costs or order a detailed assessment or merely adjourn the summary assessment. Where a detailed assessment or an adjourned summary assessment are necessary because of the failure of the official receiver, it is likely that the official receiver would be ordered to pay any additional costs occasioned by the default.
The official receiver should ensure that he/she takes to court all necessary documentation on the costs to enable him/her to assist the court in the summary assessment.
If there is a good reason not to make an order for summary assessment at the conclusion of the hearing, e.g. there is a substantial dispute over the costs involved or there is insufficient time to carry out the summary assessment, the court must give directions for another hearing. It is the duty of the official receiver to ensure that he/she is represented at any subsequent hearing to assist the judge in making a summary assessment of the costs. If the court makes a summary assessment of the costs the court will usually specify in the order the amount payable as a single figure for payment by some specified date or by instalments, which will include all sums in respect of profit costs, disbursements and VAT. If no date for payment is specified in the order the assessed costs will be payable within 14 days of the order.
When a judge makes an order to pay by instalments this is usually as a result of a claim to be unable to pay by the party concerned. The order in such circumstances will be based on a brief assessment of ability to pay. The official receiver may make representations to the judge during this assessment.
This chapter is concerned with detailed assessment of costs. A costs officer may be any of the following individuals:
a. a costs judge,
b. a district judge,
c. an authorised court officer of the county court, district registry, or the Senior Courts Costs Office. Court officers are authorised by the Lord Chancellor and are authorised to deal with claims for costs not exceeding £17,500 (excluding VAT) in the case of Senior Executive Officers and £35,000 (excluding VAT) in the case of principal officers.
Notes: [CPR r43.2]
The overriding objective of the CPR is to enable the court to deal with cases justly. Dealing with a case justly includes 'so far as practicable’ saving expense and ensuring that litigation costs are controlled effectively, making them more proportionate to the value of the case and the means of the parties.
Notes: [CPR r1.1]
39.6 Requirement to assess costs by the detailed assessment procedure
(amended February 2011)
Where the costs (including charges and expenses) of any person are properly payable out of the insolvent estate, the office-holder has the discretion to agree any costs with the person entitled to payment without requiring detailed assessment.
Notes: [r7.33A][r7.34A(1)] [CPR Part 47]
In the absence of such agreement the official receiver as office-holder may serve notice in writing requiring that person to commence detailed assessment proceedings in accordance with CPR Part 47 (procedure for detailed assessment of costs and default provisions) in the court to which the insolvency proceedings are allocated (see paragraph 39.28).
Detailed assessment of costs should not be requested until sufficient funds are available in the estate for payment of those costs, or it is known that such funds will become available in the immediate future, unless Technical Section has agreed to the incurring of a debit balance (see chapter 32.1.10). Where there is an absolute need to pay the costs as they have been ordered to be paid by the official receiver personally the official receiver should pay these costs as soon as possible, with the agreement of Technical Section if a debit balance is to be incurred.
If a liquidation or creditors' committee has been established and resolves that the amount of any such costs, charges or expenses should be decided by detailed assessment, the office-holder must require detailed assessment in accordance with CPR part 47. Where the official receiver is liquidator or trustee the committee’s functions will always be fulfilled by the Secretary of State (Technical Section) and in practice therefore the official receiver is unlikely to be required to seek a detailed assessment, although that is not to say that the official receiver will not require such action of his/her own volition.
Notes: [r7.34A(2)] [s141(4) or s302(1)]
If any person is aggrieved by an act or decision of the official receiver as liquidator or trustee, that person may apply to the court; and the court may confirm, reverse or modify the act or decision complained of, and make such order as it sees fit. Consequently a person may apply to the court for an order that the official receiver’s costs be subject to detailed assessment.
Notes: [s168(5), s303]
(amended February 2011)
If it is decided that the costs, charges or expenses of any person employed by the official receiver are to be determined by detailed assessment the official receiver may make payments on account to any agent employed on production of a bill of costs for work carried out to date. Before making payment on account the official receiver should require the agent to provide a written undertaking to repay as soon as reasonably practicable any money which may, when detailed assessment is made, prove to have been overpaid, with interest at the rate specified in section 17 of the Judgments Act 1838 on the date payment was made and for the period from the date of payment to that of the repayment.
Notes: [r7.34A(4)]
In any proceedings before the court, including proceedings on a petition, the court may order costs to be decided by detailed assessment.
A requirement for detailed assessment of costs contained in an order of court can be reviewed on application. If the official receiver considers it appropriate to make such an application he should first consult Technical Section, providing full details of the circumstances. Where an insolvency practitioner has been, or is likely to be, appointed any question of detailed assessment should be left to the practitioner for consideration.
Notes: [r7.34A(5)]
39.9 Costs of a trustee in bankruptcy or a liquidator
Unless otherwise directed or authorised, the costs of a trustee in bankruptcy or a liquidator in relation to the employment of an agent etc, are to be allowed on the standard basis for which provision is made in CPR rule 44.4 (see paragraph 39.10) and CPR rule 44.5 (see paragraph 39.13).
Notes: [r7.34A(6)]
Where the court is to assess the amount of costs by detailed assessment it will assess those costs:
a. on the standard basis (see paragraph 39.11),
or
b. on the indemnity basis (see paragraph 39.12).
The basic test for the assessment of costs is whether the costs have been incurred reasonably or unreasonably and whether they are reasonable or unreasonable in amount.
The costs officer's approach to the question of reasonableness is defined in the judgment Re Francis v Francis and Dickerson [1955] 3 All ER 836:
'When considering whether or not an item in a bill is 'proper' the correct viewpoint to be adopted by a taxing officer (now referred to as costs officer) is that of a sensible solicitor sitting in his chair and considering what in the light of his then knowledge is reasonable in the interests of his lay client….'.
Notes: [CPR r44.4]
39.11 Assessment on the standard basis
Where the amount of the costs is to be assessed on the standard basis, the court will –
a. only allow costs which are proportionate to the matters in issue (see also paragraph 39.5); and
b. resolve any doubt which it may have as to whether costs were reasonably incurred or reasonable and proportionate in amount in favour of the paying party.
Notes: [CPR r44.4(2)]
39.12 Assessment on the indemnity basis
Where the amount of costs is to be assessed on the indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party.
Notes: [CPR r44.4(3)]
39.13 Factors to be taken into account in deciding the amount of costs
In deciding the amount of costs as well as the factors mentioned in paragraphs 39.11 and 39.12 the court must also have regard to:
a. the conduct of all the parties, including in particular:-
i. conduct before, as well as during, the proceedings, and
ii. the efforts made, if any, before and during the proceedings in order to resolve the dispute;
b. the amount or value of any money or property involved;
c. the importance of the matter to all the parties;
d. the particular complexity of the matter or the difficulty or novelty of the questions raised;
e. the skill, effort, specialised knowledge and responsibility involved;
f. the time spent on the case; and
g. the place where and the circumstances in which work or any part of it was done.
Notes: [CPR r44.5]
39.14 Matters where the official receiver would not require detailed assessment
Generally, costs or charges incurred in conveyancing, obtaining legal advice relating to court applications and the sale, transfer or disposal of assets or undertakings in an insolvent’s estate, need not be subject to detailed assessment, provided they do not exceed any estimate or agreement made with the official receiver in advance and otherwise appear reasonable. The official receiver should agree the costs in advance in writing and notify the person concerned that they must not exceed the estimate without prior authorisation. The official receiver should ensure that there is no scope for any doubt regarding the rates of fees to be charged by any particular agent. If the official receiver follows this procedure and monitors the agent/solicitor involved, the submission of the bill should be a formality and the detailed assessment procedure can then be avoided. For further information see Chapter 32.1.
A petitioning solicitor’s costs may be divided into the following elements:
Notes: [CPR r43.2(2)]
39.16 Payment of petition costs
When making a bankruptcy/winding-up order there is no need for the court to specifically provide for the payment of the petition costs, except if a special provision is required, as rules 6.224 (bankruptcy) and 4.218 (company) make provision for their payment out of the assets in an estate in due order of priority. In cases where the bankruptcy order/winding-up order is not made it might be that a special costs provision would be required but the official receiver would have no involvement in this.
The petitioning creditor is liable for his/her solicitor’s costs but, by virtue of rules 4.218(3)(h) and 6.224(1)(h), is entitled to recover such costs from the insolvent estate as an expense of the liquidation or bankruptcy. Petition costs (including court fees) can normally be paid without detailed assessment provided they do not exceed £2,000 for a company and £1,500 in bankruptcy. If the court has consolidated two separate bankruptcy petitions and ordered that both sets of costs be discharged from the bankrupt’s estate then the limits quoted above should be applied separately to each petition.
Notes: [r4.218, r6.224]
39.17 Circumstances where the official receiver would require detailed assessment (Amended December 2009)
Bills of costs should be subject to detailed assessment where:-
a. bearing in mind the circumstances of the case, the official receiver considers the charges are excessive or disallowable (e.g. petition costs in excess of £2,000 for a company or £1,500 in a bankruptcy - see paragraph 39.16) or which include VAT in the petitioning creditor’s solicitor’s costs (see also paragraphs 39.15 and 39.23). Where the case has incurred extra costs due to service evasion, a higher amount might be justified and reasonable.
b. the bill concerns litigation, whether initiated by the official receiver or a third party, and it exceeds any estimate or agreement made in advance (costs in these circumstances are unpredictable);
c. the costs incurred are of an exceptional or unusual nature and cannot be justified or be judged by familiar criteria;
d. there is a prior commitment to carry out the detailed assessment, i.e. the court has ordered or the committee has resolved (see paragraphs 39.6 and 39.8).
39.18 Costs where official receiver requests detailed assessment
CPR rule 47.18 states that the receiving party is entitled to the costs of a detailed assessment unless any Act, the CPR or a practice direction provides otherwise or the court makes some other order. Where the official receiver has requested detailed assessment the usual course would be for the court to order the insolvent estate to pay the costs of the detailed assessment unless there were a good reason for not doing so and such an order would probably be made in the event that costs were assessed in the sum originally sought by the receiving party. Rule 7.39 makes clear that the official receiver will not be personally liable for costs and expenses unless the court otherwise directs and it is unlikely that the court would order the official receiver to personally pay the costs of a detailed assessment unless the view were taken that the official receiver had acted unreasonably in relation to the assessment. Under rule 10.4(1) any expenses incurred by the official receiver are to be treated as expenses of the insolvency proceedings.
Notes: [CPR r47.18, r7.39][r10.4(1)]
39.19 Request for detailed assessment of bill of costs
Where the official receiver is unable to agree any costs, charges or expenses in a bill of costs or he/she is required to do so, as in paragraphs 39.6 or 39.8 above, he should request detailed assessment of the bill by giving notice in writing to the person entitled to payment, requiring that the bill of costs is delivered to the appropriate costs officer (see paragraph 39.28). The official receiver should also inform the person entitled to payment of the effect of non-compliance (see paragraph 39.27).
Notes: [r7.34A(1)and (2)][form CDETAS]
Procedure Where Detailed Assessment Required
39.20 Requirements of costs officer
Before passing a bill of costs of any person employed by the official receiver to the costs officer for detailed assessment, a certificate of employment must be prepared. The certificate must include the following information:
a. the name and address of the person employed,
b, details of the functions to be carried out under the employment, and
c. a note of any special terms and remuneration which have been agreed.
The official receiver should endorse the bill of costs with the certificate of employment. In normal circumstances the official receiver should also sign and date the document prior to its return to the person employed and mark the bill at the end with the statement:
‘Approved subject to detailed assessment, notice of which is waived’
Notes: [r7.35(1) and (2)]
Where in these circumstances the enforcement officer, petitioning creditor’s solicitor (or any other party appearing on the petition whose costs the court has ordered may be discharged from the estate) submits a bill of costs, the official receiver in normal circumstances should mark the bill at the end with the following sentence:
‘Seen for detailed assessment, notice of which is waived’ and sign and date the document prior to its return to the party who submitted it.
These normal endorsements will mean that the official receiver does not wish to be given notice of the venue for detailed assessment.
39.21 Official receiver attendance at detailed assessment hearings
It should not normally be necessary for the official receiver to attend a detailed assessment hearing but, where he/she considers it is necessary, the words ‘notice of which is waived’ should be omitted from the endorsement. The official receiver will then be notified of the venue for the detailed assessment hearing, thus enabling him/her to attend and make representations.
39.22 Disallowable or excessive costs
Occasionally the official receiver may consider particular items on the bill of costs to be disallowable or excessive (e.g. see paragraphs 39.23 and 39.24). The official receiver should draw the cost officer’s attention to any such matters by mentioning them specifically in his/her endorsement (see paragraph 39.20).
Where the official receiver disputes a point he/she should be short and succinct in the explanation of the dispute. Points of dispute must:
1. identify each item in the bill of costs which is disputed,
2. in each case state concisely the nature and grounds of dispute,
3. where practicable suggest a figure to be allowed for each item in respect of which a reduction is sought, and,
4. be signed by the official receiver.
Where points of dispute are served, the official receiver must file a request for a detailed assessment hearing and should attend at that hearing to clarify any matters as required by the court.
Notes: [CPR r47.14]
The official receiver will only be concerned with the charging of VAT in relation to the petitioning creditor’s solicitor’s bill of costs. The official receiver will have established from initial enquiries whether the petitioning creditor is registered for VAT. Where the petitioning creditor is not registered for VAT the bill of costs may be processed as outlined in paragraph 39.20. Where the petitioning creditor is registered for VAT he/she will be able to recover as an input tax any VAT charged by his/her solicitor (see chapter 78). The official receiver should therefore ensure that in such a case VAT is not included in the bill of costs of the petitioning creditor’s solicitor in order to prevent the possibility of an added contribution being made from the estate towards the petitioning creditor’s costs. If the solicitor agrees to exclude any VAT element the bill should be endorsed ‘Seen for assessment, notice of which is waived provided the solicitor does not seek to include VAT’.
If the solicitor will not agree to exclude the VAT element, the official receiver must endorse the bill appropriately and attend any detailed assessment hearing to object to the inclusion of the VAT (see paragraph 39.22).
Notes: [CPR r47.6(3)] [form CDETAS]
39.24 Costs and expenses of witnesses
(amended February 2011)
Except as directed by the court, no allowance as a witness in any examination (e.g. public examination) or other proceedings before the court shall be made to the bankrupt or the debtor or an officer of the insolvent company to which the proceedings relate.
The official receiver should ensure that such expenses not agreed by the court are excluded from the bill before endorsing it in accordance with paragraph 39.20. If agreement cannot be reached for the exclusion of such costs or expenses then the official receiver should endorse the bill in accordance with paragraph 39.21.
A person presenting any petition in a company insolvency or in bankruptcy proceedings shall not be regarded as a witness on the hearing of the petition but the costs officer may allow his/her expenses of travelling and subsistence.
Notes: [r7.41(1), s133 or s290] [r7.41(2)]
39.25 Costs of enforcement officers (formerly sheriffs)
(amended February 2011)
Where an enforcement officer, or other officer, is required to deliver up goods or money taken in execution to the official receiver, or where he/she has deducted costs from the proceeds of an execution or money paid to him/her, the official receiver may require, in writing, that the amount of the enforcement officer’s bill of costs be decided by detailed assessment. The official receiver should only undertake such a course of action where it appears that the costs are excessive or unreasonable in amount. Where such a requirement is made, the provisions of paragraph 39.20 apply.
If any amounts deducted by the enforcement officer are disallowed at the conclusion of the detailed assessment proceedings, the enforcement officer shall as soon as reasonably practicable pay a sum equal to that disallowed to the official receiver for the benefit of the insolvent estate.
Notes: [r7.36, s184(2) or s346(2),s184(3) or s346(3)]
39.26 Detailed assessment proceedings
Every person whose costs in insolvency proceedings are required to be decided by detailed assessment shall, on being required in writing to do so by the official receiver, commence detailed assessment proceedings in accordance with CPR Part 47 (procedure for detailed assessment of costs and default provisions).
Notes: [r7.35(3)]
39.27 Commencement of detailed assessment proceedings within 3 months
(amended February 2011)
If a person who has been requested to commence detailed assessment by the official receiver fails to do so within 3 months of the requirement, or within such further time as the court, on application, may allow, the official receiver may deal with the insolvent estate without regard to any claim by that person, whose claim is forfeited by such failure to commence proceedings. The consequence of this is that the insolvent estate might be distributed without regard to this particular expense.
Where in any such case such a claim lies additionally against an office-holder in his/her personal capacity, that claim is also forfeited by such failure to commence proceedings.
Notes: [r7.35(4)] [r7.35(5)]
39.28 Where cases have been transferred between courts
Detailed assessment is usually carried out in the court which is dealing with the insolvency. Where costs have been incurred in insolvency proceedings in the High Court and those proceedings are subsequently transferred to a county court, all costs of those proceedings directed by the court or otherwise required to be assessed may nevertheless, on the application of the person who incurred the costs, be ordered to be decided by detailed assessment in the High Court.
A county court may order that another county court should deal with the detailed assessment. Such an order may be made without the proceedings being transferred to that court.
Notes: [r7.35(6)][CPR r47.4(3) and (4)]
39.29 Costs paid otherwise than out of the insolvent estate
Where the amount of costs is decided by detailed assessment under an order of the court directing that those costs are to be paid otherwise than out of the insolvent estate, the costs officer shall note on the final costs certificate by whom, or the manner in which, the costs are to be paid.
Notes: [r7.38]
39.30 Petitions presented by insolvents
(amended February 2011)
In any case where a winding-up petition is presented by a company against itself or a bankruptcy petition is presented by a debtor against himself/herself , any solicitor acting for the insolvent must in his/her bill of costs give credit for any sum or security received from the insolvent as a deposit on account of the costs and expenses to be incurred in respect of the filing and prosecution of the petition. The deposit must also be noted by the costs officer on the final costs certificate.
Notes: [r7.37A(1) and (2)]
39.31 No costs allowed to insolvent
(amended February 2011)
Where an order is made on a petition by a company or an individual against themselves, and prior to the presentation of that petition a petition had already been presented by a creditor, ,no costs are allowed to the insolvent or the insolvent’s solicitor unless the court considers that the insolvent estate has benefited by the insolvent's conduct, or that there are otherwise special circumstances justifying the allowance of costs.
If the original creditor’s petition is dismissed with no order as to costs, no right to costs arises and there is no costs liability in respect of which the creditor could prove in the insolvency proceedings.
Notes: [r7.37A(3)]
39.32 Award of costs against official receiver or office-holder
(amended February 2011)
Without prejudice to any provision of the Act or Rules by virtue of which the official receiver is not in any event to be liable for costs and expenses, where the office-holder or the official receiver (if not acting as office-holder) is made a party to the proceedings, he/she shall not be personally liable for costs unless the court otherwise directs.
Notes: [r7.39]
(amended February 2011)
It is important to make an application for costs at the time of the proceedings in respect of which the costs have been incurred. If a party to, or other person affected by, insolvency proceedings makes an application at some other time to the court for an order allowing his/her costs, or part of them, incidental to those proceedings, no costs of or incidental to the application for costs will be allowed to the applicant unless the court is satisfied that the application could not have been made at the time of the proceedings. The court will exercise its jurisdiction in the ordinary way in respect of the respondent's costs.
Where such an application to court for costs is necessary, the person concerned must serve a sealed copy of the application on the office-holder and the official receiver.
Notes: [r7.40]
A final costs certificate of the costs officer is final and conclusive as to all matters that have not been objected to in the manner provided for under the rules of the court.
Notes: [r7.42]
Any party involved in detailed assessment proceedings may appeal against a decision of an authorised court officer in those proceedings. Such an appeal is to a costs judge or a district judge of the High Court. The court will rehear the proceedings that gave rise to the decision appealed against and make any order and give such directions as it considers appropriate.
Notes: [CPR r47.20, r47.21 and r47.23]
Where it is proved to the satisfaction of a costs officer that a final costs certificate has been lost or destroyed, he/she may issue a duplicate. In such circumstances the official receiver should request the person who submitted the bill of costs for detailed assessment to obtain a duplicate final costs certificate.
Notes: [r7.42(2)]
39.37 Time for complying with an order for costs
The official receiver must comply with an order of costs within 14 days of –
a. the date of the judgment or order if it states the amount of those costs;
b. if the amount of those costs (or part of them) is decided later in accordance with Part 47 of the CPR, the date of the certificate which states the amount; or
c. in either case, such later date as the court may specify.
All costs incurred in the course of winding up or bankruptcy proceedings are to be regarded as an expense in the liquidation or bankruptcy. Where a debit balance on the estate account will result from the payment of the costs or where the existing debit balance will be increased the prior approval of Technical Section should be sought, although it is usual for the official receiver to seek this approval prior to employing the agent concerned. Further information on the employment of agents may be found in Chapter 32.1.
Notes: [CPR r44.8]
The official receiver should ensure that payment is made in the due order of priority. The bill of costs for persons employed by the official receiver should be paid in accordance with Chapter 32.1. Payment of all other costs is dealt with in Chapter 36.
Where a party or his/her legal representative fails to conduct detailed assessment proceedings in accordance with CPR Part 47 or any direction of the court, or it appears to the court that the conduct of a party or his/her legal representative, before or during the proceedings, was unreasonable or improper the court may:
a. disallow all or part of the costs which are being assessed, or
b. order the party at fault or his/her legal representative to pay costs which he/she caused any other party to incur.
Conduct before or during the proceedings, which gave rise to the assessment by the court that conduct is unreasonable or improper, includes steps which are calculated to prevent or inhibit the court from furthering the overriding objection (see paragraph 39.5).
Notes: [CPR r 44.14]