> ### PRACTICE DIRECTION

> ### PART 43 - PRACTICE DIRECTION ABOUT COSTS

> ### See also Civil Procedure Rules
> See also Court Service Forms

> ### DIRECTIONS RELATING TO PART 43

> ### SCOPE OF COSTS RULES AND DEFINITIONS

> ### SECTION 1 MODEL FORMS FOR CLAIMS FOR COSTS

> ### RULE 43.3 MEANING OF SUMMARY ASSESSMENT

> 1.1 | Rule 43.3 defines summary assessment.
> 1.2 | Form 1 of the Schedule of Costs Forms annexed to this Direction is a model form of Statement of Costs to be used for summary assessments.
> 1.3 | Further details about Statements of Costs are given in paragraph 4 of the Directions Relating to Rule 44.7 (Procedure for assessing costs).

> ### RULE 43.4 MEANING OF DETAILED ASSESSMENT

> 1.4 | Rule 43.4 defines detailed assessment.
> 1.5 | Form 2 of the Schedule of Costs Forms annexed to this Practice Direction is a model form of bill of costs to be used for detailed assessments.
> 1.6 | Further details about bills of costs are given in the next section of these Directions and in paragraph 2.7 of the Directions Relating to Part 47 (Procedure for detailed assessment of costs and default provisions).
> 1.7 | Form 2 of the Schedule of Costs Forms and the next section of this practice direction both refer to the model form of bills of costs. The use of the model form is not compulsory, but is encouraged. A party wishing to rely upon a bill which departs from the model form should include in the background information of the bill an explanation for that departure.
> 1.8 | In any order of the court (whether made before or after 26 April 1999) the word "taxation" will be taken to mean "detailed assessment" and the words "to be taxed" will be taken to mean "to be decided by detailed assessment" unless in either case the context otherwise requires.

> ### SECTION 2 FORM AND CONTENTS OF BILLS OF COSTS

> 2.1 | A bill of costs may consist of such of the following sections as may be appropriate:- title page; background information; items of costs claimed under the headings specified in paragraph 2.5; summary showing the total costs claimed on each page of the bill; schedules of time spent on non-routine attendances; and the certificates referred to in paragraph 2.14.
> 2.2 | Where it is necessary or convenient to do so, a bill of costs may be divided into two or more parts, each part containing sections (2), (3) and (4) above. A division into parts will be necessary or convenient in the following circumstances:- Where the receiving party acted in person during the course of the proceedings (whether or not he also had a legal representative at that time) the bill should be divided into different parts so as to distinguish between; the costs claimed for work done by the legal representative; and the costs claimed for work done by the receiving party in person. Where the receiving party was represented by different solicitors during the course of the proceedings, the bill should be divided into different parts so as to distinguish between the costs payable in respect of each solicitor. Where the receiving party obtained legal aid in respect of all or part of the proceedings the bill should be divided into separate parts so as to distinguish between; costs claimed before legal aid was granted; costs claimed against another party after legal aid was granted; costs claimed against the Legal Aid Board only; and any costs claimed after legal aid ceased. Where value added tax (VAT) is claimed and there was a change in the rate of VAT during the course of the proceedings, the bill should be divided into separate parts so as to distinguish between; costs claimed at the old rate of VAT; and costs claimed at the new rate of VAT. Where the bill covers costs payable under two or more orders under which there are different paying parties the bill should be divided into parts so as to deal separately with the costs payable by each paying party.
> 2.3 | The title page of the bill of costs must set out:- the full title of the proceedings; the name of the party whose bill it is and a description of the document showing the right to assessment (as to which see paragraph 4.5 of the Directions Relating to Part 47); if VAT is included as part of the claim for costs, the VAT number of the legal representative or other person in respect of whom VAT is claimed; details of all legal aid certificates and legal aid amendment certificates in respect of which claims for costs are included in the bill.
> 2.4 | The background information included in the bill of costs should set out:- a brief description of the proceedings up to the date of the notice of commencement; A statement of the status of the solicitor or solicitor's employee in respect of whom costs are claimed and (if those costs are calculated on the basis of hourly rates) the hourly rates claimed for each such person. It should be noted that "legal executive" means a Fellow of the Institute of Legal Executives. Other clerks who are fee earners of equivalent experience, may be entitled to similar rates. It should be borne in mind that Fellows of the Institute of Legal Executives will have spent approximately 6 years in practice, and taken both general and specialist examinations. The Fellows have therefore acquired considerable practical and academic experience. Clerks without the equivalent experience of legal executives will normally be treated as being the equivalent of trainee solicitors and para-legals. a brief explanation of any agreement or arrangement between the receiving party and his solicitors which affects the costs claimed in the bill.
> 2.5 | The bill of costs may consist of items under such of the following heads as may be appropriate:- attendances on the court and counsel up to the date of the notice of commencement; attendances on and communications with the receiving party; attendances on and communications with witnesses including any expert witness; attendances to inspect any property or place for the purposes of the proceedings; searches and enquiries made at offices of public records, the Companies Registry and similar searches and enquiries; attendances on and communications with other persons; communications with the court and with counsel; work done in connection with arithmetical calculations of compensation and/or interest; work done on documents: preparing and considering documentation which was of and incidental to the proceedings, including time spent on pre-action protocols where appropriate and time spent collating documents; work done in connection with mediation, alternative dispute resolution and negotiations with a view to settlement if not already covered in the heads listed above; attendances on and communications with London and other agents and work done by them; other work done which was of or incidental to the proceedings and which is not already covered in the heads listed above.
> 2.6 | In respect of each of the heads of costs:- "communications" means letters out and telephone calls; communications which are not routine communications must be set out in chronological order; routine communications should be set out as a single item at the end of each head;
> 2.7 | Routine communications are letters out and telephone calls which by reason of their simplicity should not be regarded as letters of substance or telephone calls which properly amount to an attendance.
> 2.8 | Each item claimed in the bill of costs must be consecutively numbered.
> 2.9 | In each part of the bill of costs which claims items under head (1) (attendances on court and counsel) a note should be made of: all relevant events, including events which do not constitute chargeable items; any orders for costs which the court made (whether or not a claim is made in respect of those costs in this bill of costs).
> 2.10 | The numbered items of costs may be set out on paper divided into five columns, of which the last two columns should be left blank. The five columns should be headed as follows: Item, Amount claimed, VAT, Amount allowed, VAT.
> 2.11 | In respect of heads (2) to (12) in paragraph 2.5 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.
> 2.12 | The bill of costs must not contain any claims in respect of costs or court fees which relate solely to the detailed assessment proceedings other than costs claimed for preparing and checking the bill.
> 2.13 | The summary must show the total profit costs and disbursements claimed separately from the total VAT claimed. Where the bill of costs is divided into parts the summary must also give totals for each part. If each page of the bill gives a page total the summary must also set out the page totals for each page.
> 2.14 | The bill of costs must contain such of the certificates, the texts of which are set out in Form 4 of the Schedule of Costs Forms annexed to this Practice Direction, as are appropriate.
> 2.15 | The following provisions relate to work done by solicitors: Routine letters out and routine telephone calls will in general be allowed on a unit basis of 6 minutes each, the charge being calculated by reference to the appropriate hourly rate. The unit charge for letters out will include perusing and considering the relevant letters in and no separate charge should be made for in-coming letters. E-mails received or sent by solicitors will not normally be allowed but the court may, in its discretion, allow an actual time charge for preparation of e-mails sent by solicitors which properly amount to attendances provided that the time taken has been recorded. The court may also, in its discretion, allow a sum in respect of e-mails sent to the client or others where it is satisfied that, had e-mails not been sent, the number of communications which it would have been reasonable to allow would have been substantially greater than the number actually claimed. Local travelling expenses incurred by solicitors will not be allowed. The definition of "local" is a matter for the discretion of the court. While no absolute rule can be laid down, as a matter of guidance, "local" will, in general, be taken to mean within a radius of 10 miles from the court dealing with the case at the relevant time. Where travelling and waiting time is claimed, this should be allowed at the rate agreed with the client unless this is more than the hourly rate on the assessment. The cost of postage, couriers, out-going telephone calls, fax and telex messages will in general not be allowed but the court may exceptionally in its discretion allow such expenses in unusual circumstances or where the cost is unusually heavy. The cost of making copies of documents will not in general be allowed but the court may exceptionally in its discretion make an allowance for copying in unusual circumstances or where the documents copied are unusually numerous in relation to the nature of the case. Where this discretion is invoked the number of copies made, their purpose and the costs claimed for them must be set out in the bill. Agency charges as between a principal solicitor and his agent will be dealt with on the principle that such charges, where appropriate, form part of the principal solicitor's charges. Where these charges relate to head (1) in paragraph 2.5 (attendances at court and on counsel) they should be included in their chronological order in that head. In other cases they should be included in head (11) (attendances on London and other agents).

> ### Costs of preparing the bill

> 2.16 | A claim may be made for the reasonable costs of preparing and checking the bill of costs.

> ### SECTION 3 SPECIAL PROVISIONS RELATING TO VAT

> 3.1 | This section deals with claims for value added tax (VAT) which are made in respect of costs being dealt with by way of summary assessment or detailed assessment.

> ### VAT Registration Number

> 3.2 | The number allocated by HM Customs and Excise to every person registered under the Value Added Tax Act 1983 (except a Government Department) must appear in a prominent place at the head of every statement, bill of costs, fee sheet, account or voucher on which VAT is being included as part of a claim for costs.

> ### Entitlement to VAT on Costs

> 3.3 | VAT should not be included in a claim for costs if the receiving party is able to recover the VAT as input tax. Where the receiving party is able to obtain credit from HM Customs and Excise for a proportion of the VAT as input tax, only that proportion which is not eligible for credit should be included in the claim for costs.
> 3.4 | The receiving party has responsibility for ensuring that VAT is claimed only when the receiving party is unable to recover the VAT or a proportion thereof as input tax.
> 3.5 | Where there is a dispute as to whether VAT is properly claimed the receiving party must provide a certificate signed by the solicitors or the auditors of the receiving party in the form in the Schedule of Certificates annexed to this Practice Direction. Where the receiving party is a litigant in person who is claiming VAT, reference should be made by him to HM Customs and Excise and wherever possible a Statement to similar effect produced at the hearing at which the costs are assessed.
> 3.6 | Where there is a dispute as to whether any service in respect of which a charge is proposed to be made in the bill is zero rated or exempt, reference should be made to HM Customs and Excise and wherever possible the view of HM Customs and Excise obtained and made known at the hearing at which the costs are assessed. Such application should be made by the receiving party. In the case of a bill from a solicitor to his own client such application should be made by the client.

> ### Form of bill of costs where VAT rate changes

> 3.7 | Where there is a change in the rate of VAT, suppliers of goods and services are entitled by ss.88(1) and 88(2) of the VAT Act 1994 in most circumstances to elect whether the new or the old rate of VAT should apply to a supply where the basic and actual tax points span a period during which there has been a change in VAT rates.
> 3.8 | It will be assumed, unless a contrary indication is given in writing, that an election to take advantage of the provisions mentioned in paragraph 3.7 above and to charge VAT at the lower rate has been made. In any case in which an election to charge at the lower rate is not made, such a decision must be justified to the court assessing the costs.

> ### Apportionment

> 3.9 | All bills of costs, fees and disbursements on which VAT is included must be divided into separate parts so as to show work done before, on and after the date or dates from which any change in the rate of VAT takes effect. Where, however, a lump sum charge is made for work which spans a period during which there has been a change in VAT rates, and paragraphs 3.7 and 3.8 above do not apply, reference should be made to paragraphs 8 and 9 of Appendix F of Customs' Notice 700 (or any revised edition of that notice), a copy of which should be in the possession of every registered trader. If necessary, the lump sum should be apportioned. The totals of profit costs and disbursements in each part must be carried separately to the summary.
> 3.10 | Should there be a change in the rate between the conclusion of a detailed assessment and the issue of the final costs certificate, any interested party may apply for the detailed assessment to be varied so as to take account of any increase or reduction in the amount of tax payable. Once the final costs certificate has been issued, no variation under this paragraph will be permitted.

> ### Disbursements

> 3.11 | Petty (or general) disbursements such as postage, fares etc which are normally treated as part of a solicitor's overheads and included in his profit costs should be charged with VAT even though they bear no tax when the solicitor incurs them. The cost of travel by public transport on a specific journey for a particular client where it forms part of the service rendered by a solicitor to his client and is charged in his bill of costs, attracts VAT.
> 3.12 | Reference is made to the criteria set out in the VAT Guide (Customs and Excise Notice 700 - 1st August 1991 edition paragraph 83, or any revised edition of that Notice), as to expenses which are not subject to VAT. Charges for the cost of travel by public transport, postage, telephone calls and telegraphic transfers where these form part of the service rendered by the solicitor to his client are examples of charges which do not satisfy these criteria and are thus liable to VAT at the standard rate.

> ### Legal Aid

> 3.13 | VAT will be payable in respect of every supply made pursuant to a Legal Aid Certificate provided only that the person making the supply is a taxable person and that the assisted person is not resident outside the European Union. Where the assisted person is registered for VAT and the legal services paid for by the Legal Aid Board are in connection with the assisted person's business, the VAT on those services will be payable by the Legal Aid Board only.
> 3.14 | In Legal Aid cases the legal aid summary must be drawn so as to show the total VAT on Counsel's fees as a separate item from the VAT on other disbursements and the VAT on profit costs.

> ### Tax invoice

> 3.15 | A bill of costs filed for detailed assessment is always retained by the Court. Accordingly if a solicitor waives his solicitor and client costs and accepts the costs certified by the court as payable by the unsuccessful party in settlement, it will be necessary for a short statement as to the amount of the certified costs and the VAT thereon to be prepared for use as the tax invoice.

> ### Vouchers

> 3.16 | Where receipted accounts for disbursements made by the solicitor or his client are retained as tax invoices a photostat copy of any such receipted account may be produced and will be accepted as sufficient evidence of payment when disbursements are vouched.

> ### Certificates

> 3.17 | In non legal aid cases the total VAT allowed will be shown in the final costs certificate as a separate item. In legal aid cases the VAT on Counsel's fees will be shown separately from the remaining VAT.

> ### Litigants acting in person

> 3.18 | Where a litigant acts in litigation on his own behalf he is not treated for the purposes of VAT as having supplied services and therefore no VAT is chargeable on that litigant's costs (even where, for example, that litigant is a solicitor or other legal representative).
> 3.19 | Consequently in the circumstances described in the preceding paragraph, a bill of costs presented for agreement or assessment should not claim any VAT which will not be allowed on assessment.

> ### Government Departments

> 3.20 | On an assessment between parties, where costs are being paid to a Government Department in respect of services rendered by its legal staff, VAT should not be added.

> ### SECTION 4 ESTIMATES OF COSTS

> 4.1 | This section sets out certain steps which parties must take in order to keep the other parties informed about their potential liability in respect of costs and in order to assist the court to decide what, if any, order to make about costs and about case management.
> 4.2 | In this section an estimate of costs means an estimate of those costs already incurred and, if appropriate, to be incurred by the party who gives it which he intends, if he is successful in the case, to seek to recover from any other party under an order for costs.
> 4.3 | The court may at any stage in a case order any party to file an estimate of costs and to serve copies of the estimate on all other parties. The court may direct that the estimate be prepared in such a way as to demonstrate the likely effects of giving or not giving a particular case management direction which the court is considering, for example a direction for a split trial or for the trial of a preliminary issue. The court may specify a time limit for filing and serving the estimate. However, if no time limit is specified the estimate should be filed and served within 28 days of the date of the order.
> 4.4 | An estimate of costs should be substantially in the form of a Statement of Costs as illustrated in Form 1 of the Schedule of Costs Forms annexed to this Practice Direction.
> 4.5 | When a party to a claim which is outside the financial scope of the small claims track, files an allocation questionnaire, he must also file an estimate of costs and serve a copy of it on every other party, unless the court otherwise directs. The legal representative must in addition serve a copy of the estimate upon the client. Where a party to a claim is being dealt with on the fast track or the multi track, or under Part 8 files a listing questionnaire, he must also file an estimate of costs and serve a copy of it on every other party, unless the court otherwise directs. Where a party is represented, the legal representative must in addition serve a copy of the estimate on the client. This paragraph does not apply to litigants in person.

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