Haji-Ioannou v Frangos & Ors

Failure to commence detailed assessment proceedings within the prescribed period satisfies the jurisdictional requirement for disallowing costs under rule 44.14 of the Civil Procedure Rules 1998. No causal connection between the delay and the costs being assessed is required.

Disallowance of costs will usually be appropriate only where the breach can properly be categorised as misconduct. Inordinate and inexcusable delay causing prejudice may qualify. Excusable delay causing no prejudice may not. Because rule 47.8 provides for loss of interest and permits the paying party to seek an unless order, the court should hesitate before imposing the further sanction of disallowing otherwise recoverable costs.

The claimant had been ordered to pay substantial costs following unsuccessful English proceedings against the defendants. The receiving party failed to commence detailed assessment proceedings within three months and delayed for about five years. It subsequently agreed to forgo interest for most of that period.

The Costs Judge refused the claimant's application to disallow part of the costs in addition to interest. Lindsay J dismissed an appeal in [2005] EWHC 279 (Ch). On this second appeal, the Court of Appeal considered the relationship between rules 44.14 and 47.8 of the Civil Procedure Rules 1998, the circumstances in which delayed commencement amounts to misconduct, and when costs may be disallowed.

1. The appeal was dismissed unanimously. Lindsay J had made no error when exercising the discretion afresh and deciding that no costs should be disallowed beyond the receiving party's concession concerning interest.

2. Rule 44.14(2)(a) does not require proof that the failure to commence detailed assessment proceedings on time caused the costs proposed for disallowance. Unlike rule 44.14(2)(b), it contains no express requirement for a causal link. Non-compliance with a rule, practice direction or court order is the only jurisdictional requirement under rule 44.14(1)(a).

3. Rules 44.14 and 47.8 are consistent, although a tension exists between them. Not every failure to comply with the three-month period in rule 47.7 should be treated as misconduct warranting disallowance of both costs and interest. The reference to misconduct in the heading of rule 44.14 guides the exercise of discretion without limiting jurisdiction.

4. A sufficiently serious breach may justify disallowing some or all assessed costs. Ordinarily, the breach must be capable of being categorised as misconduct. Inordinate and inexcusable delay which prejudices the paying party may satisfy that description. Excusable delay may not, particularly where it causes no prejudice. The court declined to prescribe an exhaustive test.

5. Rule 47.8 provides the paying party with a means of seeking an order compelling commencement of assessment and identifies disallowance of interest as the normal sanction for delay. A court should therefore hesitate before imposing an additional reduction of otherwise allowable costs. Any sanction should be proportionate, and unnecessary satellite disputes over the allocation of disallowed costs should be avoided.

6. The delay was inordinate, but it caused the claimant no prejudice. It was neither wilful, deliberate nor contumelious, and the claimant's own conduct had not promoted co-operative expedition. A further sanction would therefore have been disproportionate and unnecessary.

1. Court of Appeal (Civil Division): The second appeal was dismissed unanimously. The court upheld Lindsay J's refusal to disallow costs in addition to the interest already forgone: [2006] EWCA Civ 1663.

2. High Court, Chancery Division: Lindsay J identified an error in the Costs Judge's approach, exercised the discretion afresh and dismissed the claimant's appeal: [2005] EWHC 279 (Ch).

3. Costs Judge: Costs Judge Seager Berry dismissed the application to disallow costs, save for the receiving party's concession that interest would be forgone for the relevant period.

4. Earlier Court of Appeal proceedings: The claimant's substantive appeal was dismissed and costs orders were made in favour of the defendant: [1999] 2 Lloyds Rep 337. Those orders generated the detailed assessment proceedings.