Daniella Duffy v Birmingham City Council

Lord Justice Phillips:

1. The substantive issue raised by this second appeal is whether a bill of costs is invalid (and ineffective to commence a detailed assessment under CPR 47.6) if, although the bill is signed by a solicitor, the solicitor does not also expressly certify that “the costs claimed do not exceed the costs which the receiving party is liable to pay to me/my firm”, that is to say, that the bill complies with the indemnity principle.

2. The defendant (“the Council”) now asserts such invalidity in an attempt to set aside, as of right, a default costs certificate obtained by the claimant when the Council failed to file points of dispute within 21 days of service of the claimant’s bill of costs. However, before HH Judge Najib (“the Judge”), against whose order dated 29 November 2024 the Council appeals, the Council sought, unsuccessfully, to set aside the default costs certificate on a different ground relating to service of the bill of costs. The Council did not advance before the Judge the point it now wishes to take, but conceded that the defect in the bill of costs did not render the detailed assessment process a nullity. On 12 May 2025 Asplin LJ granted permission to appeal the Judge’s order, but subject to the question of whether the Council should be permitted to raise the new issue despite its concession below.

3. As the new issue is a pure point of law, the claimant is well prepared to meet it and the claimant is not prejudiced by the failure to take the point below in any way that could not be compensated in costs (see Pittalis v Grant [1989] 1 QB 605 ), I would permit the Council to withdraw its concession and take the point. I would, however, dismiss the appeal for the reasons set out below. The factual background

4. The claimant is a tenant of the Council. On 6 October 2022 the parties compromised proceedings brought by the claimant in the Birmingham County Court for damages for disrepair and specific performance of the obligation to repair. Paragraph 4 of the consent order provided that the Council was to pay the claimant’s costs, to be assessed if not agreed.

5. On 16 November 2022 the claimant served a notice of commencement of detailed assessment and her bill of costs. The bill totalled £26,809.60.

6. The bill of costs was signed by a solicitor in the firm of High Street Solicitors, underneath a section which starts “I certify that:” and then lists a number of statements next to boxes for the solicitor to tick or leave blank. The solicitor ticked the box next to the statement “the bill is both accurate and complete”, but left blank the box next to the statement “[in respect of parts…of the bill] the costs claimed herein do not exceed the costs which the receiving party is liable to pay to me/my firm”. The solicitor also ticked the box to certify that no payments had been made by any paying party on account of costs included in the bill and completed the section certifying that the claimant would not be entitled to recover the VAT claimed in the bill on costs and disbursements.

7. As the Council failed to file and serve points of dispute within the permitted 21 days, the claimant (after sending several reminders to the Council) requested a default costs certificate, duly issued on 9 January 2023.

8. On 18 May 2023 the Council applied to set aside the default costs certificate as of right under CPR 47.12(1), asserting that service of the notice of commencement and bill of costs on the Council by email was invalid as the Council had not notified that it would accept service by that means, and also asserting that the bill of costs was invalid due to the absence of certification of compliance with the indemnity principle. Alternatively, the Council sought the setting aside of the default costs certificate as a matter of discretion under CPR 47.12(2).

9. The Council’s application was heard by District Judge Rouine on 11 April 2024. At the instigation of the Council’s representative, the District Judge refused to hear the costs lawyer who attended on behalf of the claimant, even as to an adjournment, because notice of change had not been filed to place the firm which had instructed him on the record. The District Judge then proceeded, without hearing from the claimant’s side, to determine that service of the notice of commencement and bill of costs had been invalid and that the default costs certificate should therefore be set aside.

10. The claimant’s appeal came before the Judge on 29 November 2024. He allowed the appeal on the ground that the Council had indeed indicated that it would accept service by email, and accordingly service of the notice of commencement and bill of costs was valid. As for alternative grounds of invalidity alleged by the Council by way of Respondent’s Notice, the Judge recorded that the Council accepted that any defects in the bill of costs did not remove the obligation on the Council to file points of dispute and that a defective bill of costs was not an automatic basis to set aside a default certificate; in other words, the Council accepted that a bill that did not certify compliance with the indemnity principle, although defective, is not invalid or a nullity. The Judge also, quite rightly in my view, expressed concern that the District Judge’s approach in refusing to hear from the costs lawyer did not comply with the Overriding Objective, and noted that the Council bore a degree of blame for seeking and encouraging the course taken. But the Judge decided that he did not need to make a formal ruling in that regard.

11. The Judge further remitted the Council’s alternative application to set aside the default costs certificate on discretionary grounds to be heard by a different district judge. The relevant provisions

12. A receiving party wishing to commence a detailed assessment of its costs must serve a notice of commencement and bill of costs in required form, as set out in CPR 47.6: Commencement of detailed assessment proceedings 47.6 (1) Detailed assessment proceedings are commenced by the receiving party serving on the paying party – (a) notice of commencement in the relevant practice form; (b) a copy or copies of the bill of costs, as required by Practice Direction 47; and (c) if required by Practice Direction 47, a breakdown of the costs claimed for each phase of the proceedings. …. (Practice Direction 47 deals with – other documents which the party must file when requesting detailed assessment; the court’s powers where it considers that a hearing may be necessary; the form of the bill; and the length of notice which will be given if a hearing date is fixed.)

13. CPR 47.7 provides a time limit of 3 months from the relevant judgment or order (or lifting of a stay pending appeal), discontinuance or acceptance of a Part 36 offer for commencing a detailed assessment.

14. A paying party wishing to dispute any item in the bill of costs must file points of dispute within 21 days pursuant to CPR 47.9, failing which the receiving party may file a request for a default costs certificate: Points of dispute and consequences of not serving 47.9 (1) The paying party and any other party to the detailed assessment proceedings may dispute any item in the bill of costs by serving points of dispute… (2) The period for serving points of dispute is 21 days after the date of service of the notice of commencement. (3) If a party serves points of dispute after the period set out in paragraph (2), that party may not be heard further in the detailed assessment proceedings unless the court gives permission. …. (4) The receiving party may file a request for a default costs certificate if – (a) the period set out in paragraph (2) for serving points of dispute has expired; and (b) the receiving party has not been served with any points of dispute. (5) If any party (including the paying party) serves points of dispute before the issue of a default costs certificate the court may not issue the default costs certificate.…”

15. The procedure for obtaining a default costs certificate and the consequences of doing so are provided for in CPR 47.11: Default costs certificate 47.11 (1) Where the receiving party is permitted by rule 47.9 to obtain a default costs certificate, that party does so by filing a request in the relevant practice form. (Practice Direction 47 deals with the procedure by which the receiving party may obtain a default costs certificate.) (2) A default costs certificate will include an order to pay the costs to which it relates.

16. CPR 47.12 provides for setting aside a default costs certificate either as a matter of right (such as where the receiving party had not served a bill of costs) or as a matter of discretion: Setting aside a default costs certificate 47.12 (1) The court will set aside a default costs certificate if the receiving party was not entitled to it. (2) In any other case, the court may set aside a default costs certificate if it appears to the court that there is some good reason why the detailed assessment proceedings should continue. (Practice Direction 47 contains further details about the procedure for setting aside a default costs certificate and the matters which the court must take into account)…

17. As stated in Rule 47.6, the form and contents of a bill of costs are addressed in Practice Direction 47. Many of the provisions are expressed in mandatory terms, including: 5.10 The title page of the bill of costs must set out- (1) the full title of the proceedings; (2) the name of the party whose bill it is and a description of the document showing the right to assessment…; (3) if VAT is included… the VAT number of the legal representative…; (4) details of all legal aid certificates [etc]. …. 5.15 Each item claimed in the bill of costs must be consecutively numbered. … 5.20 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.

18. The key provision for the purposes of this appeal, however, is paragraph 5.21, also expressed in mandatory terms as follows: 5.21 The bill of costs must contain such of the certificates, the texts of which are set out in Precedent F of the Schedule of Costs Precedents annexed to this Practice Direction, as are appropriate.

19. Precedent F deals with “Certificates for including in Bill of Costs” and provides that “Appropriate certificates under headings (1) and (2) are required in all cases” and that “All certificates must be signed by the receiving party or his solicitor”.

20. Heading (1) sets out the certificate required as to accuracy, including the certificate to be provided (by ticking the box) by a legal representative in respect of their or their firm’s costs: I certify that this bill is both accurate and complete [and] …. (other cases where costs are claimed for work done by a legal representative) [in respect of Parts(s) of the bill….] the costs claimed herein do not exceed the costs which the receiving party is required to pay me/my firm. The Council’s case as to invalidity of the bill

21. Mr Joseph, for the Council, who did not appear at either hearing below, conceded that not every failure to comply with the mandatory provisions in PD47 as to the form and content of a bill of costs would render a bill invalid and ineffective to commence a detailed assessment. Thus omitting one of the many details which “must” be given would not result in the bill being a nullity. A bill of costs which did not comply with such mandatory provisions was defective, but was still a bill.

22. Mr Joseph’s submission was that the requirement to include certification as to compliance with the indemnity principle was of a different order, due to the recognition of the fundamental importance of that principle in the costs regime, described in Friston on Costs 3 rd ed para 18.05 as “the bedrock on which other costs law was based”. In General of Berne Insurance Company v Jardine Reinsurance Management Limited [1998] 2 All ER 301 , following Gundry v Sainsbury [1910] 1 KB 645 , Sir Brian Neill at 312 summarised the applicable principle as follows: “…that as between party and party an order for costs is not intended to provide more than an indemnity. The receiving party is not entitled to a bonus …”

23. Mr Joseph stated in his skeleton argument that “[t]he importance of the mandatory certificate confirming compliance with the indemnity principle was dealt with in the seminal case of Bailey v IBC Vehicles Ltd [1998] 2 Costs LR 46. In that case the Court of Appeal held that, where there was a challenge as to whether the receiving party’s bill of costs complied with the indemnity principle, it was unnecessary for the receiving party to supply documentary evidence of precise charging rates etc. to the paying party, although the costs judge could call for it if not satisfied on the information before him. Judge LJ, at p.50, explained the rationale for not requiring supporting documents in the first instance as follows: “As officers of the court, solicitors are trusted not to mislead or allow the court to be misled. This elementary principle applies to the submission of a bill of costs.”

24. Henry LJ stated as follows at p.51: “Order 62 rule 29(7)(c)(iii) requires the solicitor who brings proceedings for taxation to sign the bill of costs. In so signing he certifies that the contents of the bill are correct. That signature is no empty formality. The bill specifies the hourly rates applied, and the care and attention uplift claimed. If an agreement between the receiving solicitor and his client (here the trade union) restricted (say) the hourly rate payable by the client, that hourly rate is the most that can be claimed or recovered on taxation….The signature on the bill of costs under the Rules is effectively the certificate by an officer of the court that the receiving party’s solicitors are not seeking to recover in relation to any item more than they have agreed to charge their client under a contentious business agreement. The court can (and should unless there is evidence to the contrary) assume that his signature to the bill of costs shows that the indemnity principle has not been offended. Here Rowley Ashworth’s letter of 19 September put (or should have put) the matter beyond all doubt. But, strictly speaking, the signature of the bill required by the rules should have done that already. …. For the avoidance of doubt, I also agree that the taxing officer may and should seek further information where some feature of the case raises suspicions that the whole truth may not have been told. And the other side of the presumption of trust afforded to the signature of an officer of the court must be that breach of that trust should be treated as a most serious disciplinary offence.”

25. The principle was most recently reiterated in Gempride Ltd v Bamrah [2018] EWCA Civ 1367 by Hickinbottom LJ (with whom Davis LJ agreed): “160.…. As this court made clear in Bailey …, a solicitor as a legal representative holds a particular position of trust; and, on the basis of that trust, when a solicitor signs a bill of costs, he certifies that the contents of the bill (including the hourly rates due from the client) are correct. The court and the receiving [sic] party are entitled to rely upon that certificate; indeed, unless there are circumstances such as to raise suspicion, that paying party cannot go behind the certificate. It is bound to accept it.”

26. It will be apparent from the above that, contrary to Mr Joseph’s contention, Bailey is not support for the importance of the mandatory certificate confirming compliance with the indemnity principle. Indeed, the exact contrary is the case, the central proposition being that the signature of a bill by the solicitor is in itself confirmation that the bill complies with the indemnity principle owing to the solicitor’s position of trust. On that analysis, clearly articulated in both Bailey and Gempride , no separate certificate of compliance with the indemnity principle is necessary. A solicitor who knowingly or recklessly signs and serves a bill which does not comply with the indemnity principle would be committing a most serious disciplinary offence even absent inclusion of express certification of compliance.

27. It follows that, whilst the express certification that the bill complies with the indemnity principle is a mandatory requirement under the rules, there is no justification for treating a breach of that requirement as fatal to the validity of the bill any more than any other breach. Indeed, given that the signature of the bill constitutes implicit certification, it may be seen as a less serious error than many others. Of course, the failure to provide express certification, particularly if not explained or remedied when queried, might well justify a challenge by the paying party or an order by the Costs Judge that supporting evidence be provided. It would not, however, justify the non-service of points of dispute in which such a challenge would properly be made or prefaced.

28. Indeed, CPR 3.10, which applies with full force to the costs provisions in CPR 47, provides that an error of procedure such as a failure to comply with a rule or practice direction does not invalidate any step taken in the proceedings (unless the court so orders) and the court may make an order to remedy the error.

29. The above view is supported by the analysis of HH Judge Lethem in Choudhury v Islam (Central London County Court, unreported 21 April 2021), in which he explains why even a defective bill, or even a wholly deficient bill, should not be treated as a nullity, including by reason of the applicability of CPR rule 3.10: “34 …[A]lthough the grounds expressed in rule 47.6 are mandatory grounds, if [the nullity argument] is correct, then a small inadvertent slip could lead to grossly disproportionate consequences, as I shall demonstrate. If [the nullity argument] is correct, then… a defendant could sit on their hands, allow a whole process to go through, even so far as to enforcement, before they popped up and sought to derail the entire process. That would lead to a position that rewarded indolence and was contrary to the need to conduct litigation proportionality and efficiently.

35. Thus it is the case that the consequences of the [nullity] approach … it seems to me, can hardly be that which the rule-makers envisaged. The answer to [the] contrary point, namely that a piece of paper saying: “You owe me £50” could hardly constitute a bill and could hardly support a default costs certificate is that the court has a power to set aside a default costs certificate. If one produced a wholly deficient bill, that, it seems to me, would be the most powerful reason for exercising a discretionary remedy to set aside the original default costs certificate…. That is not a basis for a mandatory set aside but rather a powerful basis for exercising discretion to set aside the bill.

36. [That] interpretation… of course resolves the issue of the duty to notify the defect. The moment one accepts that the proceedings were validly commenced, then of course the need to serve points of dispute arises. Those points of dispute can encompass…[the] defects in relation to the bill, and indeed it would be open to a party to apply to have the bill struck out and a fresh bill filed and served. Thus, it seems to me, that the service of points of dispute is the vehicle by which the paying party can bring to the receiving party and to the court’s attention any alleged defects in relation to the bill. It is simply not right to argue that the paying party is deprived of the right to argue against a note simply saying ‘you owe me £50,000’. They have the right and the rules provide a procedure in the points of dispute. ……

38. …[T]hat analysis, it seems to me, is validated by a consideration of the operation of rule 3.10. One has to look at CPR 47 in the context of the rules as a whole. If the makers of the rule have provided a remedy in another part of the rules, that is relevant to the interpretation of CPR 47. The moment one sees the case in the context of rule 3.10 it begins to make perfect sense….”

30. In my judgment that analysis identifies the correct approach as a matter of principle, procedure and practicality. It applies to a failure of a solicitor to tick the box next to certification of the indemnity principle just as much as to any other defect in a bill of costs.

31. Mr Joseph argued that the decision in Choudhury was wrong and could not stand in the light of the decisions in Barking, Havering & Redbridge University Hospitals NHS Trust v AKC at both High Court level [2021] EWHC 2607 (QB) (Steyn J) and in the Court of Appeal [2022] Costs LR 1095 , the Court of Appeal considering different defects in a bill of costs than had been addressed by Steyn J. However, both decisions were that the bill of costs be struck out (a possible option fully contemplated in Choudhury ) and the Court of Appeal ordered service of a replacement. That is very different from a finding that a bill was invalid from the outset. Indeed, in the Court of Appeal Newey LJ stated at [53]: “It is very far from the case that a bill of costs which fails fully to comply with the rules should invariably be struck out, let alone treated as a nullity. Typically, a defect will, at the most, warrant a lesser sanction.”

32. It follows that the claimant’s bill of costs was valid and effective to commence a detailed assessment and the claimant was entitled to a default costs certificate when the Council failed to serve points of dispute.

33. The Council remains entitled to pursue its alternative application under CPR 47.12(2) for a discretionary order permitting it to dispute the bill of costs, as per the direction of the Judge. I say nothing about the merits of such an application. I would, however, note that the Council’s attempt to revive its entitlement to challenge a bill for £26,809.60 has already involved three hearings and two different unsuccessful challenges to the bill or its service. Its own costs just for this appeal are in excess of £45,000, and that is before considering its liability for adverse costs, to be added to the £7,000 it was ordered to pay by the Judge. Whether that has been a good use of public funds, and whether further challenges would be a good use of further public funds, must be open to debate. Lord Justice Nugee

34. I agree. Lord Justice Newey

35. I also agree.