£571,571.18 recovered after preliminary costs decisions in a complex police action

Costs Lawyer by ARC Costs acted in a complex costs dispute following an action against the police involving three claimants. The underlying allegations concerned wrongful arrest, unlawful searches and malicious prosecution, arising from an investigation into alleged firearms offences. Substantial sums of money had been seized and residential property searched.

The claimants maintained that the arrests, searches and prosecution were unlawful. The litigation continued over several years and required extensive factual and expert evidence before settling in their favour. Damages were approximately £150,000, but the importance of the case extended beyond its monetary value: the claimants faced serious consequences for their professional reputation and career prospects.

Following settlement of the substantive proceedings, costs became the focus of a substantial dispute. The Bill of Costs was close to £700,000, making the treatment of hourly rates and budgeted costs particularly significant to the eventual recovery.

The defendant challenged alleged spending above the approved costs budget, the hourly rates claimed and the extent of work undertaken after costs management. A central question was whether there was good reason to depart from the approved budget figures.

Before the hearing, the defendant made a Part 36 offer of £414,000. With a substantial difference between that offer and the bill, a four-day detailed assessment hearing was listed to address significant preliminary issues. The receiving party needed to establish a persuasive position on those issues before the remainder of the costs could be resolved.

The defendant argued that the hourly rates exceeded the applicable Guideline Hourly Rates and should be reduced. The receiving party’s position was that the particular circumstances of the litigation justified higher rates.

The argument did not depend simply on the claim being an action against the police. It addressed the significance of these proceedings and the serious personal and professional consequences of the alleged wrongful arrest and prosecution. The Costs Judge accepted that the circumstances justified enhanced rates.

Grade A fee earner rates of £400 per hour were allowed, together with a rate of £250 per hour for the conducting Costs Lawyer. This illustrates that Guideline Hourly Rates are guidance rather than fixed ceilings. It does not mean that those rates will be allowed in every police action: the justification must be supported by the circumstances of the individual case.

The defendant also sought to restrict costs that exceeded approved budget figures. The receiving party argued that subsequent developments provided good reason to depart. Importantly, the budgeting in this matter had extended only to the end of December 2023, while the litigation continued beyond that point.

Further disclosure was needed, additional expert evidence was obtained and a Joint Settlement Meeting took place during 2024. Substantial work was also undertaken to progress the case towards resolution. The Costs Judge accepted that those developments justified a departure from the approved budget.

The hearing also explored how costs should be assessed once good reason had been established. Possible approaches discussed included allowing the claimed costs where no alternative contentions had been advanced, assessing the phases item by item, or using the approved budget as a starting point with further allowances for subsequent developments and reasonable expenditure.

No definitive guidance was given on the preferred assessment methodology. The favourable decision on good reason should therefore not be presented as resolving that wider question, or as permission to disregard costs management requirements in other cases.

The receiving party achieved favourable decisions on the preliminary issues during the first day of the hearing. The findings on rates and budget departures materially changed the position from which the parties negotiated.

Settlement discussions followed with the benefit of those decisions. Instead of completing the remaining days of the listed hearing, the parties agreed an all-inclusive settlement of £571,571.18. That was a substantial improvement on the defendant’s £414,000 Part 36 offer.

The original case report describes the settlement as recovery of more than 80% of the total bill. The figure was all-inclusive, and the final amount was negotiated rather than determined through a completed item-by-item assessment. The court’s preliminary decisions and the subsequent settlement are distinct parts of the outcome.

In a substantial costs dispute, a small number of preliminary questions can have a considerable effect on recovery. Here, the evidence supporting enhanced rates and the chronology explaining post-budget work were central to the receiving party’s position.

The case also shows how advocacy and negotiation can complement one another. Success on the first day created the conditions for a commercial resolution without the parties completing the four-day hearing. That does not make an assessment hearing unnecessary in every dispute; it demonstrates the value of identifying the issues most likely to influence the outcome.

Costs Lawyer by ARC Costs assists receiving and paying parties with complex detailed assessment proceedings, costs budgeting disputes, hourly rate challenges and high-value Bills of Costs. We bring together technical analysis, hearing preparation and a practical approach to negotiations, taking account of the papers, court orders and risks in each matter.