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Merrix v Heart of England NHS Foundation Trust

24/10/2016

On 13 October, before Regional Costs Judge, District Judge Lumb, it was decided that a “good reason” to depart downwards from an approved budget is not needed upon detailed assessment.

The court was asked to consider to what extent, if at all, the costs budgeting regime fetters the powers and discretion of the costs judge at a detailed assessment of costs.

CPR 3.18 provides that, where a budget has been approved, then upon assessment the court will “not depart from such approved or agreed budget unless satisfied that there is good reason to do so.”

CPR 44.4(3) sets out in list form the factors to be taken into account by the court when deciding the amount of costs upon assessment to include at (h) “the receiving party’s last approved or agreed budget”.

Claimant’s position

The claimant contended that the intention of costs budgeting at a CCMC is to limit the matters that would need to be considered at a detailed assessment to those that are outside the budgeting process.

The claimant submitted that the wording of CPR Part 3.18 is clear. It provides an approach for the court on assessment of costs that the budget will only be departed from if there is “good reason” to do so.

So where the amount claimed for a phase in the bill was less than the amount allowed for the phase in the approved budget then the paying party needs to establish “good reason” before the court will depart from the amount in the bill.

Defendant’s position

The primary position was that the court is obliged by the mandatory terms of CPR 47 to carry out a line by line detailed assessment of reasonable costs and then decide on any issues of proportionality, applying the appropriate test factors contained in CPR 44.3 and CPR 44.4.

Nowhere in CPR 44 or 47 is the court directed that on a detailed assessment the paying party is required to show “good reason” why any item of costs should be reduced or disallowed where there is an approved or agreed costs budget.

The relevance of such a costs budget on detailed assessment is limited to CPR 44.4 (3) (h). It is therefore just one factor to take into account.

Regional Costs Judge Lumb held that the defendants must be correct in their submission that cost budgeting was not intended to replace detailed assessment.

When the costs management provisions were introduced, the rule makers did not make wholesale changes to CPR parts 44 and 47. The amendment that was made to CPR 44,  was to include an additional factor (h) under CPR 44.4 (3). The receiving party’s last agreed or approved budget is just another factor that the court will have to consider.

The court went further and set out that an approved “budget” does not mean either a cap or a fixed amount.

An approved costs budget is a fund that is considered to be within the reasonable range of proportionate costs but nowhere is it stated to be a fixed assessed amount.

Budgeting and assessment of costs of any phases are not mutually exclusive. There are different tools available to the court to manage costs to ensure that, ultimately, any costs to be paid by a paying party to a receiving party are reasonable and proportionate.

A helpful analogy may be to view costs budgeting as setting out the general landscape for the claim, whereas the assessment of costs performs a different function by surveying the terrain within that landscape in more detail.

The strict answer to the question of the preliminary issue in the present case is that the powers and discretion of a costs judge on detailed assessment are not fettered by the costs budgeting regime save that the budgeted figures should not be exceeded unless good reason can be shown.

Keoghs comment

Let common sense prevail and let costs management and detailed assessment have their rightful places within the litigation!

Costs management should be about approving a budget (at a macro level) that is the limit of reasonable and proportionate costs that a party may incur to allow reasonable investigation and progression of their case, and nothing more.

Detailed assessment should be about only allowing costs (at a micro level) that are reasonably and proportionately incurred and are reasonable and proportionate in amount.

Together the costs management and detailed assessment processes have the ability to reduce the frequency of detailed assessment hearings compared with before the introduction of costs management.

Perhaps all could have been avoided if the CPR 3.18(b) had provided that the court may not depart “upward” from such approved or agreed budget unless satisfied that there is good reason to do so.

We understand that the claimant has been granted permission to appeal. We shall advise you as to the outcome of the forthcoming appeal in due course.

Howard Dean
Author

Howard Dean
Partner
Head of Costs

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