Costs budgets rule
In this blog I look at two recent cases concerning the somewhat dry but nevertheless important issue of costs recovery for a successful party in court proceedings to which the cost budgeting regime applies.
Costs management and budgeting has brought about a sea change in the approach to litigation costs since it was first introduced (following limited pilot schemes) on 1 April 2013. Initially applicable to multitrack claims up to £2 million in value, it was extended in April 2014 to include all multitrack claims up to £10 million in value, save in respect of litigants in person.
I have recent experience of a case where a claimant sought more than the amount stated in its costs budget. This must happen frequently even though, at CPR rule 3.18, it states that without “good reason” the court will not depart from an approved or agreed costs budget.
In Merrix v Heart of England NHS Foundation Trust, the party receiving costs (who had been successful in her claim for clinical negligence) sought to recover the sum stated in her costs budget even though she had in fact incurred less.
" The costs judge also suggested that the costs budget, although not binding, would be a strong guide as to what was allowed on detailed assessment."
In response to Mrs Merrix’s claim that her costs should be assessed as in the approved costs budget, unless the paying party could establish a good reason to depart from that figure, the Trust (the paying party) argued the court was not constrained by the costs budget. The Trust argued that it was entitled to benefit from detailed assessment as the costs budget was just one relevant factor.
The costs judge had concluded that he had the power to reduce an approved budget on detailed assessment. However, the costs judge also suggested that the costs budget, although not binding, would be a strong guide as to what was allowed on detailed assessment.
Mrs Merrix appealed the decision of the costs judge on a preliminary issue: “to what extent if at all does the costs budgeting regime under CPR Part 3 fetter the powers and discretion of the costs judge at a detailed assessment of costs under CPR Part 47?”
The appeal judge, Mrs Justice Carr, focused on the mandatory nature of the wording of CPR rule 3.18 which requires the court not to depart from the costs budget without good reason. Mrs Justice Carr concluded:
“Where a costs management order has been made … the costs judge will not depart from the receiving party’s last approved or agreed budget unless satisfied that there is good reason to do so. This applies as much where the receiving party claims a sum equal to or less than the sums budgeted as where the receiving party seeks to recover more than the sums budgeted.”
However, Mrs Justice Carr acknowledged that the decision in this appeal would not end the debate. It was suggested that it may be appropriate for the Court of Appeal to consider this important point of procedure and practice.
In my experience some changes in circumstances, such as the impact of interim orders, are taken into account as “good reasons” to depart from an approved budget. However, other changes in circumstances will be more controversial and need to be considered in context.
The judgment in Car Giant Limited v London Borough of Hammersmith is interesting because it touches on, amongst other things, the practicalities of dealing with the changes to the costs budgets, and the reasonableness of such changes, including in the light of Merrix. In short, the judge in Car Giant indicated that the court should not interfere with issues relevant to the assessment of costs without particular knowledge of any factors relevant to the particular issue.
This judgment seems to me to further emphasise the need to prepare costs budgets with as much care and forethought as possible, and to raise any issues regarding their revision at the earliest possible opportunity.
I think that these judgments will lead to parties and their solicitors focusing increased attention on the detail of their, and the other parties’, costs budgets submitted in advance of the first costs and case management conference. Merrix indicates that unless there is a good reason to depart from an approved or agreed budget, recovery will be at those approved amounts.
This area of the law will continue to develop in the coming months, when we learn the outcome of any appeal from the Merrix judgment and a further appeal (to which Mrs Justice Carr referred) in Harrison v Coventry NHS Trust.