Budgeting uncertainty set to roll on until Merrix appeal

Knight: agreement of budgets in advance now even more unlikely

The fall-out is continuing from the recent High Court decision that budgets bind the parties at detailed assessment unless there is good reason not to, although it seems clear that parties are waiting for a definitive ruling from the Court of Appeal.

In her ruling in Merrix last month, Mrs Justice Carr concluded: “I am told that many stays of detailed assessments are already in place, pending the outcome of this appeal. The parties may accept my judgment as binding for their purposes.

“Alternatively, it may be that further stays need to be imposed, to prevenient unnecessary court and judicial time and expense being devoted to a debate which the Court of Appeal is very shortly going to consider.”

There is already a case on the issue going to the Court of Appeal in May – Harrison v The University Hospitals of Coventry and Warwickshire NHS Foundation Trust, on appeal from Master Whalan – and it is possible that this will be conjoined with an appeal in Merrix.

Gary Knight, a partner at costs firm Harmans, told Litigation Futures that the defendant in a case he is handling sought an adjournment of a three-day detailed assessment listed for early next month, arguing that “with all due respect, Mrs Justice Carr’s decision in Merrix is incorrect”

He said: “The dilemma is the claimant applied for detailed assessment hearing back in October 2016 and whilst six months from application to hearing is a fair turnaround time by today’s standards, any adjournment is likely to add a further delay of six months for the assessment hearing (and subsequent payment) of costs… It is clear that Merrix was not the final word on this issue.”

He said live issues included the need for further case law to define “good reason” to depart.

“One thing that can almost certainly be guaranteed is that the agreement of claimant budgets in advance of any case management hearing just became even more unlikely and given this latest guidance, can the courts continue to adopt the approach that hourly rates are not to be debated at the case management hearings?

“Should parties now insist on a mini-detailed assessment at case management hearings whereat the location of solicitors, grade of fee earner and rates applied are debated, as rates are clearly a key element in the decision to allow profit costs for each phase.”

Lee Coulthard, Leeds-based assistant regional manager at costs firm John M Hayes, said that while “a clearer, more common sense judgment would be hard to envisage”, the issue would have to be settled by the Court of Appeal. “However, it would be no great surprise if the decision on appeal in Merrix were upheld.”

He said the ruling did not mean the end of detailed assessment, as – in addition to cases where there was a good reason to depart from the budget – other issues would still need determining, such as incurred costs, costs of unforeseen interim applications, costs excluded from the budget, all costs awarded on the indemnity basis.

Mr Coulthard also challenged the “perceived wisdom” that front-loading cases would be beneficial because it would take those costs outside of the scope of costs budgeting.

He said: “Given that costs judges are no longer bound to allow reasonable or necessary costs on assessment, and can reduce costs on the grounds of proportionality, any costs not included within the scope of costs budgeting are surely at much greater risk on assessment.

“Even if a particularly harsh budget is set in the costs management phase, at least the parties have the benefit of foresight in respect of the limit on recoverable costs.”

Writing on the blog of specialist costs law firm MRN Solicitors, solicitor Adam Fenton said the definition of a ‘good reason’ to depart would be “key in determining whether Mrs Justice Carr’s interpretation of the cost management rules has any real chance of achieving the desired savings with regard to assessment”.

He said: If ‘good reason’ emerges as a high barrier to overcome, detailed assessments could well be streamlined considerably; with non-exceeded phases likely to be agreed before the assessment. On the other hand, if ‘good reason’ is a low barrier, then the new interpretation may become little more than a synonym for detailed assessment, with no significant reduction in the arguments being heard.”

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