Budgeting v detailed assessment – it’s a toughie, admits rule committee group

Handcuffed: is the costs judge’s discretion fettered?

The question of whether and to what extent the costs budgeting regime fetters the powers and discretion of the costs judge at detailed assessment is a difficult one that needs to be put out to consultation, the rule committee was told earlier this month.

The issue has come to the fore following the recent ruling of District Judge Lumb, a regional costs judge, in Merrix v Heart of England NHS Foundation Trust [2016] EWHC B28 (QB).

In this, he held that his powers on detailed assessment were not fettered even though the receiving party had come in within budget.

He said that though there was no direct authority on the relationship between the two, there were numerous examples in the CPR and case law to support the contention that cost budgeting was not intended to replace detailed assessment.

The issue was raised by the Civil Procedure Rule Committee’s (CPRC) sub-committee which recommended changes to the costs management regime as a result of the Court of Appeal’s ruling in SARPD earlier this year.

In its paper to the CPRC, the committee – chaired by Master Roberts – said: “On the one hand, there is a view (which is that of the Judicial College) that if costs are claimed at or below the figure approved or agreed for that phase of the budget, then they should be assessed as claimed without further consideration.

“The budget fixes the amount of costs recoverable and the costs can only be reduced if the defendant paying party satisfies an evidential burden that there is good reason to depart from the figure in the budget.

“There is a contrary view that the cost judge’s powers and discretion are not fettered by the budgeted figure for that phase and the budget is but one factor to be considered in determining reasonable proportionate costs on assessment of costs under CPR part 47. This view was accepted by Lumb DJ in Merrix.

“We have flagged up this important issue but have not sought to resolve it. Firstly, it was not within our remit. Secondly, there is a strong argument that an issue of such fundamental importance should be the subject of public consultation. Thirdly, we could not reach a unanimous decision.”

It is not yet known what the CPRC decided to do.

    Readers Comments

  • Phil says:

    In common parlance a ‘budget’ just sets an upper level for something. The Judicial College say it means you can charge what you want for something and pass it on to the other side, as long as it does exceed the budget.

    The simple question is: should unreasonably incurred costs nevertheless be payable on the standard basis if they are less than the costs budget? The obvious answer is that they should not. This does not undermine the budgeting process. The budget gives certainty – the parties know the costs will not exceed the budget without good reason. The corollary does not have to be that it in budget costs are dealt with a 45 minute hearing on the basis of speculative assumption rather than a two day hearing on assessment applying the rigours of Part 44 and 47 (incidentally only 1%-2% of cases actually go to assessment this remains the same for budgeted cases across the 1000s of costs cases I see annually although a large non-refundable court fee is payable in a much higher % of cases whereas virtually 100% cases reaching a CMC have a budget)

    90% of cases with a costs budget don’t go to trial. The budgeted work is not fully undertaken. The phases are not chronological. Costs budgets must be set on the basis everything that is in issue will remain in issue, as parties cannot argue at the end of the case “I thought the other side was going to concede X, Y & Z so I didn’t budget for it”. Issues frequently narrow. Damages recovered are seldom on line with the maximum of the level of damages pleaded and proportionality may therefore need to be revisited (especially if for costs post 1 April 2013 VAT and additional liabilities are deemed relevant to proportionality as in the BNM judgment).

    Costs budgets should ensure that costs that exceed a budget are disallowed on assessment (other than those within a narrow definition of having “good reason” to depart). They should not operate to increase costs by allowing costs that would otherwise be deemed unreasonable costs on assessment to be rubber stamped and allowed because they are within what is often an arbitrary sum that is set at an extremely short hearing is “in budget”.

    Of course most cases never go to detailed assessment but if you can potentially recover unreasonable costs on assessment issues become far more contentious .

    The Judicial College approach is perhaps fine for the cases they see that go to trial that go exactly as planned at the budgeting phase. However, only 3% of issued claims go to trial. A slightly higher % of cases with a costs budget may reach go to trial but what percentage of those follow the exact route anticipated early in the litigation?

    Costs budgets are good to say this is the upper limit but they should not give carte blanche recovery of unreasonably incurred costs.

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