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Failure to spend budget “not a good reason to depart”

Budget: Risk of every settled case going to detailed assessment

A failure to spend the totality of a budgeted figure for a phase because of settlement is not in itself a good reason to depart from a costs budget, a regional costs judge has ruled.

In doing so, District Judge Lumb in Birmingham expressly disagreed with the decision last year of His Honour Judge Dight in Salmon v Barts, where he found the fact that the two phases had not been completed was in itself good reason to depart from the budgeted phase figures.

DJ Lumb said that, applying the strict guidance of Davis LJ in Harrison – who said good reason was a high hurdle – the court was not expected to carry out a micro-assessment of how much work has been done in each particular phase.

In Chapman v Norfolk and Norwich University Hospitals NHS Foundation Trust, the defendant argued that early settlement in favour of the claimant was good reason to depart in the experts and ADR/settlement phases.

Rejecting this, the judge said: “Very clear evidence of obvious overspending in a particular phase would be required before the court could even begin to entertain arguments that there was a good reason to depart from the budgeted phase figure if the amount spent comes within the budget.

“If it were otherwise, one of the principal purposes of costs budgeting would be lost, namely the certainty of the parties of the amounts that they are likely to be able to recover or pay respectively. Quite simply, the court would be required to carry out a detailed assessment of all the costs in any phase that was not completed, which cannot possibly have been the intention of the rule makers.

“It follows that a complaint that the budget was set too generously or on too miserly a basis cannot, of itself, amount to a good reason to depart.”

DJ Lumb said there was nothing in the file to suggest there had been a “substantial overspending” on work done in the two phases, even though the experts phase was not completed.

It was not the role of the costs judge at detailed assessment to calculate what a prudent party would have incurred where a phase has not been completed, otherwise potentially every case that settled would end up with a detailed assessment.

“That consequence was clearly one that the Court of Appeal judgment in Harrison was warning against,” he said.

This implied that something amounting to a “specific and substantial point arising in the case, as opposed to merely a general point”, was required for it to amount to a good reason to depart from a figure that came within budget.

“Were that not the case, there would be a highly undesirable risk that arguments raised at the costs management hearing could be reopened on assessment on the basis that the budget was too generous.

“The costs judge could be invited to look again at the constituent elements of the receiving party’s Precedent H.

“Those constituent elements in Precedent H were only ever intended as a guide to the costs managing judge to show how the party arrived at the figure contended for.

“It would also lead to a reopening of the issue of proportionality that had already been determined in the budgeted figure subject only to the final proportionality cross check on assessment.

“Allowing such an approach would further undermine the budgeting process. It most certainly could not be defended as exercising a safeguard against a real risk of injustice.

“In fact, quite the reverse, as it would lead to a risk of double jeopardy of issues already decided at the costs management hearing.”