High Court to hear appeal over decision to cut hourly rates in budget after doing same to incurred costs

Hayman: ruling has potentially wide-ranging impact

The High Court is set to provide guidance on whether a costs judge who reduces the hourly rates for incurred costs should then do the same to budgeted costs.

It follows conflicting lower court decisions, one of which – RNB v London Borough of Newham – is now being appealed.

In that case, Deputy Master Campbell ruled that reducing the hourly rates for the incurred costs meant there was a “good reason” to reduce the budgeted costs too.

To do otherwise would mean that the claimant would recover an hourly rate as set out in Precedent H for the budgeted stage “at a level that significantly exceeds the figure I consider to be reasonable and proportionate for the pre-budget stage”.

However, last month in Bains v Royal Wolverhampton NHS Trust, District Judge Lumb, sitting as a regional costs judge, expressly disagreed with this position, according to Michael Fletcher, a costs lawyer and chartered legal executive at Manchester firm Glaisyers who acted for the claimant.

He reported: “Judge Lumb held that to reduce hourly charging rates for budgeted costs to the same levels as those allowed for the incurred costs, thereby causing a potential departure from the budgeted phase totals, would be to second guess the thought process of costs managing judge and would impute a risk of double jeopardy into the detailed assessment.

“The costs managing judge was not fixing hourly rates, but may have had regard to them when setting a reasonable and proportionate allowance for each phase of the budget. Absent cogent evidence to the contrary, the costs judge simply couldn’t know.

“The clear philosophy and guidance from the senior courts in Merrix and Harrison was to simplify and reduce the scope of detailed assessments. The ‘good reason’ bar was a high one.”

Mr Fletcher, who was instructed by Thompsons, said there has been no appeal by the defendant, possibly because RNB was being appealed.

London firm Bolt Burdon Kemp acted for the claimant in RNB. Sam Hayman, senior associate in its costs team, confirmed that the High Court has granted permission to appeal on the hourly rates point.

A decision is still awaited on permission to appeal Deputy Master Campbell’s finding that in any case the sums sought were disproportionate.

Mr Hayman said: “The judgment has potentially wide-ranging impact across the detailed assessment process, with Deputy Master Campbell having effectively driven a coach and horses through Harrison and the wider budgeting process.

“We are bringing this appeal due to the potential future impact across all detailed assessments if the decision goes unchecked, not just for the impact on this standalone claim.”

He said the firm has subsequently and successfully run the same point before Master Whalan.

    Readers Comments

  • Bill says:

    RCJ Lumb’s initial decision in Merrix made sense – essentially even costs ostensibly ‘in budget’ must be reasonable to be recovered. However, his decision in Merrix was overturned and the decision to was approved by the Court of Appeal in Harrison.

    The Bains decision that rates can’t be interfered with he followed the logic that flowed from his original decision being overturned and Harrison. Unfortunately the Harrison decision leads to illogical and perverse outcomes.

    Under Harrison the costs budgeting regime is a charter for the recovery of unreasonable costs.

    Essentially if a case settles between the budget being set at CMC and Trial (which approx 90% of budgeted cases do given only 3% of litigated cases make it to trial) the receiving party may have undertaken 20% of the work budgeted for but is able to massively overcharge in rates and time for that work and claim costs equivalent to 90% of the budget. When opposed the receiving party says “I’m in budget” and is awarded the grossly excessive costs (I see examples of this on a daily basis post Harrison).

    On provisional assessment it is impossible for a costs judge to deal with the issues raised by budgets and this ends up with massively inflated and unreasonable costs, obfuscated by being spit into a 20 part phased bill being allowed.

    To add to this is the issue deal with in the cases above – hourly rates were not usually ruled upon when the budget is set. A surprisingly large number of judges take the rule to mean that hourly rates cannot be reduced ed to explicitly rule on them but take into account if they are excessive many assume (or assumed for the last 4 years) they can be dealt with on DA. Harrison logic would suggest they can’t (essentially what RCJ Lumb says) so no one ever rules on hourly rates. They are effectively allowed as claimed unless a Judge factors in a reduction when setting the budget (but keeps schtum about it to satisfy PD 3E).

    RCJ Lumb is following the logic the flows from his original decision being overturned. The problem his original judgement made sense but the overturned version & Harrison lead to perverse and illogical outcomes as they result in the recovery of unreasonable costs and unreasonable hourly rates that have never been ruled upon.

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