The matter of Merrix v Heart of England NHS Foundation Trust  EWHC B82 (QB) dated 13th October 2016 sets out how an agreed or approved budget impacts upon the party at detailed assessment.
District Judge Lumb sat on the matter as Regional Costs Judge in the QBD, Birmingham District Registry and was hearing what was a preliminary issue within the assessment phrased as “to what extent, if at all, does the costs budgeting regime under CPR Part 3 fetter the powers and discretion of the cost judge at a detailed assessment of costs under CPR Part 47.”
In deciding upon this point it was necessary to examine the relationship between the costs management process and consideration of CPR 3.18 which states:
In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –
(a) have regard to the receiving party’s last approved or agreed budget for each phase of the proceedings; and
(b) not depart from such approved or agreed budget unless satisfied that there is good reason to do so
The word “budget” is commonly used to describe the entire document presented to the Court and parties for the purpose of Costs Management, but is a misnomer for the most part. The “budget” relates solely to the costs which are estimated and not those that have been incurred. To describe the complete document as such is wholly incorrect in that the incurred costs are a matter of fact and cannot therefore be considered within a process not designed for detailed or forensic consideration of that that has gone before.
The Court will, of course, consider the incurred costs, but only insofar as they impact on the estimated sums going forward and this principle was set out in the matter of Redfern v Corby Borough Council. This is also a safeguard to some degree in ensuring that globally the costs are proportionate and that the matter has not been “frontloaded”.
DJ Lumb, a clinical negligence judge, considered the changes made to CPR Part 44 and most particularly the addition at CPR 44.4 (3) whereby it now states in the factors to be considered in deciding whether costs are reasonable and proportionate the Court will have regard to;
(h) the receiving party’s last approved or agreed budget
The Claimant’s contention in the Merrix case was one that as there was an agreed or approved budget and provided the Bill of Costs fell within the total, or the total claimed within the bill of costs did not exceed any particular phase then no reduction should be made without good reason.
However, this contention is flawed. A good friend of mine once described the Costs Management process, as prescribed by CPR 3, as a “light-touch exercise” and this exactly what it remains. The Court has not the time to consider within the 90 minutes allocated for both Case and Costs Management whether in fact the incurred costs have been reasonably and, more importantly, proportionately incurred. As Master McCloud indicated to me at a CCMC they simply reflect as “falling within a range of what is reasonable and proportionate”.
For the purposes of CPR 3.18 the budgeted sums (and by that I mean estimated) sums alone must be considered as a starting point rather than a fixed sum or target to be got to. The Precedent H remains a document that all parties have every right to rely upon, even though it is an estimate rather than a scientific process. This is borne out with the continued inclusion of CPR PD 44.3;
3.1 In any case where the parties have filed budgets in accordance with Practice Direction 3E but the court has not made a costs management order under rule 3.15, the provisions of this subsection shall apply.
3.2 If there is a difference of 20% or more between the costs claimed by a receiving party on detailed assessment and the costs shown in a budget filed by that party, the receiving party must provide a statement of the reasons for the difference with the bill of costs.
Further to this the Practice Direction under CPR 3 allows that;
7.6 Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions. Such amended budgets shall be submitted to the other parties for agreement. In default of agreement, the amended budgets shall be submitted to the court, together with a note of (a) the changes made and the reasons for those changes and (b) the objections of any other party. The court may approve, vary or disapprove the revisions, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed.
But also includes the phrase under CPR PDE.7.3;
……When reviewing budgets, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.
As DJ Lumb concluded at paragraph 50 of his judgment “What undoubtedly was intended was that effective costs and case management would greatly reduce the need for detailed assessment of some or all of the parties’ costs..”.
The pivotal word contained herein is that of “effective” and until such time as a suitable replacement is found Costs Management will continue. To make the process as effective as possible, therefore, regular auditing is required and parties put on notice of departures from the original sums as and when appropriate.
The final words once again come from the judgment of DJ Lumb in what is a consummately sensible decision and reinforces the need for continued, effective and contemporaneous auditing “A costs budget is a living document that the parties and the Court are obliged to keep under review throughout the case”, “…the powers and discretion of a costs judge on detailed assessment are not fettered by the costs budgeting regime save that the budgeted figures should not be exceeded unless good reason can be shown”.
Written by Jonathan Wiseman - Senior Costs Draftsman & Associate
The purpose of this blog is to provide information and discussion. Nothing on this blog should be relied upon as a substitute for advice from a qualified Solicitor regarding any actual legal issue or dispute. Nothing on this website should be construed as legal advice or perceived as creating a solicitor – client relationship. Just Costs Limited can accept no liability in contract or tort to any person, firm or company that relies on or makes use of the above, or any part thereof.