High Court backs Budgeting Regime

The High Court in its recent decision in Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB) has backed the Budgeting regime and reaffirms the message that an agreed approved budget binds the parties at the detailed assessment.

When cost budgeting was introduced parties were unsure as to the relevance of an approved budget on assessment proceedings. CPR 44.3 (3) (h) gave some guidance. Further guidance is also provided by CPR 3.18, which states that where a budget has been approved, then upon assessment the court will “not depart from such approved or agreed budget unless satisfied that there is good reason to do so.

Whilst CPR 3.18 (b) applies as a cap where the receiving party is over-budget, the question remained where the receiving party is under-budget as was the case in Merrix.


The Claimant’s cost budget had been approved in the total sum of £128,256, of which £74,780 related to future costs. The bill of costs served by the Claimant was less than the approved total budget after the case was ended before trial but after lay and expert evidence had been exchanged.

It was the Claimant’s case that if costs are claimed at or less than the budget then they should be assessed as claimed unless the paying party satisfied an evidential burden that there was a good reason to depart.

The Defendant’s position was that the budget is only one factor to be considered in determining reasonable and proportionate costs on assessment, and should not apply as a cap.

Merrix 1st instance

Regional Costs Judge, District Judge Lumb disagreed with the Claimant’s interpretation of CPR 3.18. It was considered that a budget was not a ‘fixed sum’, but an ‘available fund’ and departing from the budget whether the departure was more or less being claimed did not matter.

What DJ Lumb was saying in essence is that the budget provides a framework of what the costs are and the function of a detailed assessment is to carry out a line by line detailed assessment of reasonable costs and then decide on any issues of proportionality.

DJ Lumb was of the opinion that 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.

The above decision brought the whole budgeting/costs management into the spotlight and questioned the merits of preparing a costs budget.

Permission for appeal was granted to the Claimant.

Judgement on Appeal

On appeal it was decided that where a costs management order has been made, when assessing costs on the standard basis, the costs judge will not depart from the receiving party’s last approved or agreed budget unless satisfied that there is a good reason to do so. It also decided that this applied as much where the receiving party claims a sum equal to or less than the sums budgeted as where the receiving party seeks to recover more than the sums budgeted.


Written by Nadia Zarait - Associate and Costs Lawyer

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