In the recent judgment of Merrix v Heart of England NHS Foundation Trust (Birmingham District Registry, 13 October 2016), Regional Costs Judge District Judge Lumb considered the extent to which the costs budgeting regime in CPR Part 3, fettered the powers and discretion of the Costs Judge on detailed assessment under CPR Part 47.
DJ Lumb pointed out at the start of his judgment, that:
‘Both processes share a common objective to identify reasonable and proportionate costs. However, looking from opposite ends of a procedural timeline they are not necessarily focussed on exactly the same thing’.
The matter was a preliminary issue in a clinical negligence claim and the defendant was the paying party. The claimant submitted that a budget fixed the amount of recoverable costs and can be reduced only if the paying party can show good reason to depart from it. This, it was said, was the meaning behind the words in CPR r. 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.
Therefore, said the claimant, if her costs are claimed at or less than the figure approved or agreed for that phase of the budget then they should be assessed as claimed without further consideration.
The defendant’s position was that the Costs Judge’s powers and discretion are not fettered by the budgeted figure for the phase but that the budget is but one factor to be considered in determining reasonable and proportionate costs on assessment. Additionally, it pointed out that costs budgeting was not intended to replace detailed assessment, if this were the case then there would be no test of proportionality for these costs, which is carried out at the detailed assessment stage.
Before giving his judgment, DJ Lumb noted that:
‘Although aspects of costs budgeting have been considered in a number of authorities there appears to be no direct case authority on the relationship between costs budgeting and costs assessment. The debate in the legal profession concerning this issue reflects wide-ranging views and interpretations and the parties in the present case have taken entrenched positions which can only be described as polar opposites’.
Having regard to this, he concluded that the defendants must be correct in its submission that costs budgeting was not intended to replace detailed assessment and that the receiving party’s last agreed or approved budget is just another factor that the Court will have regard to. This the judge said, was clear from the fact that the Rules Committee did not make changes to CPR Parts 44 and 47 to give importance to the budget. Further evidence that there was no intention to preclude the availability of detailed assessment can be found in the Practice Direction. PD 3E which expressly states that in budgeting the Court is not carrying out a detailed assessment in advance. DJ Lumb stated:
‘The words “in advance” must mean that this will be available at the conclusion of the case. PD 3E also states that the hourly rates and time to be expended are for guidance purposes only to assist the Court in setting a budget. The time to consider those in detail must therefore come later, at assessment’.
Instead, he stated that, what must have been intended was that effective costs and case management would greatly reduce the need for detailed assessment of some or all of the parties’ costs by ensuring that the costs budgets were within the range of reasonable and proportionate costs for each phase. In so doing the scope for disagreement should be reduced to a level where a paying party would be unwise to risk incurring the significant costs of the detailed assessment process for what would only be limited potential gains.
Therefore he concluded that the strict answer to the question in issue in this case was 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. However, he added:
‘… the full answer to the issue is more nuanced than the defendant’s position of “open season” and complete discretion to attack a bill on detailed assessment, and the claimant’s opportunistic attempt to impose a straight-jacket on the costs judge and claim a fixed figure’.
Therefore, he granted permission to appeal and the claimant representative has said it is considering its position on the matter.