On the (costs) buses

It would seem that answers in costs jurisprudence are somewhat like proverbial buses: you spend years waiting for one and then two come along at once, albeit travelling in different directions.

As the costs management regime bedded in and claims moved through the court system, the question arose as to the extent to which an approved costs budget would impact upon a subsequent detailed assessment.

The key provision in CPR 3.18(b) provides that when assessing costs, the court will ‘not depart from such approved or agreed budget unless satisfied that there is good reason to do so’. The meaning of this paragraph has been the subject of considerable debate, with receiving parties generally arguing that the court should apply a light touch to a bill that does not exceed the budget and paying parties maintaining that the budget merely operates as a cap on the total costs recoverable.

The point recently arose twice in quick succession in Jones v Harding and St Helens and Knowsley NHS Trust and Merrix v Heart of England NHS Foundation Trust, with regional costs judges Baldwin and Lumb respectively taking different approaches to the issue.

Good reason

In Jones, a claim arising from the late diagnosis of cauda equine syndrome, the claimant’s costs budget of £259,974.39 had been approved, and the bill of costs did not exceed it. In considering the application of CPR 3.18(b), the court heard submissions from both parties which focused on the incurred element of the budget.

The defendant argued that the reference to ‘budget’ in CPR 3.18(b) could only apply to the estimated element of the budget approved by the court and did not include the costs already incurred when the costs management order was made. The defendant attempted to distinguish the decision of the Court of Appeal in Sarpd Oil International Ltd v Addax Energy SA [2016] EWCA Civ 120 on the basis that the budget in that case had been agreed between the parties. The claimant argued that the court was bound by Sarpd Oil, specifically that absent a negative comment at the CCMC, the incurred costs should only be departed from with good reason.

As the claim did not involve an agreement between the parties in relation to the costs budgets, District Judge Baldwin did not consider himself to be bound by Sarpd Oil. However, he considered the total for each phase approved at the CCMC to be subject to CPR 3.18(b) (including the incurred costs) and good reason would be required to depart from the figure. The judge noted that a claim lower than the phase total would amount to good reason to depart but that the lower figure would be even more reasonable and proportionate than the approved amount.

Mutual exclusivity

In Merrix, the same issue arose in the form of a preliminary issues hearing to decide whether the court’s powers on detailed assessment were fettered by the costs budgeting regime. The defendant argued that the court was obliged by CPR 47 to conduct a detailed assessment of both the incurred and future costs. The defendant noted that PD 3E confirmed the court should not conduct a detailed assessment in advance and submitted that the purpose of approving a costs budget was to set a limit on the costs recoverable for each phase.

By contrast, the claimant submitted that CPR 3.18 provided a mechanism for the court to depart from the future costs element of the budget on assessment only, where there was good reason to do so, albeit it was accepted that the incurred costs should be assessed by the court. It said ‘budget’ meant a ‘fund and any figure within that fund’ and the ‘departure’ did not just mean upwards but also downwards from any figure within the budget. Therefore, if the figure claimed in the bill was within the budget and the defendant failed to show good reason to reduce that figure, then it should be allowed.

District Judge Lumb did not wholly accept either party’s position and found that budgeting and assessment were not mutually exclusive. Sarpd Oil was distinguished on the basis that it did not relate to the assessment of costs. The judge considered that ‘departure’ in CPR 3.18 related to the total available fund for the phase and not a sum claimed in the bill, which was within budget. Therefore, the powers of the assessing judge were determined not to be constrained by the budgeting process.

With two experienced costs judges deciding the point in completely different ways, it appears that clarity over CPR 3.18 remains elusive. It is to be hoped that a definitive answer will be provided once the issue comes before an appellate court. Until that particular bus arrives, however, local knowledge will be crucial to any party contesting a detailed assessment involving a costs budget.

David Wright is a council member of the Association of Costs Lawyers and a costs lawyer at Irwin Mitchell

@CostsLawyers www.associationofcostslawyers.co.uk