Costs Budgeting – A New Twist

Published April 18, 2017 by

Has a new can of worms been opened as a result of the appeal in Merrix – v – Heart of England NHS Foundation Trust (2017) EWHC 346 (QB).

The question before District Judge Lumb sitting as a regional costs judge at the trial in October 2016 was “ to what extent, if at all, does the costs’ budgeting regime under CPR Part 3 fetter the powers and discretion of the costs Judge at a detailed assessment of costs under CPR Part 47”? I

In a carefully reasoned decision District Judge Lumb determined that the powers and discretion of a costs judge was not fettered by the costs budgeting regime save that the figures should not exceed those of the last approved or agreed budget unless good reason shown. In more simplistic terms he concluded that a costs budget acted simply as a cap (in the absence of a “good reason” to allow more) on the recoverable costs but that any costs up to the level of that cap could be challenged on detailed assessment in the normal manner.

What was considered to be fundamentally clear, the wording of the relevant rule at CPR Part 3.18 reads;

“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.”

However, on appeal Mrs Justice Carr concluded:

“the answer to the preliminary issue is as follows: 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 good reason to do so. This applies 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….

…the central message is that set out in CPR 3.18, namely that the approved or agreed budget will bind the parties at the detailed assessment stage (on a standard basis) whether the costs claimed are for less than, equal to or more than the sums approved or agreed by that budget, unless there is good reason otherwise.”

The above conclusions raise the questions on matters that settle pre-trial, how un-completed phases dealt with on assessment, i.e. expert reports, PTR, Trial etc, after all if parties are to be “bound” by the sums approved or agreed in the last budget to what extent does the fact that an early conclusion to a case mean that there is a “good reason to depart”.

This may not be the end of this particular issue, the Court of Appeal is due to consider this issue in another case, Harrison v Coventry NHS Trust, in May this year, although there is a strong possibility that they will reach the same conclusion although it is hoped that clear guidance is forthcoming in respect of what is considered to be “good reason to depart” although one feels that the matter will continue to roll on until a definitive precedent is set.

Hearing Fees – No longer refundable

From 6th March 2017, the Civil Proceedings Fees (Amendment) Order 2016 came into force, whereas prior to the implementation of these amendments, hearing fees were refundable on a sliding scale depending on the date of the notification to the Court where a case settled pre-trial, i.e.

  • 100% where notification is given more than 28 days before a hearing,
  • 75% if the court was notified between 15 and 28 days before the hearing, and,
  • 50% if the court was notified between 15 and 28 days before the hearing.

The new rules have changed this position and as such the hearing fee is no longer refundable if a matter settles pre-trial, although the hearing fee is now payable closer to the trial itself, which will reduce the impact of this change.

This new rule does not apply to cases where the court gave notice of a trial date or the start of the trial period before 6 March 2017.