Costs Budgets on Assessment: The Court of Appeal View

Following the decision of Merrix -v- Heart of England NHS Foundation Trust [2017] EWHC 346 (QB) in February this year, the Court of Appeal has now had the opportunity to consider the effect of case management orders on assessment proceedings.

CPR 3.18 states that in any case where a costs management order has been made, when assessing costs on the standard basis, the court will have regard to the party’s last approved or agreed budget for each phase of the proceedings and not depart from the same unless satisfied that there is good reason to do so.

However, there has been disagreement over the interpretation of this part on matters where a party’s costs had not exceeded the budget in respect of a particular phase and therefore whether a costs judge on assessment was precluded from going below the budgeted amount.

In Harrison -v- University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792, the Court of Appeal were asked to address this issue and also whether this applied to the costs already incurred at the time of the budget, as such costs would have been taken into account at the costs management stage in assessing the total figures for each phase of the proceedings.

Lord Justice Davis stated:

“I am in no real doubt that Master Whalan reached the right conclusion on this issue and that the conclusion of Carr J in Merrix was also correct, for the reasons which she gave. “

Affirming that to go below the budgeted amount for a particular phase the paying party does need to establish good reason.

However, the Court of Appeal did find in favour of the appellant in respect of the issue of incurred costs, concluding that the same are to be the subject to detailed assessment in the usual way, without any added requirement of “good reason” for departure from the approved budget.

Lord Justice Davis explained that a costs judge on assessment involving a case management order will assess incurred costs in the usual way and also consider budgeted costs before ultimately having to look at matters in the round and consider whether the resulting aggregate figure is proportionate, having regard to CPR 44.3 (2)(a) and (5).

We have now started to receive assessments from the Court relating to cases involving these issues, therefore if you ever need assistance on such matters, contact us!

Ryan Murphy

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