COSTS BUDGETING AND THE FINAL BILL: HARRISON IN THE COURT OF APPEAL

How definitive is a costs budget when it comes to detailed assessment? That is an issue that has been troubling the courts now for a few years.  The judgment of the Court of Appeal  today in Harrison -v- University Hospitals Coventry & Warwickshire Hospital NHS Trust [2017]  EWCA Civ 792 provides guidance. I will provide a more detailed examination later on.

There are other issues which are explored in detail  a 4 New Square article on the subject – available here.

THE ISSUES

  1.  How definitive is a costs budget on the budgeted”future costs” when the matter comes for assessment.
  2. Is the budget definitive in relation to incurred costs

THE DECISION

  1. In relation to the budgeted “future costs” the budget is to be seen as definitive. The budget will not be departed from (upwards or downwards) unless there is “good reason to do so”.
  2. The “incurred costs” element of the budget is not definitive.  It has to be assessed in the traditional way.

JUDGMENT ON THE FUTURE BUDGETED COSTS

The court held that the existence of the budget had an effect on those costs that the court had budgeted. They considered the appellant’s arguments that costs budgeting would replace the detailed assessment.

” First, aspects of it seemed to be almost asserting that unless the Rules were interpreted as he argued a CMO approving a budget would operate in effect to replace the detailed assessment.  That clearly is not right: as Carr J pointed out in Merrix.  The effect, rather, is as to how the detailed assessment is conducted.  Second, and linked to the first point, the whole argument, in my opinion, tends to downplay the significance of the “override” built into the wording of CPR 3.18 (b).  Where there is a proposed departure from budget – be it upwards or downwards – the court on a detailed assessment is empowered to sanction such a departure if it is satisfied that there is good reason for doing so.  That of course is a significant fetter on the court having an unrestricted discretion: it is deliberately designed to be so.  Costs judges should therefore be expected not to adopt a lax or over-indulgent approach to the need to find “good reason”: if only because to do so would tend to subvert one of the principal purposes of costs budgeting and thence the overriding objective.  Moreover, while the context and the wording of CPR 3.18 (b) is different from that of CPR 3.9 relating to relief from sanctions, the robustness and relative rigour of approach to be expected in that context (see Denton v TH White Limited [2014] EWCA Civ 906, [2014] 1 WLR 3926) can properly find at least some degree of reflection in the present context.  Nevertheless, all that said, the existence of the “good reason” provision gives a valuable and important safeguard in order to prevent a real risk of injustice; and, as I see it, it goes a considerable way to meeting Mr Hutton’s doom-laden predictions of detailed assessments becoming mere rubber stamps of CMOs and of injustice for paying parties if the approach is to be that adopted in this present case.  As to what will constitute “good reason” in any given case I think it much better not to seek to proffer any further, necessarily generalised, guidance or examples.  The matter can safely be left to the individual appraisal and evaluation of costs judges by reference to the circumstances of each individual case.”

JUDGMENT ON INCURRED COSTS

“It follows, in my view, that incurred costs are not as such within the ambit of CPR 3.18 (in its unamended form) at all.  Accordingly such incurred costs are to be the subject of detailed assessment in the usual way, without any added requirement of “good reason” for departure from the approved budget”