reduced if the paying party satisfies an evidential
burden that there is good reason to depart from
the figure in the Budget.”
The question of whether, and to what extent the
Costs Budgeting regime fetters the powers and
discretion of the Costs Judge at Detailed
Assessment is a difficult one that needs to be put
out to consultation, the Rule Committee was told
in December.
The issue has come to the fore following the
recent ruling of District Judge Lumb, a regional
Costs Judge, in Merrix v Heart of England NHS
Foundation Trust [2016] EWHC B28 (QB). District
Judge Lumb held that his powers on Detailed
Assessment were not fettered even though the
receiving party had not exceeded the Budget and
stated that there was no direct authority on the
relationship between the two. There were
numerous examples in the CPR and case law to
support the contention that Cost Budgeting was
not intended to replace Detailed Assessment.
The issue was raised by the Civil Procedure Rule
Committee’s (CPRC) sub-committee which
recommended changes to the costs management
regime as a result of the Court of Appeal’s ruling in
SARPD earlier this year.
In its paper to the CPRC, the committee chaired by
Master Roberts said that “on the one hand, there is
a view (which is that of the Judicial College) that if
costs are claimed at or below the figure approved
or agreed for that phase of the Budget, then they
should be assessed as claimed without further
consideration. The Budget fixes the amount of
costs recoverable and the costs can only be ...
“There is a contrary view that the cost Judge’s
powers and discretion are not fettered by the
budgeted figure for that phase and the Budget is
but one factor to be considered in determining
reasonable proportionate costs on Assessment of
Costs under CPR part 47. This view was accepted
by Lumb DJ in Merrix.”
We have been debating this in-house since the inception of Costs Budgeting and it is our opinion
that the CPRC will most likely agree with District
Judge Lumb’s reasoning despite the amounts
allowed by the Court previously at the Cost Case
Management Conference, so in essence receiving
parties will be subject to a double reduction and
the paying party will be able to have another bite
of the cherry.
Uncertainty around the question of whether
recoverable additional liabilities are subject to
the Proportionality test has grown after a split
between Costs judges emerged. In King v
Basildon & Thurrock University Hospital NHS
Foundation Trust, Master Rowley expressly
disagreed
with
Senior
Costs Judge
Gordon-Saker’s decision in BNM v MGN,
which has been listed for an appeal in October
2017.
The case in question was a complex Clinical
Negligence matter in which the Claimant was
awarded £35,000.00 plus Costs after a three
day trial. At Detailed Assessment, Master
Rowley was presented with a Bill for
£326,000.00. The Costs were reduced to
£250,000.00 as being
reasonable and
then went on to consider the new test of
Proportionality under CPR 44.3 (5) and
reduced the Costs to £234,000.00.
Base Profit Costs were £88,337.00, a sum
Master Rowley said would “almost always” be
proportionate in such a case, unless the
damages were “very modest”. Master Rowley
concluded they were not in this instance.
Master Rowley said that the word ‘costs’ in
the Proportionality Test, as now defined,
referred to Profit Costs and Disbursements,
but not additional liabilities given that the
Test applies to costs incurred post the 1st April
2013 if proceedings were not issued prior to
this date.
Among other reasons he cited for defining
‘costs’ as referring only to base costs was that
it fitted in with the Provisions of Part 3
relating to Costs Management. The Precedent
H expressly excludes any additional liabilities
that may still be recoverable.
Master Rowley went on to state that if the base
Costs have been allowed at a proportionate
figure, a success fee at a percentage agreed by
the parties or allowed by the Court would also
be proportionate. Had the additional liabilities
been subject to the Test, the Judge said, it was
unlikely that he would have considered
£234,000.00 to be proportionate.
Master Rowley has granted the Defendant
leave to appeal within 21 days of the Court of
Appeal’s ruling in BNM.
It is our view that Master Rowley’s reasoning in
this particular case is correct and it will be
interesting to see how the Court of Appeal
views the reasoning in this case when
considering the appeal in October for BNM.
The Cost Budgeting rules are to be amended to make it clear that the Case Management Hearing
is not the forum to debate incurred costs.
The Civil Procedure Rule Committee (CPRC) agreed the change at its meeting in December in the
wake of certainty caused by the Court of Appeal’s ruling in 2016 in SARPD Oil International
Limited v Addax Energy SA and another [2016] EWCA Civ 120. In this, Lord Justice Sales said that
the first Case Management Conference was the time to contest incurred costs, as well as
estimated costs.
The Judgment was widely interpreted as preventing a paying party from challenging the costs
incurred if they have agreed a Budget at the Case Management stage. Further it is seen as an
incentive to challenge all parts of the costs incurred at the Case Management stage. The
interpretation of SARPD effectively undermined the efforts of the CPRC to simplify costs
management to promote agreement and to thus reduce hearing time.
The case shows an inherent tension in the Rules as the Court limits its costs management
function to approval or management of the costs to be incurred. However, the Court’s approval
relates to each phase of the Budget which is an amalgam of the incurred costs and the budgeted
future costs. As SARPD highlights, the approval of a Phase of the Budget may be seen to indicate
approval of both the incurred costs and future costs and thus deprive a party of raising points
relating to the incurred costs on a later Assessment of Costs.
The CPRC accepted a series of changes to rules 3.15,3.18, 44.1 and practice direction 3E with the
aim of:
1. Decoupling the costs incurred from the budgeted costs, making it clear that the Court’s
Budgeting will only relate to the costs to be incurred.
2. Ensuring that the court on Detailed Assessment can properly apply CPR 44.4.
3. Retaining the power of the Court to comment on the incurred costs so as to provide clarity as
to the interrelationship between the budgeted costs and the costs to be incurred and provide a
steer which may promote agreement of the costs incurred.
4. Retaining the power of the parties to agree the incurred costs and the budgeted costs.
It is our opinion that this change was inevitably going to be made and the decision to amend the
rules is practical. Given the rules, common sense should prevail that the case management
process should not deal with incurred costs and the same should be dealt with at Detailed
Assessment.
We hope you found this newsletter informative. Should you have any queries with
respect to the articles, please do not hesitate to get in touch with Rebecca
Whitworth, Senior Costs Manager here at JFS at [email protected] or call her
on: 01254 918 744
Our skilled Costs Team provide a cost effective, dedicated and tailored costs
recovery service and are on hand to assist with all costs issues on Personal
Injury, Catastrophic Injury, Industrial Disease, Clinical Negligence, Court of
Protection, Civil and Commercial matters.
For more information about the services we offer, please get in touch with our
Client Relationship Team on 0845 653 7529.