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Clarifying the relationship between Costs Budgeting and Detailed Assessment

June, 22, 2017

The Court of Appeal handed down their judgment yesterday in the case of Harrison v University Hospitals Coventry and Warwickshire NHS Trust [2017] EWCA CIV 792, which dealt with the relationship between costs budgeting and detailed assessment.

In summary, the court found as follows:-

On Estimated Costs

The court agreed with the decision in Merrix namely that the court will not interfere with estimated costs that have been approved unless there is ‘good reason’ to do so.

On Incurred Costs

In respect of the costs that have been incurred prior to the costs management hearing, the Court of Appeal found that these should be subject to assessment in the usual way.

On Proportionality

The Court of Appeal considered the meaning of the word “commenced” in the new proportionality rules that came into force for cases “commenced” on or after 1 April 2013. The court found that this was the usual interpretation applied and therefore any claim form issued on or after 1 April 2013 is caught by the new proportionality test.

The court also mentioned, in passing, that it would ordinarily expect an assessment to revisit the issue of proportionality in the round, considering whether the overall costs (i.e. both incurred and estimated) were proportionate and this would provide a further safeguard for the paying party.

What does the decision mean?

  • The decision reinforces the need to make sure proper consideration is given to budgets and the right arguments are raised at the CCMC.
  • At CCMCs, even after the court has gone through the individual phases of the budget, representations can still be made that the overall costs claimed are disproportionate and the court asked to revisit the total estimated costs allowed. It will also be possible in some cases to pursue this line of argument at assessment in relation to the entirety of the costs claimed.
  • Hourly rates are not to be considered at the CCMC and therefore remain open to challenge on assessment. The defendant’s position needs to be reserved in this regard at the CCMC.
  • Costs incurred prior to the CCMC will be dealt with in the usual way via detailed assessment. In addition, it will be important at assessment to consider whether the claimant has exceeded his budget and further consideration needs to focus on finding reasons that the court should depart from the budget downwards.
  • Going forward, it is clear that it will be difficult to raise issues at the end of the case in respect of the estimated costs. In practical terms detailed assessment hearings will centre around the incurred costs, the hourly rates and arguments on proportionality.
  • If the budgeting process is done correctly, properly considered arguments are raised at the hearing and the assumptions are recorded where possible and monitored during the life of the claim, then the budgeting process should work in the way that it was intended.

Our experience has been that the Courts are keen to control disproportionate costs at CCMCs. However, it is more difficult in cases where, based on the evidence before the court at that time, the costs appear proportionate. In those cases it will be necessary to focus on establishing a good reason for departure from the budget at the assessment hearing. The costs claimed in budgeted cases tend to be lower than those where the claimant is free to spend as they wish and as such the budgeting process should continue to work to reduce legal costs.

What’s next?

The decision in Harrison leaves a large number of questions unanswered including:-

  • What amounts to a ‘good reason’ for departing from the approved estimated costs?
  • How the court should approach the assessment if there is a ‘good reason’?
  • How the court should approach the assessment if there is no ‘good reason’?
  • How the “normal” assessment process interacts with the ‘good reason’ process?
  • How proportionality interacts with assessments in budgeted cases?
  • How hourly rates are to be dealt with and what impact a reduction in the hourly rates has on budgeted costs?

It seems clear that Harrison is unlikely to be the last time the Court of Appeal is troubled by the interplay between assessment and budgeting and it is likely to be the first in a line of cases on this issue.


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