The Court of Appeal has addressed aspects of the relationship between costs budgeting and detailed assessment
The appeal was brought by the defendant NHS Trust against a decision of Master Whalan, sitting as a district judge of the County Court, on three counts:
- Master Whalan had taken the view that, where a CMO approving a costs budget has been made, so far as budgeted costs were incurred CPR 3.18 precluded him from subjecting them to a ‘conventional’ detailed assessment unless good reason for doing so was shown.
- As to incurred – pre CMO - costs, Master Whalan said that although these not approved as such at the case management conference nevertheless they would have featured in the overall budget put forward and thus had a ‘certain status’. Master Whalan indicated that, with regard to the incurred costs, it was ‘in practical terms’ required that good reason likewise should be shown if there was to be a departure from what was set out in Precedent H.
- As to the date when the case commenced for the purposes of the transitional provisions relating to proportionality contained in CPR 44.3(7), an entirely discrete point, Master Whalan held that in the present case that was when the letter was sent to the court enclosing the claim form and issue fee (on 27 March 2013) by a prescribed method which would lead to next-day delivery and so was prior to 1 April 2013. This meant that the claimant was afforded the benefit of the more favourable ‘old’ proportionality.
The appellant argued that the costs judge was wrong on all three points.
In addition, since the decision of Master Whalan the decision of Carr J had been handed down in the case of Merrix v Heart of England NHS Foundation Trust  EWHC 346 (QB),  1 Costs LR 91, whereby Carr J reached the same conclusion on the first issue as Master Whalan reached in the present case: that is, that good reason is required. Although there was no appeal before the Court from the decision in Merrix, it was necessary to consider whether or not that case was correctly decided on this point.
The appeal was dismissed on the first ground, but allowed on the second and third grounds.
The Court of Appeal was 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. On this basis, giving the words in CPR 3.18 their ‘clear’ and mandatory meaning, Carr J had already answered the preliminary issue as such:
‘”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 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.”
Absent good reason the agreed or approved estimated costs within each phase of the budget will be treated as binding whether or not the costs ultimately exceed, or end up lower than, those budgeted.
As to what will constitute ‘good reason’ in any given case the Court thought it much better not to seek to proffer any further, necessarily generalised, guidance or examples, and instead left the matter to the individual appraisal and evaluation of costs judges by reference to the circumstances of each individual case. However, it was said that costs judges should not be expected to adopt a ‘lax or over-indulgent approach’ to the need to find good reason.
The Court held that it was wrong to include the incurred costs within the ambit of CPR 3.18 (recently amended to clarify that the rule relates to only ‘budgeted costs’ in any event). Incurred costs are precluded from being approved at the budgeting stage and are therefore subject to detailed assessment in the usual way, without any requirement to show ‘good reason’ for departure, although any comments the budgeting judge has about the incurred costs are to be taken into account in any subsequent assessment proceedings.
The Court’s plain view was that a case is ‘commenced’ for the purposes of CPR 44.3 (7)(a) when the relevant proceedings are issued by the court. That, in the present case, yielded the date of 9 April 2013 and the ‘new’ proportionality provisions of CPR 44 (2)(a) and (5) applied accordingly.
The matter was remitted to the costs judge for a further assessment i.e. to assess the incurred costs and to apply the new proportionality test.