Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792

This is an interesting case in respect of costs budgeting and the need for there to be ‘good reason’ for a costs judge on detailed assessment to depart from an approved or agreed budget.

Although, the main proceedings involved a clinical negligence case the same principles in respect of costs budgeting applies to casualty claims.

The facts

In this case, the claim form had been sent to the court under cover of a letter dated 27 March 2013 and was stamped as being received by the court on 2 April 2013. The claim was formally issued on 9 April 2013 and in August 2014 a costs management conference took place where the parties were given permission to rely on updated costs budgets. At this time, the costs showed as having already been incurred by the claimant exceeded their estimated future costs.

The claim was settled shortly before the trial date and the claimant was awarded costs to be subject to detailed assessment. The detailed assessment went ahead and the defendant appealed the decision of the costs judge requesting that the Court of Appeal addressed the following points:-

  1. Whether a costs judge at detailed assessment could not, unless good reason to do so, go below the budgeted amount if there was a costs-management order approving the costs budget that had been submitted.

  2. Whether there was the requirement for there to be good reason for a costs judge at detailed assessment, to depart from the amount put forward at the costs-management hearing in respect of costs incurred.

  3. The date when a case was to be treated as “commenced”. This was of practical significance because if the case was treated as being commenced before 1 April 2013 then the proportionality exercise when assessing costs would be more favourable to the claimant as the receiving party.

Decision

In respect of the first question, the Court of Appeal held that where there was either an upwards or downwards departure from a costs budget, the costs judge on detailed assessment could only permit such as departure if satisfied that there was a good reason to so do.

In relation to the second question, it was held that incurred costs were the subject of detailed assessment in the usual way, without the need for there to be good reason for departure from the approved costs budget. It was concluded that the costs that had been incurred by the claimant before the date of the budget were never agreed and were not approved by the costs-management order.

The Court of Appeal made clear that the focus of a judge when making a costs-management order is on estimating the costs that were reasonably and proportionality to be incurred in the future and not on costs that had already been incurred. Further, it was concluded that the rules specified that the judge at a costs-management conference could not approve the costs that had already been incurred before the date of the budget.

Whilst in respect of the third question, the Court of Appeal held that a case was commenced for the purposes of CPR, r. 44.3(7)(a) when the relevant proceedings were issued by the court. It was stated that the relevant date in this case, was 9 April 2013, which was the date when the claim form had been formally issued by the court. As a result, the proportionality exercise was likely to be more favourable to the defendant than what it would have been had the proceedings been commenced prior to 1 April 2013.

What this means for you

In this case, the Court of Appeal upheld the primacy of costs budgeting over detailed assessment by making clear that costs judges on detailed assessment can only depart from approved or agreed costs budgets in the event that there is ‘good reason’ to do so. As a result, it is essential that an accurate costs budget is prepared prior to the costs-case management hearing because an approved or agreed costs budget cannot easily be departed from.

It should be noted that the Davis LJ was not prepared to provide any guidance or examples in respect of what would constitute a ‘good reason’ to depart from a costs budget. It was specifically stated that this “…can safely be left to the individual appraisal and evaluation of costs judges by reference to the circumstances of each individual case.

This case reaffirms the position that costs incurred prior to the date of the costs budget will not be considered at the costs-case management conference and should be considered in isolation to the budgeted costs. As a result, incurred costs will be considered at the detailed assessment and can be amended without ‘good reason’ and without the need for there to be a departure from any approved or agreed costs budget.

This decision reaffirms the judgment of Carr J in Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB), and highlights the importance of ensuring that budgets are accurate and will not in future need to be changed. Also, this case indicates that it will be difficult for the parties to have any agreed or approved costs budgets amended by the costs judge at a detailed assessment hearing.