Court of Appeal confirms that the court can only depart from agreed or approved budgets, upwards or downwards, at detailed assessment stage – if there is a “good reason” for doing so
Court of Appeal confirms that the court can only depart from agreed or approved budgets, upwards or downwards, at detailed assessment stage – if there is a “good reason” for doing so.
HARRISON v UNIVERSITY HOSPITALS COVENTRY & WARWICKSHIRE NHS TRUST  EWCA CIV 792
- The court can only depart from agreed or approved budgets, upwards or downwards, at detailed assessment stage – if there is a “good reason” for doing so.
- There is no equivalent “good reason” requirement for the detailed assessment of incurred costs, which remain subject to detailed assessment in the usual way.
- For the purposes of CPR 44.3 (7) (a), a dispute’s “commence” date is deemed to be the date at which a court issues proceedings.
This much awaited Court of Appeal judgment answered several important questions regarding the relationship between costs budgeting and detailed assessment. The dispute was a direct appeal from the 16 August 2016 costs decision of Master Whalan, sitting as a district judge in the county court. Although this case was not directly linked to the decision of Carr J in Merrix v Heart of England NHS Foundation Trust  EWHC 346 (QB), the outcome of Harrison indicated whether or not the Court of Appeal regarded the decision of the judge in that case as being correct (paragraph 5).
The original dispute arose out of a claim for clinical negligence. The claimant’s claim form was sent by DX to the court on 27 March 2013, and officially received as stamped by the court on 2 April 2013. The claim form was then formally issued on 9 April 2013 (paragraph 8).
The claimant originally requested damages limited to £50,000. They later accepted the defendant’s offer to pay £20,000 plus costs, to be assessed on the standard basis (paragraphs 9 and 10).
At the costs management conference on 18 August 2014 the judge allowed both parties allowed to rely on their updated Precedent H costs budgets. The claimant’s total, including both incurred costs and estimated future costs but excluding success fees and the ATE insurance premium, came to £197,000. Of that figure, £108,000 related to incurred costs.
Three points arose on appeal:
- At the detailed assessment, Master Whalan decided that the wording of CPR 3.18 prevented him from subjecting the claimant’s costs to a “conventional” detailed assessment at the behest of the paying party defendant unless a “good reason” for doing so was shown (paragraph 17).
- In relation to the incurred costs, Master Whalan decided that, while they had not been approved “as such” at the CMC, the amount requested nevertheless had a “certain status” because they featured in the overall budget that had been put forward. “In practical terms”, he concluded that a “good reason” would therefore be needed to depart from what was set out in precedent H (paragraphs 17).
- Finally, in relation to the issue of when the case commenced, Master Whalan concluded that the date should be regarded as being the day after a letter was sent to the court by a prescribed method. In order words, the case should be regarded as having commenced before the 1 April 2013 CPR rule change. Consequently, Master Whalan assessed the claimant’s recoverable costs to be £420,168. These costs include the claimant’s success fee and ATE premium (paragraph 17).
Davis LJ delivered the only judgment in this case.
After a lengthy analysis of the submissions made by Alexander Hutton QC on behalf of the defendant, Davis LJ concluded that meaning of CPR 3.18 was clear .
“Where there is a proposed departure from budget – be it upwards or downwards – the court on detailed assessment is empowered to sanction such a departure if there is a good reason for doing so,”
However, Davis LJ then declined to “proffer any further, necessarily generalised, guidance or examples” of what a good reason might be. “The matter can safely be left to the individual appraisal and evaluation of costs judges by reference to the circumstances of each induvial case.”
In reaching this conclusion, Davis LJ rejected defence counsel’s argument that a “budget” might be regarded as being synonymous with “available funds”. The implication of this analysis would mean that costs that came under budget did not, therefore, represent a departure from that budget .
“The appellant’s argument has [an] initial, and unattractive, oddity,” Davis LJ said, noting that this approach would have a “most unappealing lack of reciprocity”. “It means that a receiving party may only seek to recover more than the approved or agreed budgeted amount if good reason is shown; whereas the paying party may seek to pay less than the approved or agreed budgeted amount without good reason being required to be shown,” he said. “It is difficult to see the sense or fairness in that.” .
In delivering this section of his judgment, Davis LJ confirmed that, not only did he think that Master Whalan had reached the correct decision in this case, but that Carr J has also done so in Merrix, and for the same reasons she gave. 
In relation to the second argued point, Davis LJ ruled in favour of the claimant. Costs incurred before the date of the budget were never agreed in this case, he said, and nor were they “approved” by the CMO. Indeed, he added, paragraph 7.4 of PD 3E specifically prohibited the court from approving costs incurred before the date of any budget.
Accordingly, because the claimant’s incurred costs fell outside the ambit of CPR 3.18, Davis LJ decided that these costs could be the subject of a detailed assessment in the usual way. This meant incurred costs were not subject to an additional “good reason” requirement before they could be departed from. 
Finally, in relation to the dispute’s contested “commence” date, Davis LJ concluded that CPR 44.3 (7) (a) should be regarded as meaning the date which the relevant proceedings were issued by the court, as opposed to when they were delivered. In this particular case, this yielded a date of 9 April 2013 – after the updated proportionality provisions of CPR 44 (2) (a) and (5) took effect (paragraph 62).
Lady Justice Black and Sir Terrace Etherton MR agreed with Davis LJ’s conclusions that the defendant’s appeal on the first ground should be dismissed, but that appeals should be allowed on the second and third grounds. The matter was therefore remitted to the cost judge for further assessment on that basis.