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CPR 3.18(b) | Underspend Does Not Constitute Good Reason To Depart From An Approved Budget

Master Brown (costs judge) has joined the debate about the effect of an underspend in a costs budgeted case.

“I agree with [DJ Lumb] that if an underspend were to be a good reason for departing from a budget it would be liable to substantially undermine the effectiveness of cost budgeting. As the Judge effectively observed, solicitors who had acted efficiently and kept costs within budget would find their costs subject to detailed assessment, whereas less efficient solicitors who exceeded the budget would, absent any other “good reason”, receive the budgeted sum and avoid detailed assessment…

“even if ‘underspend’ were a “good reason” for the purpose of CPR 3.18 it does not follow that there should be a deduction from the sums claimed. Plainly, the fact that a party has spent less than its budget for a phase does not mean there is therefore in fact a good or appropriate reason for any further reduction and I was not satisfied that there was any additional “good reason” for any such reduction.”

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CPR 3.18(b) | Is Underspend Good Reason To Depart?

In March last year we reported on the decision in Salmon v Barts Health NHS Trust [2019] wherein HHJ Dight held that if the sum claimed on assessment in any given phase of a bill is lower than the budgeted figure for that phase, because the anticipated work had not been completed and/or by virtue of the indemnity principle, this is, in and of itself, capable of being a ‘good reason to depart’ under CPR 3.18(b) thus opening that phase to a traditional line by line assessment.

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CPR 3.18(b): Good Reason To Depart?

HHJ Dight finds on appeal that the fact that the sum claimed on assessment in any given phase of a bill is lower than the budgeted figure for that phase, because the anticipated work had not been completed and/or by virtue of the indemnity principle, is itself capable of being a ‘good reason to depart’ under CPR 3.18(b). Once CPR 3.18(b) had been invoked it was then open to the paying party to challenge the figure which was then being claimed by the receiving party, and they did not have to assert a further good reason to enable the court to do so.