Finally found a ‘good reason’ (or have we?)

Ever since the introduction of costs budgeting there has been a desperate need to clarify the relationship between costs budgeting and the detailed assessment procedure. Kelsi Harrison reports. 

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Arguably the biggest development since its introduction are the cases of Harrison v University Hospitals Coventry and Warwickshire Hospital NHS Trust (2017) 3 Costs LR424 and Merrix v Heart of England Foundation NHS Trust [2017] 1 Costs LR91.

These cases were clear in that the importance of the detailed assessment procedure had been diminished and the decisions as to costs to be allowed at costs budgeting would stand unless there was a ‘good reason’ to depart from the budget.

So that settles it then…

Apart from one small issue; what exactly constitutes a good reason?

 One of the only tests to this question so far comes in the form of RNB v London Borough of Newham [2017] EWHC B15 (Costs) where Deputy Master Campbell decided that there was a ‘good reason’ where the hourly rates claimed in the agreed/approved budget were in excess of what would be considered as reasonable. However, permission to appeal this decision has been granted only last week which should provide some much needed clarification on this issue.

The guidance in dealing with costs budgets contained in PD 3E at paragraph 7.10 is clear in its wording:

“The making of a costs management order under rule 3.15 concerns the totals allowed for each phase of the budget. It is not the role of the court in the cost management hearing to fix or approve the hourly rates claimed in the budget. The underlying detail in the budget for each phase used by the party to calculate the totals claimed is provided for reference purposes only to assist the court in fixing a budget.”

The logic of Deputy Master Campbell in RNB is clear to see. It would be absurd for costs lawyers to prepare budgets using hourly rates as a multiplier, but then allowing no opportunity for a discussion surrounding hourly rates to be discussed, either at the CCMC or the detailed assessment hearing.

On the other hand, what is the point of having costs budgeting if hourly rates are going to be questioned at detailed assessment after the budgets have been set? As Master Gordon Saker pointed out in Collins v Devonport Royal Dockyard Limited (8th February 2017: AGS/1602954):

“… what would be the point of costs budgeting (and the considerable resources it has required) if the resulting figures amount to nothing more than a factor, guidance or cap at detailed assessment?”

A successful appeal in RNB would mean that at detailed assessment hourly rates are reduced in respect of incurred costs but not in respect of anticipated costs.

Our bet would be that RNB is successfully appealed as it goes against most of Jackson’s ethos as well as many others. Whatever the decision is it will be welcome clarification.

Kelsi Harrison is a Costs Consultant at PIC. 

To contact her about any matter raised in this blog, please click here.