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:
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 (paragraphs 28 – 44), Davis LJ concluded that meaning of CPR 3.18 was clear (paragraphs 29, 35 and 39). “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,” he said. 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.” (paragraph 44).
In reaching this conclusion, Davis LJ rejected the defence counsel’s argument that a “budget” might be regarded as being synonymous with “available funds” (paragraph 37). The implication of this analysis would mean that costs that came under budget did not, therefore, represent a departure from that budget (paragraph 41).
“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.” (paragraph 36).
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 (paragraph 28).
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 (paragraph 46). 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 (paragraph 47).
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.
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