In the past, perhaps the mention of costs budgeting itself was good reason for many a law practitioner to depart hastily from a conversation. However, this complex issue has been further complicated by the inevitable fall-out of the decision in Harrison v University Hospitals Coventry & Warwickshire NHS Trust, where the Court of Appeal determined that upon detailed assessment, you need a good reason to depart either upwards or downwards from an approved costs budget. The issue of what constituted “good reason” has already sparked much debate following this decision.
In RNB v London Borough of Newham, Deputy Master Campbell decided that a good reason to depart from the budget may include the instance where the hourly rates claimed in the agreed/approved budget were in excess of the reasonable hourly rates as determined as part of the detailed assessment process.
This decision has been met with some surprise. This is particularly so when considered in the context of the budgeting process itself, where costs are often reduced in line with a reasonable total for an entire phase, without specific reference to hourly rates and time, and, further, in view of Practice Direction (PD) 3E 7.10. PD 3E 7.10 states:
“It is not the role of the court in the cost management hearing to fix or approve the hourly rates claimed in the budget.”
When undertaking a costs management exercise, the court should also have regard to the issue of proportionality in any event. It may well be somewhat difficult to ascertain the thought process behind a costs management order, particularly if the assessment of costs at conclusion is not undertaken by the same judge that conducted the case and costs management conference.
There is a degree of difficulty in ascertaining whether a costs management order has made any allowance for reduced hourly rates when compared to the hourly rates as claimed. It is also difficult to try to reconcile this with the final hourly rates claimed in the bill of costs.
District Judge Lumb in Birmingham reached a contrary conclusion recently in Bains v Royal Wolverhampton NHS Trust (unreported). He declined to reduce the hourly rates of the budgeted costs in line with those claimed for incurred costs, as to have done so would have potentially given rise to a double jeopardy situation. This was the exact opposite view to the one expressed by Deputy Master Campbell.
Given the impact that this decision has on the whole of the costs management and detailed assessment process, there should be welcome guidance forthcoming from the High Court; it has recently been confirmed that the decision in RNB is being appealed.
In the meantime, it would be good practice to ensure that appropriate regard is given to the hourly rates claimed within a budget and to ensure that, where possible, there is consistency with the hourly rates claimed within a budget and subsequently the rates claimed within any bill of costs.
This will ensure maximum transparency and would assist both parties in reaching a timely and effective resolution of costs following settlement, based on the hourly rates and overall costs claimed within the bill of costs falling within the approved costs management order.