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Merrix and detailed assessment: now Car Giant!

The first High Court decision following Merrix v Heart of England NHS Foundation Trust has now been handed down, enabling this follow up to be written to the blog of 10 March 2017 on this subject: see Car Giant v the Mayor and Burgesses of the London Borough of Hammersmith (judgment on 2 March 2017).

As an aide memoire, Carr J’s judgment in Merrix directed that costs judges on a standard basis detailed assessment must not depart from the last agreed or approved budget unless “good reason” under CPR 3.18(b) can be shown for doing so. Thus, the costs budget is not merely one of several factors to be taken into account as the paying party had contended: on the contrary, absent good reason, budgeted costs must be ticked through without a line-by-line assessment.

The immediate inference to be drawn from that is that it is for the paying party to show good reason why the costs should be less than the budgeted amount. However, good reason cuts both ways. A winning party receiving costs, who has gone over budget, will also need to show good reason why the unapproved amounts should be allowed. An obvious case is where costs have been awarded on the indemnity basis: in those circumstances, the receiving party is freed from the costs budget (see paragraph 43 of the judgment of Lord Dyson MR in Denton v White) and will be able to use that reason to claim more than the court allowed for each phase.

The decision in Car Giant has brought into sharp focus how a party who has won at trial should address an overspend. The facts are straightforward. Car Giant won damages of £179,125 but failed to beat the mayor’s offer of £250,000 under Part 36. It followed that under the rule, the mayor was entitled to costs from the date that the offer should have been accepted. Since those costs had been awarded only on the standard basis, the mayor’s last approved costs budget remained relevant, a fortiori because there had been overspends in four areas. To address this, at the conclusion of the trial, the mayor had asked the judge, Mr Stephen Furst QC sitting as a deputy judge of the High Court, for an indication that the excess costs had been reasonably incurred.

The pre-Merrix authorities on this point are inconsistent. In Elvante v AMEC, Coulson J’s view was that:

“The certainty provided by the new rules would be lost entirely if the parties thought that, after the trial, the successful party could seek retrospective approval of the costs incurred far beyond the level of the approved costs management order.”

That can be contrasted with Thomas Pink v Victoria’s Secret, in which Birss J increased the costs budgets by £50,000 after he had circulated his reserved judgment to the parties, but before formal handing down. His approach was also followed by Warby J in Barkhuysen v Hamilton, when he permitted the successful claimant, after trial, to increase the budget in five specific areas.

Mr Furst was of the Elvanite persuasion and was having none of the mayor’s request for an indication of reasonableness, still less would he permit any increase in the last approved budget in the four areas where there had been an overspend, as Birss J and Warby J had done in their cases. Here the work had related to additional expenditure, before trial, on:

  • The expert.
  • Extra work on the trial bundle.
  • The attendance by the expert on all three days of the hearing (rather than one).
  • A grade D fee earner attending trial because he had had primary knowledge of the trial bundles.
  • A mediation for which the budget had been exceeded.

Mr Furst’s view was clear:

“I can understand that there might be cases where the trial judge has a particular view or on an aspect of costs, having conducted the trial, or where he has to decide an issue which is directly relevant to the assessment of costs. Absent such circumstances, it would seem to me that a court should not seek to trammel the costs judge’s jurisdiction… In this case is nothing in the nature of the applications to exceed the costs budget which cannot be explained equally well to the costs judge… for these reasons, I decline to give any indication… [paragraphs 34 to 35] In my view, whilst there are authorities showing that the courts can give such indications as are sought here, the court should be slow to do so [paragraph 33]”.

The upshot? No help given, either to the parties, which would enable them to narrow the differences in advance of any detailed assessment, nor to the costs judge, by way of a steer to assist him or her in deciding the reasonableness of the overspend. Indeed, such a cautious approach will do little to assist the attainment of Jackson LJ’s expectation that costs budgeting should lessen the need for detailed assessment. On the contrary, it makes a detailed assessment more likely because the arguments which the trial judge could have resolved will remain alive.

Could the matter have been addressed differently? The answer to that is yes. In the days of Order 62, the procedural or trial judges were willing to give helpful steers to the taxing masters (as the costs judges then were known), for example in certifying the hearing “fit for counsel”, so that there could be no subsequent argument about whether counsel should have attended. Where, as in Car Giant, there has been a trial bundle, legal representation, three days of submissions, and evidence and cross-examination, no one other than the trial judge is better placed to decide the reasonableness of the costs relating to these matters, as a matter of principle. The mayor was not asking the judge to carry out a detailed assessment, only for a steer. If the trial judge believed he was being helpful to the costs judge, he was not. In adjudicating upon disputed costs, the views of the judge who made the order for costs, whether at trial or following an appeal, are enormously helpful, even if they are not binding.

Kain Knight Colin Campbell

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