The debate as to when and in what circumstances a party can depart from a costs budget rumbles on. As readers will know, the test is whether there is a “good reason” for such a departure.
A recent case in which the court found that there was good reason to depart from a costs budget is RNB v Newham LBC. Deputy Master Campbell sitting in the Senior Courts Costs Office (SCCO) on 4 August 2017 was conducting a detailed assessment of the incurred costs. During the course of the assessment, the receiving party’s hourly rates were assessed below the level at which they had been agreed in the budget. The paying party made an application to the court to allow it to depart from paying the budgeted costs to the receiving party, on the basis that this amounted to a good reason for departing from the budget.
The master found that given that:
“… the hourly rate is a mandatory component in Precedent H which is not and cannot be subjected to the rigours of detailed assessment at the CCMC, it makes no sense if it is automatically left untouched when the rates for the incurred work are scrutinised at the “conventional” assessment… it is only on that occasion that a paying party has an opportunity to challenge the rate”.
He therefore applied the lower hourly rate to the budgeted costs. This is perhaps unsurprising given the terms of paragraph 73 of Merrix v Heart of England NHS Foundation Trust, which expressly approves the notes in the White book which suggest that the fact that hourly rates at the detailed assessment stage may be different to those for the budget may be a good reason for allowing less or more than the phase totals in the budget.
However, what is more interesting about this judgment is the alternative way in which Deputy Master Campbell deals with the point. He held that, even if he was wrong about what amounted to a good reason, having carried out a line by line assessment of incurred costs and aggregated this to the (unaltered) budgeted costs, the overall figure was disproportionate and must therefore be:
“… adjusted by the application of CPR 44.3(5) so that the sum payable is the same as if the rates allowed for the incurred had been used to work out the amount to be allowed for the budgeted work.”
By this route he got to the same outcome. It may therefore be that looking at budgeted costs through the prism of proportionality may prove more fertile ground for challenge than whether or not there is a good reason to depart from the budget.
The question as to when a party should argue that there is a good reason to depart from a budget is far from clear:
- During the life of a case, a party is well advised to make an application as soon as it is clear that a budget is to be exceeded. Clearly this will need to be made to the judge who is costs managing the case.
- Less clear is where a party should make the application once the substantive issues in the case have been decided. Should the matter be raised before the trial judge at the point that the order for costs is being made, or can it safely be saved for argument before the costs judge at the point at which quantum is being determined?
There are good arguments for trying to draw the trial judge on this point, given:
- First, that the trial judge is the judge who has presided over the trial and so, one would think, they would be in a good position to know whether certain steps in the litigation that have been taken and not provided for in the budget would amount to a good reason to depart from the budget.
- Secondly, because if there is to be a dispute about the costs budget, better to try and get this resolved in front of the trial judge at the point that the costs order is being made, rather than incurring the cost of bringing the matter before a costs judge on a detailed assessment.
Mr Stephen Furst QC, sitting as a Deputy High Court Judge, was asked to depart from the receiving party’s costs budget in the case of Car Giant Limited v the Mayor and Burgesses of the London Borough of Hammersmith. The receiving party sought an increase in the budget to take account of matters that had not been included in their budget, such as the expert attending the mediation, and attending the trial for three days rather than the one allowed for in the budget.
The judge expressed uncertainty as to the circumstances in which the trial judge should be drawn on this issue, deciding that it would be appropriate in those cases where:
- The trial judge has a particular view of costs or on an aspect of costs, having conducted the trial.
- Where the trial judge has had to decide an issue which is directly relevant to the assessment of costs.
He further doubted the weight that a costs judge would place on such a finding made by the trial judge. He ultimately declined to be drawn on whether there was a good reason to depart from the costs budget, as he was not in any better position to decide the point than the costs judge; therefore, he was not prepared to trammel the costs judge’s jurisdiction.
Lastly, practitioners may find the decision of Chief Master Marsh of interest in the case of Sir Cliff Richard OBE v The BBC & Chief Constable of South Yorkshire Police. He was asked, during the course of a case management hearing, to make a comment in respect of incurred costs pursuant to CPR 3.15(4). Having stated that the rule requires that such a comment must be taken into account by the costs judge, he held that it would not be binding upon the costs judge because “the Costs Judge will have far more information than the judge at the Costs Management Conference.” The costs judge would therefore be entitled to disagree with, or to put to one side, such a comment, if on detailed assessment a fuller picture emerged.
When considering whether or not it was appropriate to exercise the discretion to make a comment on the incurred costs, the master relied upon the fact that costs budgeting is a summary process to be undertaken briskly, with approval of the figures for each phase being granted on an “impressionistic” basis. As a result, he held that a judge should be cautious about making such comments. He further held that any such comment must be made on a sound footing.
It is worth noting that the comment the court was being invited to make was as follows:
“The incurred costs based on information available appear to be excessive and disproportionate”.
Chief Master Marsh held that consideration must be given to the utility of making a comment unless it is specific and well-founded. The suggested comment is of course expressed in the most general of terms. Practitioners may therefore have more success if the comment sought from the court is of a more specific nature and targeted at a particular tranche of costs, assuming of course that the opposing party is aware of how the time under the incurred costs has been spent.