Costs News

27 May 2020
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Underspend on budget phase “not a good reason to depart”, rules SCCO judge

Underspending on a budget phase is not in itself a good reason to depart from the budget, a costs judge has ruled in the latest lower court ruling on the issue.

Master Brown in the Senior Courts Costs Office explicitly supported the decision by District Judge Lumb, the regional costs judge in Birmingham, and disagreed with that of His Honour Judge Dight in London last year.

This is all the more notable as Master Brown sat with HHJ Dight as an assessor in Salmon v Barts. HHJ Dight recorded that while Master Brown agreed on the outcome of the appeal, he did not necessarily agree with the route by which he reached it.

Ruling last week in Utting v City College Norwich [2020] (Costs), Master Brown said: “It seems to me that the conclusions reached by [HHJ Dight] in respect of the budget were justified on the basis that the relevant phases were not completed or at least not substantially so; put another way, the assumptions upon which the budget had been prepared were not fulfilled. These were, to my mind, ‘good reasons’ for departing from the budget.”

But he agreed with DJ Lumb in Chapman that, if an underspend were to be a good reason for departing from a budget, “it would be liable to substantially undermine the effectiveness of cost budgeting”.

Master Brown explained: “Solicitors who had acted efficiently and kept costs within budget would find their costs subject to detailed assessment, whereas less efficient solicitors who exceeded the budget would, absent any other ‘good reason’, receive the budgeted sum and avoid detailed assessment.”

While it would not be unjust for a receiving party to recover less than the budgeted sum, he continued, it would be unjust for them to receive the full amount of a budgeted sum “where only a modest amount of the expected work had been done”.

In any event, Master Brown ruled that, even if he adopted HHJ Dight’s approach, it would not be appropriate to make any reduction from the sums claimed for the underspent phases.

“I could see no proper basis for having a line-by-line assessment in respect of these phases. The sums claimed fall within those sums which were agreed or approved as reasonable and proportionate for the work to be done.

“Inevitably, budgets are not produced with a degree of precision that can be applied in a detailed assessment; but I do not see that as a justification for having a line-by-line assessment. Indeed, it seems to be incompatible with the aims of costs budgeting.”

He also dismissed the argument that the fact the case settled for substantially less than claimed – £300,000, against a claim for £1.85m – justified a substantial reduction.

The judge said the sum recovered was “nevertheless substantial and not of itself sufficient to justify the conclusion that costs incurred were unreasonably incurred”.

Mr Bardoe (Costs draftsman) for the claimant. Mr Thornsby (In-house counsel at DWF Solicitors) for the defendant.

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