Costs News

05 March 2020
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Simply underspending on budget phase is not good reason to depart

Not spending the totality of the budgeted figure for a phase because of settlement is not in itself a good reason to depart, a regional costs judge has ruled. 

District Judge Lumb said that, applying the strict guidance of Davis LJ in Harrison – who said good reason was a high hurdle – the court was not expected to carry out a micro-assessment of how much work has been done in each particular phase.

He disagreed with the decision last year of His Honour Judge Dight in Salmon v Barts that, if a party has not spent the totality of the budgeted figure for a phase, that amounts to a good reason per se and the door is therefore open for the paying party to make further submissions on an appropriate figure for the phase.

“If that approach was correct, virtually every case would go to detailed assessment and there would be a perverse incentive to a prospective receiving party to overspend and marginally exceed every phase in order to avoid a detailed assessment.”

In Chapman v Norfolk and Norwich University Hospitals NHS Foundation Trust, the defendant argued that early settlement in favour of the claimant was good reason to depart in the experts and ADR/settlement phases.

Rejecting this, the judge said: “Very clear evidence of obvious overspending in a particular phase would be required before the court could even begin to entertain arguments that there was a good reason to depart from the budgeted phase figure if the amount spent comes within the budget.

“If it were otherwise, one of the principal purposes of costs budgeting would be lost, namely the certainty of the parties of the amounts that they are likely to be able to recover or pay respectively. Quite simply, the court would be required to carry out a detailed assessment of all the costs in any phase that was not completed, which cannot possibly have been the intention of the rule makers.

“It follows that a complaint that the budget was set too generously or on too miserly a basis cannot, of itself, amount to a good reason to depart.”

DJ Lumb said there was nothing in the file to suggest there had been a “substantial overspending” on work done in the two phases, even though the experts phase was not completed. “The work has been done. Any suggestion otherwise would be tantamount to an allegation of fraud and serious professional misconduct of wrongful certification of a bill that contravened the indemnity principle. That is not a position taken by the defendant paying party.”

He acknowledged that the figures may be “rather higher” than might have been expected for the stage that the parties had reached within each phase, but that just indicated that, had the case gone all the way to trial, they would have exceeded the budget.

“It is not the role of the costs judge at detailed assessment to carry out a calculation of what, in his view, is the level of the proportion of a budgeted phase that a prudent receiving party would have incurred where that phase has not been completed. Such an approach would completely undermine the whole purpose of costs budgeting in the first place.

“One of the principal objectives of the budgeting regime was to reduce the number of detailed assessments. Such an approach would potentially lead to a detailed assessment of budgeted costs in every case that settled before trial. That consequence was clearly one that the Court of Appeal judgment in Harrison was warning against.”

This implied that something amounting to a “specific and substantial point arising in the case, as opposed to merely a general point”, was required for it to amount to a good reason to depart from a figure that came within budget.

“Were that not the case, there would be a highly undesirable risk that arguments raised at the costs management hearing could be reopened on assessment on the basis that the budget was too generous. The costs judge could be invited to look again at the constituent elements of the receiving party’s Precedent H.

“Those constituent elements in Precedent H were only ever intended as a guide to the costs managing judge to show how the party arrived at the figure contended for. It would also lead to a reopening of the issue of proportionality that had already been determined in the budgeted figure subject only to the final proportionality cross check on assessment.

“Allowing such an approach would further undermine the budgeting process. It most certainly could not be defended as exercising a safeguard against a real risk of injustice. In fact, quite the reverse, as it would lead to a risk of double jeopardy of issues already decided at the costs management hearing.”

Paul Hughes (instructed by Medical Accident Group Solicitors) represented the claimant and Ken Corness, Costs Lawyer at Acumension, the defendant

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