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21 May 2019
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A GOOD REASON TO DEPART?

Parties need to consider the costs & be prepared to justify them as reasonable & proportionate, says Paul Bracewell, Council Member of The Association of Costs Lawyers

  • The decision in Barts Health NHS Trust v Salmon clearly puts ‘good reason’ at the forefront of the receiving party’s mind when preparing a phased bill/Precedent S where a matter settles early and phases are not completed.

Since budgets were introduced in 2013, parties have had to consider what constitutes ‘good reason’ to depart from a budget under CPR 3.18. It is often thought that if, in a case where a costs management order has been made, a party has incurred estimated costs less than the budgeted estimated figure, those costs will be allowed.

In January 2019, His Honour Judge Dight, with Master Brown sitting as assessor, ruled in Barts Health NHS Trust v Hilrie Rose Salmon, an appeal by the defendant paying party against decisions made by Master Whalan sitting as a judge of Central London County Court.

The case was a clinical negligence claim which settled when the claimant accepted the defendant’s part 36 offer of £7,000. The overall value of the claim was in the region of £10,000 to £15,000. The issues in the claim were relatively limited and the parties had two experts each. The claimant’s approved budget was £155,673. On assessment, Master Whalan reduced the assessed figure of £52,133 to £40,000 on grounds of proportionality. The paying party contended that the figure should have been £25,000.

The expert phase was budgeted at £24,928, but in the bill the claimant sought £14,072. The ADR phase was approved at £9,745 but the actual costs claimed were £5,041.

The issues to be determined on appeal were whether the master was wrong to conclude there was no good reason under CPR 3.18(b) to depart from the expert and ADR phases in the bill; and whether the master erred in his application of the global proportionality test under CPR 44.3.

The court considered the application, inter alia, of Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA 6792 and the more recent decision in Yirenki v Ministry of Defence [2018] 5 Costs LR 1177.

In brief, Yirenki establishes the principle that it is the goal of the costs budgeting exercise to approve a total figure for each phase. The constituent parts of each figure (time, rates and disbursements) are not “an end in themselves”.

In Salmon, the receiving party argued that the costs were reasonable as the phase had not been completed, there was no breach of the indemnity principle and there was no good reason to depart from the budget. The paying party submitted that, whilst actual expenditure had been claimed, those costs were greater than expected for the work actually done. This was good reason to depart.

HHJ Dight found the fact that the two phases had not been completed was in itself good reason to depart from the budgeted phase figures. This would not lead to a line-by-line assessment but the master could exercise his case management powers in arriving at an appropriate figure.

The factors when deciding proportionality are contained in CPR 44.4(5) and are well known. The court dismissed the appeal on proportionality and in doing so noted the application of proportionality in light of the low value, with an increase in the sum allowed to reflect the complexity of the litigation and the issues.

However, in light of the decision to send the matter for re-assessment of the two phases, then absent agreement, the court was likely to have to look at proportionality again.

The decision clearly puts ‘good reason’ at the forefront of the receiving party’s mind when preparing a phased bill/Precedent S where a matter settles early and phases are not completed. Parties need to consider the costs in each phase and be prepared to justify them as reasonable and proportionate for the work actually completed.

Paul Bracewell is a Costs Lawyer, a Council Member of the Association of Costs Lawyers, and accredited civil & commercial mediator with Bracewell Costs

This article first appeared in the New Law Journal on 21 May 2019

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