The wait is over – the Court of Appeal has handed down its highly anticipated judgment in the costs budgeting case of Harrison –v- University Hospitals Coventry & Warwickshire NHS Trust.
The Court considered three significant issues in relation to the relationship between Costs Management Orders and their implications on Detailed Assessment. Specifically the Court considered how to implement CPR 3.18 in relation to: (i) Anticipated Costs, (ii) Incurred Costs, (iii) Proportionality.
(i) What effect does the budgeting of anticipated cost have on the assessment of costs at the conclusion of the case?
In the case of Merrix v Heart of England NHS Foundation Trust  EWHC 346 (QB), Carr J concluded that where the costs claimed on assessment are, on a phase by phase basis, within the budgeted figure for the same phase as approved or agreed in a costs budget, then the court, in applying CPR 3.18 cannot depart from that agreed figure either upwards or downwards without good reason. In other words, absent good reason, the approved or agreed figure for estimated costs is to be allowed. The Court of Appeal agreed;
(ii) What effect does a costs management order have on the assessment of incurred costs?
Master Whalan held at first instance that these were subject to the same approach as with estimated costs – provided the final claim for costs per phase was within the total of both the incurred and approved estimated costs for the budget for the same phase, then the court should allow those costs without further assessment, unless there was good reason under CPR 3.18 not to do so. The Court of Appeal disagreed. Incurred costs are not approved by the Court. Incurred costs are subject to assessment without any fetter under CPR 3.18, though any comments made by the budgeting judge will be taken into account;
(iii) How is proportionality to be approached where costs have been budgeted?
Paragraph 52 of the judgment expressly held that even where the estimated costs remained within budget (and therefore the budget was not to be departed from without good reason), the court must still look at the totality of the allowed estimated costs and assessed incurred costs in order to consider proportionality and therefore potentially to decide whether and if so what further reduction to make on a global basis. A subsidiary point as to when proceedings were commenced for the purpose of CPR 44.3(7) in order to decide which proportionality test applies was considered and the Court of Appeal held that proceedings for these purposes are commenced when the Court issues the claim form and not when a Claimant took steps to have the claim form issued (such as sending the documents to the Court).
The judgment is what I think most expected. The mood music has was sounded in Merrix and the judiciaries move away from the decision in Sarpd Oil with this decision very much sings of the same hymn sheet. I am disappointed that the opportunity hasn’t been grasped to provide more detailed guidance, particularly in relation to what will constitute a good reason to depart from the approved budget and how hourly rates will impact on approved costs for example. As it is, and in the words of Liam Gallagher…. As you were!Tags: Budgets, CoA, Court of Appeal, Detailed Assessment, Harrison, University Hospitals Coventry & Warwickshire NHS Trust