Biggest costs decision of the year so far?

News | Fri 24th Feb, 2017

Mrs Justice Carr handed down a very important judgment on the controversial issue of the relationship between a costs budget and a detailed assessment. The question was to what extent, if at all, does the cost budgeting regime under CPR Part 3 fetter the power and discretion of the costs judge at a detailed assessment. This is an issue which affects every detailed assessment where there has been a costs budget agreed or approved because it determines the way in which the detailed assessment is conducted. This has been the subject of conflicting decisions by costs judges and a number of detailed assessments have been stayed pending an authoritative determination of the approach to be adopted.

The central message of the judgment is that set out in Part 3.18 namely that the approved or agreed budget will bind the parties at the detailed assessment stage (on the standard basis) whether the costs claimed are for less than, equal to or more than the sums approved or agreed by that budget, unless there is good reason otherwise.

The Claimant (the receiving party) contended that the costs allowed in the detailed assessment should be the budgeted figure unless there was good reason to depart from that figure so there was no need to go through the normal line by line detailed assessment and that applied whether the figure claimant was greater or less than the budgeted figure. It was, of course, common ground that if the costs actually spent were less than the budgeted figure, that would be a good reason to allow only the lower figure.

The Defendants (the paying party) argued that it was entitled to a full detailed assessment with the costs budget being but one factor in determining reasonable and proportionate costs. So, it was argued, the paying party does not need to establish good reason to persuade a court to depart from an approved or agreed budget downwards.

At first instance the Defendant’s arguments prevailed. In front of the High Court Judge, however, John Foy QC argued that the Regional Costs Judge was wrong and the budget was now the starting point for the detailed assessment and any party who wanted to depart from it had to establish a good reason to do so. The judge allowed the appeal. She held that the costs judge will not depart from the receiving party’s last approved or agreed budget unless satisfied there is good reason to do so and that this applies as much where the receiving party claims a sum equal to or less than the sum budgeted as where the receiving party seeks to recover more than the sums budgeted.

There is an appeal to the Court of Appeal pending in another case due to be heard in May but until the Court of Appeal gives its judgment on the issue, this is the leading authority on the subject and it is anticipated it will be followed by costs judges unless the Court of Appeal rules otherwise.

The case emphasises how important it is to get the costs budget right and it is likely to reward the time spent on it. It is also a judgment that should be read by all conduct detailed assessments.

Find the judgment here.