Where the Court has set a costs budget, can a successful party expect to recover the costs set out in that budget? Following the decision in Merrix, the answer seems to be yes – unless there is a good reason to depart from it
Since costs budgeting was introduced following the Jackson report, there has been a perceived tension between CPR 3, on costs budgeting (a prospective exercise, intended to be carried out at an early stage of the litigation to set the level of allowable costs for each phase) and CPR 47, on detailed assessment (an entirely retrospective exercise, looking at costs already incurred to ask if they were reasonably and proportionately incurred). Receiving parties have argued, at detailed assessment, that where they have spent less than they had been allowed for a particular phase, they should be able to recover the lot, without being obliged to justify the expenditure line by line. Paying parties, by contrast, have pointed out that costs budgeting is specifically not a detailed assessment exercise, so if amounts were allowed at detailed assessment simply because they were in the budget, the detailed assessment provisions would become a dead letter.
First instance decisions have gone either way. In Merrix, an appeal from a decision of Birmingham’s Regional Costs Judge, the High Court reviewed the authorities (such as they are) in an attempt to set out a unified approach. Carr J decided, at , that:
“where a costs management order has been made, when assessing costs on the standard basis, the costs judge will not depart from the receiving party's last approved or agreed budget unless satisfied that there is good reason to do so. This applies as much where the receiving party claims a sum equal to or less than the sums budgeted as where the receiving party seeks to recover more than the sums budgeted”.
She also commented that the issue seems ripe for appeal, with an appeal on a similar point apparently already listed in the Court of Appeal in May. Merrix may not be the last word.
Ross Beaton / 22nd Mar 2017
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