Out-Law News 3 min. read

Judge calls for 'procedural co-ordination' in development of legal costs law

It will be important for judges to take a co-ordinated approach as the case law around legal costs and cost budgeting develops, a High Court judge has said.

Mrs Justice Carr said that her recent ruling, in which she found in favour of a claimant who argued that a budget would generally fix the amount of recoverable costs even if the actual costs following a line-by-line assessment were lower, would "not end the debate". The case was "ripe for early consideration by the Court of Appeal", and could even be heard alongside a related case that was already on its way to the appellate court, she said.

"Whatever the future holds … it is important that a growing body of judgments on the same issue does not emerge in a piecemeal manner," she said. "It is essential that there is procedural co-ordination. The same solicitors and/or counsel are involved in many of these matters in what is a relatively small world."

"I am told that many stays of detailed assessments are already in place, pending the outcome of this appeal. The parties may accept my judgment as binding for their purposes. Alternatively, it may be that further stays need to be imposed, to prevent unnecessary court and judicial time and expense being devoted to a debate which the Court of Appeal is very shortly going to consider," she said.

Valerie Merrix had successfully settled a claim for damages for clinical negligence against an NHS trust. A costs management order had been made in the case in March 2015, six months before the case settled. Merrix argued that because she had claimed a smaller amount than that provided for by the approved budget, her costs should be assessed as claimed. In response, the trust argued that a new, detailed cost assessment was required in order to calculate the "reasonable and proportionate" amount.

Finding in favour of Merrix, Mrs Justice Carr said that the words of the CPR were "clear".

"The court will not – the words are mandatory – depart from the budget, absent good reason," she said. "On a detailed assessment on a standard basis, the costs judge is bound by the agreed or approved costs budget, unless there is good reason to depart from it. No distinction is made between the situation where it is claimed that budgeted figures are or are not to be exceeded."

"It is not possible to square the words of CPR [Civil Procedure Rule] 3.18 with the suggestion that the assessing costs judge may nevertheless depart from the budget without good reason and carry out a line by line assessment, merely using the budget as a guide or factor to be taken into account in the subsequent detailed assessment exercise. The obvious intention of CPR 3.18 was to reduce the scope of and need for detailed assessment. The [trust's] approach would defeat that object," she said.

Legal costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com, said that the decision was "a continuation of the debate that has been raging" about the interpretation and effect of detailed assessment of costs under CPR 3.18 and the effect of a costs management order, where costs have been agreed or approved in line with the costs budget.

"The judge held that cost budgeting does not replace detailed assessment. The question was how that assessment should be conducted. Absent any issue as to a breach of the so-called 'indemnity principle', which prevents a party from recovering greater costs than it has incurred, 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," he said.

"Detailed assessment on cases with approved or agreed court costs budgets will continue, as the judge held that 'further and on any analysis, there remains room for detailed assessment outside the budget – for example in relation to pre-incurred costs not the subject of the costs budget; costs of interim applications which were reasonably not included in a budget; where costs are being assessed on an indemnity basis; where the costs judge finds there to be a good reason for departing from the costs budget'," he said.

Levene said that regardless of imminent amendments to the CPRs from April 2017 and any future guidance from the Court of Appeal, it was "likely that detailed assessment will continue to be required in cases where costs budgets have been agreed or approved as a consequence of permissible challenges raised by paying parties".

"Costs lawyers and counsel will no doubt continue to come up with points to challenge claims for costs where reasonable and permissible," he said.

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