In Nash v Ministry of Defence  EWHC B4 (Costs), the Defendant advanced the argument that where the Court has reduced the hourly rates in relation to the incurred costs, that is a good reason to apply the same reduced rates to the ‘budgeted’, i.e. future costs.
The proposed method to achieve the same, presented by the Defendant to the Court was to review the estimated hours in the Claimant’s agreed budget, and apply the assessed hourly rate to those estimated hours. This would result in retrospectively arriving at a revised reduced budgeted (i.e. future) costs figure for each phase.
In support of the Defendant’s position, Counsel; Mr Joseph relied on the fact that the Claimant’s budget was agreed and was therefore never subject to the scrutiny of the Court had it been approved by the Court.
Master Nagalingam first dealt with the notion that an agreed budget had somewhat of lower status than an approved budget. Master Nagalingam certainly had what to say;
‘such a presumption would require me to accept that there exists a mind-set amongst case managing judges to simply approve any agreed budget without any reference to the constituent elements and underlying detail in the budget for each phase. That is not a presumption I accept…… In either instance, the case managing court retains a responsibility to consider whether the budgeted costs fall within the range of reasonable and proportionate costs’.
Master Nagalingam then turned to the main issue. Should future costs be subject to reductions in line with the hourly rates approved in the incurred costs? Master Nagalingam said
‘whilst I accept the definition of ‘budgeted’ to mean ‘to be incurred’ was not clarified in legislation until after the costs management order in this case was made, I have no difficulty in concluding that when the parties agreed budgets, they were agreeing to fix a budget for future costs whilst accepting that incurred costs could be the subject of detailed assessment.’
In other words, when future costs are agreed, they are agreed in full. Granted it is a cap, but if the litigation progresses to the point where the required work in all the phases is carried out, the figure agreed for future costs is final.
Master Nagalingam was not prepared to override and reduce the sums permitted by the costs management order that the case managing judge had already approved as being reasonable and proportionate.
Master Nagalingam concluded:
‘save for where hourly rates hold some special status in the setting of a budget and subsequent making of a costs management order, there is no good reason to depart from the budget for the budgeted (future) costs’.
Once agreed, always agreed!