In a Post-Jackson World Only One Thing is Close to Certain: the Height of the Ceiling


Of the various desired outcomes of the Jackson reforms, ‘certainty of costs’ was amongst the forerunners. Of the numerous bodies who were consulted as part of the investigations there was universal agreement that certainty of costs, if it could be achieved, would be of great benefit.

“There was universal agreement that certainty of costs, if it could be achieved, would be of great benefit.”

Cost management was intended to assist in providing certainty as to costs in complex, non-fixed cases. The idea being that the parties and the court would be aware of costs during the matter and could act accordingly. If the court felt costs were too high they could take active steps to control the costs before they were incurred. As a result, in theory at least certainty of costs would be achieved.

However, to date this has not been the case. Given the absence of clear direction from the judiciary or the rules regarding what reliance should be placed upon the agreed budget, parties have inevitably applied the agreed figures to whatever extent suits their interests.

The recent Judgement in Merrix v Heart of England NHS Foundation Trust offers some clarification, but primarily serves to confirm that uncertainty remains, to a point.

The case, heard as a preliminary issue before Regional Cost Judge Lumb in Birmingham, revolves around the interpretation of CPR 3.18. Namely the extent to which a Judge at assessment is bound by an agreed cost budget.

3.18 In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –
(a) have regard to the receiving party’s last approved or agreed budget for each phase of the proceedings; and
(b) not depart from such approved or agreed budget unless satisfied that there is good reason to do so.

The Claimant argued that in accordance with CPR 3.18 (b) the court at detailed assessment should not depart (either upward or downward) from a specific sum which was approved within the budget. As a result, if costs are claimed at the conclusion of the matter which are within the parameters of the approved budget they should not be reconsidered on detailed assessment and should be allowed as claimed.

The Defendant argued to the contrary, that the court is obliged by CPR 47 to perform a detailed assessment of all costs whether budgeted or not, in accordance with the rules therein. The Defendant submitted that the extent to which the court was to take into account the budget is limited to the provision of CPR 44.4(3)(h), being the latest ‘pillar of wisdom’ against which the court assesses the recovery of costs.

The court sided with the Defendant and found that cost budgeting was not intended to replace detailed assessment and that the cost budget was simply one factor to be considered when assessing the costs. Furthermore, consideration of the budget carries no special weight over the traditional considerations of conduct, value, complexity etc.

Regional Cost Judge Lumb – “The powers and discretions of a costs judge on detailed assessment are not fettered by the costs budgeting regime save that the budgeted figures should not be exceeded unless good reason can be shown.”
While it flies in the face of any certainty goals the reforms may have had, the decision in Merrix v Heart of England NHS Foundation doesn’t come as an enormous surprise.Were a judge on assessment bound by the approved budget, it would inevitably push specific cost disputes forward to the Cost Management Hearing, contrary to CPR 3 Practice Direction 3E which stipulates the court will not undertake a detailed assessment in advance (at the Cost Management Hearing).It remains critical to maximise your approved budget. However on the basis of this decision it would be unwise to expect full recovery of costs as approved. Instead, save in exceptional circumstance, your approved budget should be treated as your best case scenario and you should be ready to defend the costs which make up the approved figures as if nothing had changed…
“It remains critical to maximise your approved budget… and you should be ready to defend the costs which make up the approved figures”
Finally, it is worth noting that Regional Cost Judge Lumb did add that the decision should not signal an ‘open season’ for attacking the receiving parties’ budgeted costs. This ties in with the Claimant’s continued opportunity to refer to the approved budget in support of the reasonableness and proportionality of their costs claimed, as one of the ‘pillars of wisdom.’