Costs Budgeting is an area of concern for many firms.
A number of recent cases have reinforced the importance of the budget. Notably, in the well known case of Harrison v University Hospitals Coventry & Warwickshire Hospitals NHS Trust the Court of Appeal approved the earlier decision in Merrix that the court will not depart from the last or agreed costs budget unless there is good reason to do so. It seems that the bar is high in terms of what amounts to ‘good reason.’ In the case of Jallow v Ministry of Defence [2018] EWHC B7 (Costs), Master Rowley, Senior Costs Judge found that neither a reduction in hourly rates, nor the fact that settlement was at a significantly lower figure than claimed, constituted good reasons.
However, in the recent case of Barts Health NHS Trust v Salmon, HHJ Dight found that –
‘… once the court has a right to depart from the budget, neither the receiving party nor the paying party needs to establish a further good reason within CPR 3.18 if they wish to persuade the costs judge to make a further or different adjustment to the bill. I take this from the wording of CPR 3.18(b) and the terms and reasoning of the judgment in Mr Justice Jacob in Yirenki. In my judgment this consequence applies whether it is sought to depart from the budget upwards, or, as in this case, further downwards, because the finding of a good reason opens the gateway for departure from the budget, and the rules do not stipulate that the good reason must determine the nature of the route to be followed thereafter.’
In other words, a finding of good reason opens the door to any requests to depart from the budget. The party seeking the departure does not have to show ‘good reason’ again, for their application.
It may be stating the obvious, but it is crucially important, that solicitors get their budgets right.
We have many years’ experience in the preparation of budgets together with negotiation and attending CCMCs. Some firms are righty concerned about the cash flow implications of costs budgets especially when this aspect of the case is effectively funded by the them. This is why we are always prepared to share the risk with solicitors. In any case that is being run under a CFA we will do the budgeting work on the basis that we will not make any charge if the claim does not succeed and the solicitors are not paid.