Harrison v University Hospitals Coventry & Warwickshire NHS Trust

On a standard-basis detailed assessment, a costs judge may depart from an approved or agreed costs budget, whether upwards or downwards, only on good reason. The budget is not merely a cap, although detailed assessment remains necessary and the good-reason safeguard prevents injustice.

Pre-budget incurred costs are not approved costs within the former rule. They are assessed in the ordinary way without a preliminary good-reason requirement. The costs judge must nevertheless consider the proportionality of the resulting aggregate costs under the Civil Procedure Rules.

A case is commenced for the transitional proportionality rules when the court issues the claim form, not when the claimant sends or the court receives it.

The claimant settled a clinical-negligence claim against the NHS Trust for £20,000 plus standard-basis costs. A costs management order had permitted reliance on updated budgets. It did not comment on incurred costs. On detailed assessment, Master Whalan treated both budgeted and incurred costs as subject in practical terms to a good-reason threshold before reduction, and treated the claim as commenced before 1 April 2013.

The Trust appealed directly from the Senior Courts Costs Office decision, MAW/1601086. The appeal concerned the effect of an approved budget on detailed assessment, the status of pre-budget incurred costs, and the date on which a case is commenced for the transitional proportionality provisions.

1. The appeal was allowed on the second and third grounds, but dismissed on the first. The matter was remitted to the costs judge for further assessment on that basis.

2. Under the then version of rule 3.18(b) of the Civil Procedure Rules, an approved or agreed budget is a figure from which either party seeks to depart if it contends for a sum above or below it. The rule contains no asymmetry permitting a paying party to seek a lower figure without good reason. A costs management order does not replace detailed assessment. It determines how the assessment is conducted, subject to the important safeguard that a departure may be sanctioned on good reason.

3. The court endorsed the approach in Merrix v Heart of England NHS Foundation Trust. It also accepted that costs judges should not adopt a lax approach to good reason. The question is fact-sensitive and should be left to the appraisal of the costs judge; no further general guidance or examples were given.

4. Pre-budget incurred costs were never approved or agreed in this case. Paragraph 7.4 of Practice Direction 3E prevented their approval as part of costs management. They therefore fell outside former rule 3.18(b) and were subject to ordinary detailed assessment, without a good-reason threshold. The court rejected, as going too far, obiter observations in Sarpd Oil International Ltd v Addax Energy SA insofar as they suggested a contrary special status for incurred costs. The aggregate result must still be assessed for proportionality.

5. For rule 44.3(7)(a), a case is commenced when the court issues the claim form under rule 7.2. The claimant's claim form was issued on 9 April 2013. It was therefore not a pre-1 April 2013 case, and the newer proportionality provisions applied.

• Court of Appeal (Civil Division): The Trust's appeal was dismissed on the effect of an approved budget, but allowed on incurred costs and the commencement date. The assessment was remitted.

• Senior Courts Costs Office / County Court: Master Whalan, sitting as a district judge, assessed costs and held that good reason was required in practical terms to depart from both budgeted and incurred costs. He treated the case as commenced before 1 April 2013: MAW/1601086.