Merrix v Heart of England NHS Foundation Trust

Where a costs management order has been made, the approved or agreed budget binds the parties at a standard-basis detailed assessment unless there is good reason to depart from it. This applies whether the receiving party claims less than, equal to, or more than the budgeted amount. The budget is not merely a factor or guide, and the costs judge should not conduct an unrestricted line-by-line assessment of costs within the budget. Departure may be justified where, for example, the receiving party has spent less than the budgeted amount, because of the indemnity principle, or where other good reason exists. Detailed assessment remains relevant to costs outside the budget and to any issue justifying departure.

The appellant had succeeded in a clinical negligence claim and obtained a costs management order approving a budget under CPR 3.15(2). The claim settled before trial and the bill served was below the approved total. Before undertaking the detailed assessment, the Regional Costs Judge determined that the costs budgeting regime did not fetter the costs judge’s discretion, except that budgeted figures should not be exceeded without good reason.

The appeal concerned the proper construction of CPR 3.18. The central issue was whether the receiving party’s approved or agreed budget was binding, absent good reason to depart, even where the costs claimed were equal to or below the budget.

1. The appeal was allowed. CPR 3.18 required the costs judge, when assessing costs on the standard basis after a costs management order, not to depart from the receiving party’s last approved or agreed budget unless satisfied that there was good reason to do so. That rule applied equally where the sum claimed was less than, equal to, or greater than the budget.

2. The words of CPR 3.18 were mandatory and could not be reconciled with an unrestricted line-by-line assessment treating the budget merely as guidance. The approved or agreed budget represented the court’s or parties’ assessment of reasonable and proportionate future costs for each phase.

3. Costs budgeting did not replace detailed assessment. Detailed assessment remained available for costs outside the budget, costs of reasonably unforeseen interim applications, costs assessed on the indemnity basis, and cases where good reason for departure was established. The court could also assess pre-incurred costs and overall proportionality where relevant.

4. If the receiving party had spent less than the budgeted amount, the indemnity principle would ordinarily provide good reason to depart downwards. The lower figure would generally be presumed to be reasonable and proportionate, subject to any further good reason for allowing less.

5. The authorities concerning earlier pilot schemes and different procedural contexts did not justify the contrary construction. The purpose of CPR 3.18 was to reduce duplication, detailed assessment costs and uncertainty, while preserving a safety valve for good reason.

1. High Court (Queen’s Bench Division): allowed the appeal from the Regional Costs Judge’s preliminary ruling, reported at [2016] EWHC B28 (QB).