The interaction between costs budgeting and costs assessment has been considered again in Merrix v Heart of England NHS Foundation Trust  EWHC 346 (QB) – the appeal of a first Merrix v Heart of England NHS instance ruling.
Mrs Justice Carr found that the court will have ‘regard to the receiving party’s last approved or agreed budget by respecting it or finding that there is a good reason to depart from it’……………………………………………
………………………….. So, the question to be answered is – will a receiving party’s costs
be allowed in full if they are less than the budget? Yes – for now! The Merrix decision confirms that any departure from the budget applies to both downward and upward revisions, hence parties have to show a good reason to depart from the budget.
Does Mrs Justice Carr’s finding in Merrix deny the paying parties an opportunity to challenge potentially unreasonable costs, despite it being their responsibility for the costs of challenging those costs? At the moment – yes.
Is it ‘just’ for the receiving party to request their costs in full simply because they have been incurred and fall within the parameters of the budget? What safety mechanism is in place to ensure that any receiving party does not include unreasonable and disproportionate costs in their claim for costs, simply justified on the basis that they ‘fall within budget’?
Mrs Justice Carr felt that the indemnity principle was sufficient, though perhaps it is not – unreasonable costs can be claimed from the client, hence the need for Solicitors Act assessments. Or alternatively, the client may have little regard to the constraints of the budget and request that ‘out of scope’ or disproportionate and unreasonable costs are incurred in any event.
How can restraints be imposed on a spendthrift client with deep pockets, and at the same time discourage a paying party from being overzealous in their requests for detailed assessment? Perhaps the introduction of the ‘one-fifth rule’ to costs budgeted cases could be the answer. This shares the burden of the costs consequences, rather than the traditional costs shifting rule. If the bill is reduced by more than 20%, then the receiving party is responsible for those costs rather than the paying party, but if the paying party secures less than a 20% reduction to the bill, then they become responsible for those costs.
This should encourage all parties to think seriously about committing to detailed assessment, rather than the onus being on the paying party. Not only does this tie in nicely with the rules for Solicitors Act assessments, but it is also in line with the rules surrounding provisional assessment relating to the recoverability of costs for an oral
hearing (see article, page 10). Further, it embraces Jackson’s intention to reduce the number of detailed assessments, and at the same time does not deprive parties the opportunity to challenge the costs. Just a thought.
Is this the end? Perhaps only for now. Mrs Justice Carr requested that if this decision were to be appealed, then it should be heard together with any existing listings covering the same point of principle.
In her decision, she referred to Harrison, which was soon to be heard in the Court of Appeal. The Harrison decision is listed for May, and so the paying party in Merrix may be running out of time to get this listed together with Harrison – but we await with interest.
Please click here to read the full article which was published in the April edition of the Litigation Funding magazine.
Sue Fox is the Head of Costs Budgeting in the Costs and Litigation Funding department at Clarion Solicitors. You can contact her at firstname.lastname@example.org and 0113 336 3389, or the Clarion Costs Team on 0113 246 0622.