Cost budgets: The available fund, not the figure you are entitled to recover - DAC Beachcroft

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Cost budgets: The available fund, not the figure you are entitled to recover

Published 18 October 2016

In the recent decision of Merrix v Heart of England NHS Foundation Trust the Court rejected the Claimant's argument that there was no need for detailed assessment of their costs because the figures claimed were within the budget. Hannah Volpe, Partner at DAC Beachcroft LLP, explores the reasons behind that decision and its implications in practice.

This was a clinical negligence claim, dealt with by DAC Beachcroft LLP on behalf of the Defendant and the National Health Service Litigation Authority. The litigation was the subject of Cost Budgeting.

Following resolution of the claim, the Claimant, represented by Irwin Mitchell, submitted a bill of costs and sought determination of, as a preliminary issue, the question "to what extent, if at all, does the cost budgeting regime under CPR3 fetter the powers and discretion of the costs judge at a detailed assessment of costs under CPR47."

The preliminary issue came before District Judge Lumb, sitting as Regional Costs Judge in Birmingham on 13 October 2016.


Counsel for the Claimant sought to argue that Cost Budgeting and, in particular, the completion of a detailed Precedent H and attending a cost case management conference, had been intended to reduce the need for lengthy, costly and time consuming detailed assessment hearings.

He asserted that a Cost Budget fixed the amount of recoverable costs and that this could only be reduced if the paying party can show good reason to depart from it. If the costs sought were more or less in line with the budgeted figures, they should be assessed as claimed.

Counsel for the Defendant's cost draftsman Acumension, argued that the cost judge's powers were not fettered by the budgeted figure. The budget was one factor to be considered in determining reasonable and proportionate costs on assessment. However, the cost budgeting process was not intended to replace detailed assessment.


District Judge Lumb found that the Defendant must be correct in their submission that cost budgeting was not intended to replace detailed assessment. There were numerous examples to support this, not least that had that been the intention of the Rules Committee, they would have undoubtedly made wholesale changes to CPR parts 44 and 47. Instead, they included an additional factor (h) in the "pillars of wisdom" under CPR44.4(3). The receiving party's agreed or approved budget was just another factor that the court will consider, but no special weight was attached to it.

Furthermore, it was envisaged that there was always a possibility of detailed assessment. PD3E expressly states that in budgeting, a court is not carrying out a detailed assessment in advance.

What undoubtedly was intended was that effective costs and case management would greatly reduce the need for detailed assessment of some or all of the parties' costs, by ensuring that the costs budgets were within the range of reasonable and proportionate costs for each phase. In doing so, the scope for disagreement should be reduced to a level where a paying party would be unwise to risk incurring significant costs of the detailed assessment process for what would only be limited potential gains.    

The District Judge went onto say that in his view, the "budget" was more of an available fund for each phase of the litigation, rather than a cap or a fixed amount. The available fund is considered to be within the reasonable range of proportionate costs, but nowhere is it stated to be a fixed assessed amount. If that had been the intention then the rules would surely state as much.

The strict answer to the preliminary issue question is that the powers and discretion of the 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. However, the full answer is more nuanced than the Defendant's position of "open season" and complete discretion to attack a bill on detailed assessment and the Claimant's opportunistic attempt to impose a straight jacket on the costs judge and claim a fixed figure.
The District Judge pointed out that it was the duty of the parties to help the court to further the overriding objective by narrowing the issues between them. He referred to the need for the parties to adopt an ADR like philosophy in negotiation and preparation of budget discussion reports, so that the panacea – that the difference between the parties should be so negligible that it would not be worth the time, trouble and risk to pursue a detailed assessment  - can be achieved.     

Key points

  • A cost budget is an available fund rather than a cap or fixed amount.
  • The cost budget does not, in itself, fetter the powers and discretion of the cost judge at a detailed assessment (save where the costs exceed the figures allowed in the budget).
  • There is, nonetheless, a duty on the parties to litigation to co-operate and narrow the issues when at the cost budgeting phase.
  • The parties should adopt an ADR philosophy to cost budgeting; in production of cost budgets and negotiations, so that the difference between the parties are so negligible that it would not be worth the time or trouble of a detailed assessment.


Hannah Volpe

Hannah Volpe


+44 (0)117 918 2098

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