Harrison v University Hospitals Coventry & Warwickshire NHS Trust
On 21st June 2017, the highly-anticipated Court of Appeal decision of Harrison v University Hospitals Coventry & Warwickshire NHS Trust  EWCA Civ 792, was handed down.
It confirmed the decision in Merrix v Heart of England NHS Foundation Trust  346 (QB). In Merrix, Justice Carr stated that:
“Where a Costs Management Order has been made, when assessing costs on the standard basis, the costs judge will not depart from the receiving party’s last approved or agreed budget unless satisfied that there is good reason to do so. This applies as much where the receiving party claims a sum equal to or less than the sums budgeted as where the receiving party seeks to recover more than the sums budgeted”.
In upholding Justice Carr’s judgment, the Court of Appeal in Harrison v University Hospitals Coventry & Warwickshire NHS Trust set out the following principles:
- Costs already incurred at the time of the Budget agreement will still be subject to the process of detailed assessment, and therefore could be varied without the court having to find good reason;
- Estimated costs agreed on in a Costs Management Conference and included in a Costs Management Order, must be adhered to and the court will not depart from the Cost Management Order without good reason as per the wording of Civil Procedure Rule (CPR) 3.18
- A Bill of Costs, even if agreed and presented within the limits of the approved budget, may still be subject to further scrutiny on the basis of proportionality. The court stated: “I add that where a Costs Judge on detailed assessment will be assessing incurred costs in the usual way and also will be considering budgeted costs (and not departing from such budgeted costs in the absence of ‘good reason’) the costs judge ordinarily will still, as I see it, ultimately have to look at matters in the round and consider whether the resulting aggregate figure is proportionate, having regard to CPR 44.3 (2)(a) and (5): a further potential safeguard, therefore, for the paying party.”
The intention behind CPR 3.18
The defendant in Harrison tried to argue that CPR 3.18 was ambiguous. This was rejected by Justice Davis who stated abruptly:
“I do not consider there to be any real ambiguity in the words at all”.
CPR 3.18 states:
3.18 In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –
(a) have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings;
(b) not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so;
In Merrix, Justice Carr looked at the intent behind the implementation of cost management, which is to ‘reduce the scope and need for detailed assessment’.
Therefore, to interpret the Rule in the spirit with which it was written requires the conclusion to be drawn that estimated costs agreed and subject to a Cost Management Order, have already, in theory, been through a detailed assessment. It would be going against the intent of the rule to require another detailed assessment of estimated costs to be performed without ‘good reason’.
What is the definition of ‘good reason’?
The term, ‘good reason’ has yet to be defined and this factor is likely to leave the door open to further litigation in the future. How it is eventually construed will provide a more accurate picture of whether Rule 3.18 will, in practice, save time for the parties to a matter and the court.
Given that the overall intention of the Rule has been carefully considered by the High Court and Court of Appeal, it would not be unreasonable to predict that ‘good reason’ will be a high threshold to overcome.
If this prediction proves accurate, then it is imperative that solicitors keep their cost draftsman up to date with any changes to estimated costs so a revised Bill of Costs can be submitted if required.
The case of Harrison v University Hospitals Coventry & Warwickshire NHS Trust also highlights for claimants the value of getting their case management right from the start. Well prepared budgets and timely submission of amendments in the case of an event occurring during the life of the case which would require a material revision of the budget, are more likely to be approved by judges. Ensuring that the budget is prepared by a costs budgeting expert will increase the chances of a positive result being achieved.
R Costings is a leading firm of Costs Lawyers, Law Costs Draftsmen and Legal Costs Consultants, based near Cambridge. We have extensive experience and expertise in preparing costs budgets. For advice and/or information about costs or representation, please call us on 01480 463499.