Where a receiving party has established good reason to have claimed less than the budget, the paying party does not in principle need another good reason to challenge those costs, a circuit judge has ruled.
His Honour Judge Dight, whose earlier budgeting ruling in May v Wavell was highly regarded, said that, in such circumstances, it was open to the court to continue hearing submissions on what the final figure should be.
As it happened, in the case before him – Salmon v Barts Health NHS Trust – there were further good reasons to depart specifically on the experts and ADR phases.
The defendant was appealing the decision of Master Whalan, sitting as a judge of the Central London County Court.
The case was a clinical negligence claim which settled when the claimant accepted the defendant’s part 36 offer of £7,000. The overall value of the claim was in the region of £10,000 to £15,000. The issues in the claim were relatively limited and the parties had two experts each. The claimant’s approved budget was £155,673. On assessment, Master Whalan reduced the assessed figure of £52,133 to £40,000 on grounds of proportionality.
On appeal, HHJ Dight – sitting with Master Brown as an assessor – said the case law indicated that, once a good reason to depart from the budget has been established, it was “left to the good sense and expertise of the costs judge to undertake that assessment in an appropriate and insofar as possible practical way, whether line-by-line or in a more broad-brush way”.
He continued: “Once the court has a right to depart from the budget, neither the receiving party nor the paying party needs to establish a further good reason within CPR 3.18 if they wish to persuade the costs judge to make a further or different adjustment to the bill.”
He explained: “As to whether there needs to be a second good reason, it seems to me to make little fairness to talk of a further departure from a budget, requiring a further good reason, when, having regard to the reasoning in Yirenki, what one is departing from is a global figure for a phase which has been approved, rather than the constituent elements, to which, in my judgment, the costs judge is not intended to have regard on a detailed assessment.
“To require separate good reasons for departing from separate constituent elements of the budget is illogical if the approval of the budget does not connote an approval of those constituent elements, or any findings as to them.”
He added that there were two “real safeguards” against opening the floodgates to arguments about all the elements of the relevant phase: “First, the nature of the detailed assessment being undertaken, and the process to be adopted, is a matter for the case management skills and the expertise of the costs judge undertaking the assessment, who will control the proceedings in the appropriate way; secondly, in any event, the outcome of the assessment will be subject to the overall proportionality test.”
The experts phase was budgeted for £24,928 but the receiving party claimed £14,072 in the bill and the master assessed the bill as claimed, finding no good reason to reduce it further.
HHJ Dight said it was unclear from the ruling whether the master thought that there had to be a good reason to depart down from a budgeted figure solely because of the operation of the indemnity principle. “Insofar as he was of that view, with the greatest respect to him, it seems to me that he was wrong. In my judgment, having regard to what was said by Lord Justice Davis in the Harrison judgment, the fact that the sum claimed is lower than the budgeted figure, because of the indemnity principle, is itself capable of being a good reason.
“Awarding the lower figure would be, in my judgment, a departure from the budget, which requires a good reason to be established: in this case, once that had been done it was open to the paying party to challenge the figure which was then being claimed by the receiving party, and they did not have to assert a further good reason to enable the court to do so.”
In any event, he continued, the fact that the phase of the budget relating to experts was substantially incomplete (because of the settlement) was capable of being a good reason, and it would have been open to the master on that basis to consider whether to reduce the figure. “In my judgment, he should have heard submissions on what the appropriate figure should have been.”
The budgeted sum for the ADR phase was £9,745, but the claimant sought £5,041 because the joint settlement conference that had been expected did not happen. The master again assessed the bill as claimed.
“In my judgment, the fact that, in this case, the phase was incomplete, the sum claimed was just over half of the budgeted figure, and that there was no alternative dispute resolution process to speak of, other than the making and acceptance of a part 36 offer, were capable of being good reasons which the learned judge should have found enabled him to depart further from the budget, if he needed to find further good reasons to depart from the conceded figure.”
HHJ Dight said that, even if a further set of good reasons was necessary after finding a good reason to depart from the budget, they existed.
Having upheld the appeal on the first two issues, HHJ Dight rejected the appeal against the master’s application of the proportionality test.
The defendant submitted that there was no reasonable relationship between the value of the claim, the £7,000 settlement, and the £40,000 of costs allowed. It said £25,000 was the right figure.
Looking at the rule 44.3(5) factors, HHJ Dight considered the complexity factor: “It has to be looked at in the context not of the particular category of litigation which it forms part of, but of the overall work of the court, where it is one of the cases which is being dealt with,” he said.
“Undoubtedly, this was not a complex clinical negligence case, but it was in the great scheme of things more complicated than much of the usual work of the county court, and, in my judgment, 44.3(5)(c) requires one to look not only at the niche area in which the work falls, but at all the circumstances including the general run of work which the court handles.”
He concluded: “Standing back, what the learned judge was doing, it seems to me, was reducing the amount of the costs that are payable because of the relatively low value of the claim, but he also increasing the sum payable, not because of the behaviour of the paying party, but because of the complexity of the litigation.
“The reason why he referred to the behaviour of the paying party is because it is that behaviour, and in particular the way in which they drafted the defence, which made the case more complicated than it need otherwise have been. It does not mean that additional work was incurred and that factor (d) was engaged, it means that the litigation became more complicated because there were more issues in dispute than there would otherwise have been had the paying party accepted some of the matters which it was criticised for making non-admissions in respect of in its defence.”
The master started with a figure of £52,133 and reduced it to £40,000 on a broad-brush basis. “That conclusion cannot properly be impugned,” HHJ Dight said.
However, having allowed the appeals on the first two grounds, it followed that the starting-point for the exercise for the application of the proportionality test “might have shifted”, he acknowledged. “There will have to be, in the absence of an agreement, a re-assessment, which can be undertaken by this court.”
Roger Mallalieu (instructed by Gadsby Wicks) represented the claimant, Alex Hutton QC (instructed by Acumension) the defendant.