Mrs Valerie Elsie May Merrix v Heart of England NHS Foundation Trust
| Jurisdiction | England & Wales |
| Judge | The Honourable Mrs Justice Carr,Mrs Justice Carr |
| Judgment Date | 24 February 2017 |
| Neutral Citation | [2017] EWHC 346 (QB) |
| Date | 24 February 2017 |
| Docket Number | Case No: A90BM096 |
| Court | Queen's Bench Division |
[2017] EWHC 346 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
ON APPEAL FROM THE REGIONAL COSTS JUDGE
Birmingham Civil Justice Centre
33 Bull Street B4 6DS
The Honourable Mrs Justice Carr DBE
Case No: A90BM096
Mr John Foy QC and Mr Daniel Frieze (instructed by Irwin Mitchell LLP) for the Appellant
Mr Benjamin Williams QC (instructed by Acumension Ltd) for the Respondent
Hearing date: 16 February 2017
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an appeal from the decision of District Judge Lumb sitting as a Regional Costs Judge ("the Costs Judge") in Birmingham District Registry on 13 th October 2016 ( [2016] EWHC B28 (QB)). It raises a point of considerable importance arising out of the interplay between the costs budgeting regime under Part 3 of the Civil Procedure Rules (as amended from time to time) ("the CPR") and the detailed costs assessment regime under Part 47 of the CPR. The Costs Judge when granting permission said this:
"The issue is the subject of significant debate in the legal profession with wide-ranging views and interpretations. There is no direct case authority on the point. An authority on the point would be highly desirable and as a matter of urgency. Already a number of detailed assessments have been adjourned pending this first instance decision."
The Appellant is the successful party in a claim against the Respondent for damages for clinical negligence. A costs management order under CPR 3.15(2) was made on 19 th March 2015 when the Appellant's cost budget was approved in the total sum of £128,256. £74,780 of that figure related to future costs. The claim was compromised in September 2015 when the Appellant accepted the Respondent's offer made under CPR Part 36. By then, lay and expert evidence had been exchanged but the case had not been prepared for trial. The bill ultimately served by the Appellant was less than the total approved budget, unsurprisingly since the matter had not gone to trial.
This appeal is not about the budget in this particular case, nor whether there are good reasons for departing from it. The Costs Judge has not yet considered the budget or the bill. Rather, the appeal relates to the determination of a preliminary issue, formulated by the Costs Judge as follows:
"To what extent, if at all, does the costs budgeting regime under CPR Part 3 fetter the powers and discretion of the costs judge at a detailed assessment of costs under CPR Part 47?"
In summary, the Appellant contended that where a receiving party claims costs at or less than the budgeted figure, his or her costs should be assessed as claimed, unless the paying party establishes a good reason to depart from the budgeted figure. The Respondent, by contrast, contended that the paying party is entitled to benefit from a full detailed assessment de novo, with the costs budget being but one factor in determining reasonable and proportionate costs on detailed assessment. The costs judge is not fettered in that assessment by the costs budget. Thus the Respondent's position was (and remains) that a paying party does not need good reason to persuade a court to depart from an approved or agreed budget downwards, but a receiving party needs a good reason to persuade a court to depart from an approved or agreed budget upwards.
The Costs Judge's " strict" answer was that the powers and discretion of a 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 (see [61] of the judgment). His "full" answer was, however, more " nuanced" than the Respondent's position of " open season" (see [62] of the judgment). In essence, his conclusion was that the budget, although not binding, will be a strong guide to what will be allowed on a detailed assessment.
The issue is one that arises in every detailed assessment of costs on a standard basis where a costs management order has been made. The practical significance of the dispute is obvious and reflected in the surrounding debate that has emerged both before and after the judgment below. The Civil Procedure Rule Committee (SARPD Sub-Committee) reported in November 2016 that it had not been able to reach a unanimous decision on the issue (albeit noting that the issue did not fall strictly within its remit). The decision of the Costs Judge has been followed elsewhere in Tahera Bhojani v University Hospitals of Leicester NHS Trust (14 th December 2016) (unreported decision of District Judge Hale sitting as a Regional Costs Judge in Nottingham) (" Bhojani"), albeit " with some hesitation". But it has also been criticised recently by District Judge Middleton (another Regional Costs Judge and co-author of Cook on Costs) in an article published in Civil Procedure News (Issue 2/2017). It has been seen by some as an unfortunate decision which robs costs budgeting of much of its merit. The predictability and reduction in the scope of disagreement on assessment that costs budgets should have brought will be rendered illusory. Furthermore, Senior Costs Judge Master Gordon-Saker reached a different conclusion to that of the Costs Judge in Collins v Devonport Royal Dockyard Limited [AGS/16029/54] (" Collins") on 8 th February 2017.
Costs budgeting: some history
The recommendations in the Access to Justice: Final Report (July 1996) implemented by the introduction of the Civil Procedure Rules in 1998 made no express reference to costs management. The emphasis was on active case management as part of the court's duty to meet the overriding objective. However, Jackson LJ's Review of Civil Litigation Costs: Preliminary Report (May 2009) stated that the time had come to elevate the court's costs management powers to rules, and to use the term " costs management" for the purpose of recognising those powers as a feature of case management (see chapter 48 on " costs management").
Costs budgeting was then piloted under schemes in defamation cases (Practice Direction 51D) and in the Technology & Construction and Mercantile Courts (Practice Direction 51G). (Appropriately enough in the present context, the pilot in the Mercantile and Technology & Construction Courts was run in the Birmingham specialist civil courts.) The scheme under Practice Direction 51D was mandatory, whilst that under Practice Direction 51G was voluntary.
In his Review of Civil Litigation Costs: Final Report (December 2010) (the " Final Report"), Jackson LJ again devoted a whole chapter (40) to costs management. He had earlier (in chapter 3) proposed a definition of "proportionality", which would come into play when an assessment of "reasonable" costs would result in an excessive figure. This would of itself introduce a new dimension to costs management. At paragraph 1.4 under the heading " The essence of costs management" he stated this:
"The essential elements of case management are the following:
(i) The parties prepare and exchange litigation budgets or (as the case proceeds) amended budgets.
(ii) The court states the extent to which those budgets are approved.
(iii) So far as possible, the court manages the case so that it proceeds within the approved budgets.
(iv) At the end of the litigation, the recoverable costs of the winning party are assessed in accordance with the approved budget."
He went on to say at paragraph 1.5 under the heading " Issues for consideration":
"If costs management becomes a feature of civil litigation in the future, many issues will have to be considered before any set of costs management rules is drawn up. In particular:
…
(iii) To what extent should the last approved budget be binding, alternatively influential, upon the final assessment of costs?
(iv) In so far as the last approved budget is binding, should it operate as an upper limit upon recoverable costs or should it operate as a form of assessment in advance?
…
(vi) What steps should be taken to ensure that the process is cost-effective, i.e. that the litigation costs saved exceed the costs of the process?"
Whilst Jackson LJ recognised that costs management is an exercise which generates additional costs and which makes additional demands on the limited resources of the court – both powerful negative factors – he also identified powerful factors in support of costs management: first, case management and costs management go hand in hand; secondly, costs management, if done properly, would save substantially more costs than it would generate (see paragraph 7.1). At paragraph 7.16 he concluded, amongst other things, that effective costs management was well within the abilities of all civil judges if properly trained, and that " effective costs management has the potential to control the recoverable costs, and sometimes the actual costs, of litigation to more acceptable levels."
The costs management regime in section II of CPR Part 3 was later introduced on 1 st April 2013, based on the Final Report and drawing on the experience of the pilot schemes. Various amendments and variations to the rules have been made from time to time. Unless otherwise stated, references to rules and any practice direction below are references to those currently in force.
The CPR: Part 3: section II: costs management
By CPR 3.12(1), the costs management regime in section II of Part 3 of the CPR applies to all Part 7 multi-track claims issued after 1 st April 2013 except:
"(a) Where the claim is...
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