top of page

“The Court will not – the words are mandatory – depart from the budget, absent good reason.” Merrix


We had not anticipated that we would be writing a series of articles on this subject in such swift succession, but case law gathers apace and the decision of Mrs Justice Carr in Merrix v Heart of England NHS Foundation Trust [2017] EWHC 346 (QB) is important because it is a High Court decision and thus binding.

The first article in this series was the decision of DJ Lumb at first instance on a preliminary issue in the same case. The issue as formulated was:

“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?”

Carr J’s decision was:

“..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.”

Thus she allowed the appeal from the decision of DJ Lumb, who had found that the Budget did not fetter the discretion upon assessment save that the Budget should not be exceeded unless good reason could be shown. In disagreeing, she found that, this conclusion reflected the clear intention of costs management as set out in CPR 3.18(b), namely to reduce the cost of the detailed assessment process by the treatment of agreed or approved Budgets as binding, absent good reason.

Fundamentally this had been the Claimant’s position on the Appeal, that if the Bill came in within Budget, the costs should be allowed as claimed in the absence of good reason. The Defendant had argued that any detailed assessment should be conducted almost “de novo” with the Budget being just one of the factors to be taken into account, thus not fettering the Judge upon assessment, save that good reason would have to be shown to recover more than the Budget in any particular phase.

The Judgment is comprehensive indeed, reviewing the general principles at play, the intended purposes of Budgeting (and the differing views on that) together with the Rules and the growing list of authorities – of which there are a number on each side of the fence.

Notwithstanding her robust decision, she felt that “the issue would appear to be ripe for early consideration by the Court of Appeal” and noted that a hearing was listed to be heard in the Court of Appeal in May against Master Whalan’s decision in Harrison. She concluded her Judgment by saying that it would be preferable for the issue not to be explored in a piecemeal fashion and suggested, in terms, that cases could be stayed pending that Appeal to achieve that end.

In her decision, she is forthright in her opinion that the Budget should be of significant importance:

“The words are clear. The court will not – the words are mandatory – depart from the budget, absent good reason. On a detailed assessment on a standard basis, the costs judge is bound by the agreed or approved costs budget, unless there is good reason to depart from it. No distinction is made between the situation where it is claimed that budgeted figures are or are not to be exceeded. It is not possible to square the words of CPR 3.18 with the suggestion that the assessing costs judge may nevertheless depart from the budget without good reason and carry out a line by line assessment, merely using the budget as a guide or factor to be taken into account in the subsequent detailed assessment exercise. The obvious intention of CPR 3.18 was to reduce the scope of and need for detailed assessment. The Respondent’s approach would defeat that object”

She approved the view that at the Costs Budgeting stage, a Judge was not identifying the maximum recoverable costs, but rather what future costs are reasonable and proportionate. Noting the time, effort, expense and use of Court resources now being taken by costs budgeting, she found that it would be difficult to reconcile that with a view that a Budget was no more than a guide.

She stressed that this does not mean there should be no detailed assessment. Rather, the question was how should that hearing be conducted? There will also be work not dealt with upon budgeting such as incurred costs and applications not anticipated. Assessments may well be required in cases where an order was made for costs on the indemnity basis and where there was an argument to be had as to good reason to depart from the Budget.

There was argument before the Judge that different issues on proportionality may arise on budgeting and assessments. She felt that the proportionality test could be applied at the time of the Budget and if there was good reason to depart from that view on assessment, then so be it.

She felt that her decision was consonant with previous decisions of the higher Courts and that such an approach lead to greater certainty, or at least predictability, of the recoverable costs:

“Fidelity to the clear words of CPR 3.18, as set out above, will achieve the dual purpose both of reducing the costs of the detailed assessment process and of securing greater predictability on costs exposure/recovery for the parties. Both the receiving and paying party have the benefit of the legitimate expectation. This is a central pillar of access to justice in a world where costs will always be a primary consideration for those contemplating or participating in litigation, and consistent with the overriding objective”

She did think that where there had been an underspend, that would amount to good reason to depart from the Budget, because to allow more would probably infringe upon the indemnity principle.

The issue therefore is whether a Court should entertain a lengthy line by line assessment in cases where the paying party has not established good reason why there should be a departure from the Budget, in the sense of allowing less than the Budget.

The prospective changes to the Budgeting regime shift the emphasis more to the prospective costs, so it seems likely that the incurred costs (often mostly within the Pre-Action phase) will still be a legitimate target. However, even that is not certain, because the incurred costs may have provided a basis for the future costs allowed and so the total Budget may be regarded as determinative in some cases.

The obvious problem which arises is that in the absence of a clear view as to what the Budget really stands for, there have been a variety of approaches at CCMC’s. Can it truly be said that when agreeing or even arguing about Budgets, the parties were of the view that the Budget would be determinative (absent good reason being established)? We have experience where that certainly was not the case – after the decision of DJ Lumb some paying parties decided to take an extremely relaxed view of the Budget, feeling that they would have a second, more comprehensive, bite of the cherry at Detailed Assessment, so there was no need to be too troubled by what was and was not allowed on the Budget.

It is abundantly clear that for the system to work, parties must have a clear view of what budgeting really means from the outset. A decision from the Court of Appeal would be of great benefit in providing that clarity.

The issues discussed above illustrate the need for thorough and accurate Costs Budgets to be prepared. Here at SPH we have vast experience in drawing Costs Budgets in all manner of litigation. Our fees and service levels are competitive. Please contact Alison Bradbury on 01772 435550 to discuss your requirements or email:

bottom of page