Close this search box.

Does Costs Budgeting Trump Detailed Assessment?

8 minutes read

Back in February this year the decision in Merrix v Heart of England NHS Foundation Trust [2017] sought to resolve one of a number of practical problems arising from the Jackson reforms, namely the relationship between budgeting and detailed assessment.  In particular, the question being asked was whether the budgeting regime in any way, or to what extent, may fetter a costs judge on assessment.

The Claimant/Appellant argued that where a receiving party does not exceed the budgeted figure, their costs should be assessed at that sum, rather than being subject to any form of assessment (absent good reason not to). The Defendant/Respondent disagreed, arguing that the paying party was entitled to have a full detailed assessment of those costs.

Merrix is no longer being appealed and it is understood that the Defendant did not want to risk delaying the appeal in Harrison v Coventry NHS Trust, Unreported 16 August 2016, which was one of the cases mentioned in the Merrix judgment). The Harrison decision was again on the relationship between the budget and assessment of costs and judgment is expected in July.

The Decision

The court considered that the wording of CPR r3.18 was compulsory and the court will not depart from the budget absent good reason, thus the judge on assessment is bound by the budget. The reason given is that the intention of CPR r3.18 was to ‘reduce the need and scope for detailed assessment’. Thus, treating the agreed or approved budget as binding reduces the time and costs of detailed assessment.

Carr, J went on to say that the judge at the budgeting stage is not ‘identifying the maximum amount by way of future costs’ that are reasonable and proportionate, but is ‘identifying what future costs are reasonable and proportionate’.

The difference between these statements in practice appears to be of little or no relevance. The budget is set, a party cannot depart from it absent good reason and it is, to all intents and purposes therefore the maximum amount that a party can recover on assessment.

The judge observed that, where there is an underspend, it is ‘difficult to see why so much time and money would be invested at the costs management stage if the budget were no more than a guide’, thus she concluded that the party should simply be entitled to that amount without the need for a full assessment, unless the paying party can show good reason why there should be one.


The question of ‘good reason’ is likely to be the main area of future contention, should the decision on Merrix not be overturned on the Harrison appeal.

Where the costs come in lower than the approved budget, Carr, J suggested that this, in itself, was good reason to depart from the budget.

However, where costs come in over the budget, the test will clearly be different and although should not be as high as ‘exceptional’, it is not yet clear what that test should be, or how high the bar should be set. One suspects, given the comments in Merrix in relation to the time and costs spent on the budgeting process that the bar will be set high, however.

Carr, J makes the observation that budgeting does not replace detailed assessment, as there is still scope for assessment of areas such as pre-issue costs, applications not included on the budget, where costs are being paid on the indemnity basis and where a costs judge believes there is good reason to depart from the budget.

Carr, J considered that such an approach was a ‘central pillar of access to justice in a world where costs will always be a primary consideration…’ and by her approach, the costs of detailed assessment are reduced and the case is dealt with justly.

In reality, although the time and costs of detailed assessment may be reduced on the face of it, there is the argument that in actual fact, costs overall have not been reduced, they have simply been shunted to the time and expense of budgeting rather than at detailed assessment. 

Problems for Defendants

The decision in Merrix has created a number of issues and questions for Defendants.

Firstly, if the bill comes in at less than the budgeted sum, and that is de facto good reason to depart and should be allowed as claimed, is it possible for a defendant to say that there can be good reason to depart further from that sum? If so, what test would a defendant have to meet or, in other words, what would amount to a good enough reason to depart further from a budget that has already been departed from?

This can be demonstrated where a budgeted phase is only partially complete but only just comes in under the budget. So, for example, if a budget allows £5,000 for the preparation of four witness statements and only two are ever prepared, but the bill comes in at £4,750, the court in theory should allow that figure in accordance with Merrix unless the defendant can show good reason why not. However, will simply pointing out that not all the work was completed amount to good reason? If the test continues to be applied as if it is ‘exceptional’, then it would not and the claimant could recover all of those costs regardless of their reasonableness.

The decision also denies Defendants the opportunity of challenging issues such as the hourly rate. It has always been the case for both parties when preparing a budget that you should err on the side of caution and allow yourself some protection. However, the Merrix decision allows for scope within budgets to be included in the hope that, whilst the overall sum may be reduced, there will still be sufficient padding to always come in under budget and deny the Defendant an opportunity to fully challenge those sums being claimed.

Detailed assessment, rather than budgets, under the current system, therefore suit defendants better as it provides them more opportunity to properly challenge the fees being claimed, not just the incurred costs.

However, the problem is, as Master Whalen pointed out in Harrison that if there is a detailed assessment ‘costs budgeting would serve no meaningful purpose’. This is the crux of the matter, and a consideration that the Court of Appeal will likely be bearing in mind when they hear the appeal in Harrison later this month.

Related Documents

Related People


Make An Enquiry

Scroll to Top