Departing from a Budget….. - Wayne Spring

The test to depart from a budget still remains high.  In April 2018 Master Rowley ruled in Jallow v Ministry of Defence [2018] EWHC B7 (Costs) that a reduction in hourly rates at Assessment for incurred costs is not a justifiable reason to do the same to those budgeted costs.  CPD 3E.7.10 states “The making of a costs management order under rule 3.15 concerns the totals allowed for each phase of the budget. It is not the role of the court in the cost management hearing to fix or approve the hourly rates claimed in the budget. The underlying detail in the budget for each phase used by the party to calculate the totals claimed is provided for reference purposes only to assist the court in fixing a budget”.

In the aforementioned case, the Claimant brought a claim against the Defendant following injuries sustained whilst employed.  The Defendant provided an admission of liability on a 75/25 basis but the issue quantum was not reached and proceedings were issued in February 2015.  The claim sought to recover two different sums depending on specific outcomes but was claimed at £185,000 or £312,000 in the alternative.  The aspect of quantum was robustly fought resulting in a settlement amicable between the parties by way of an acceptance of a Part 36 in the sum of £90,000 circa 4 weeks before the final quantum hearing.  The claim was subject to a Case Management Order in which the overall budget was reduced to £120,000 plus Vat and additional liabilities in totality and not phased totals, which was described as ‘unconventional1.  The estimated costs were allowed at the reduced value of £78,505.50. 

The Claimant commenced assessment proceedings in February 2017 and serves a Bill totalling £188,085.02 inclusive of additional liabilities2.  The rates claimed in the Bill ranged from £140 per hour for a Grade D to £330 per hour for a Grade A.  At the detailed assessment hearing in April 2018 the Court applied some reductions to those hourly rates for the incurred costs but confirmed that it would only apply the reduction where there was “good reason to depart from the budget3.  It was held that the parties would need to raise something specific.  Master Rowley relied on the “genuine issue” test found in Hazlett v Sefton Metropolitan Borough Council [2001] 1 Costs LR 89 4.  The ‘genuine issue’ test was likened to the “good reason to depart5test applied today.  Accordingly, for the Defendant to have reduced the hourly rates in the budgeted phased costs there has to be “something specific to the case regarding the hourly rates challenge6.”  As the Defendant was unable to do this the Master held that there was no good reason to depart. 

A secondary submission advanced by the Defendant was that the Claimant exaggerated the value of the claim which settled at significantly less than the claimed amount.  This was not accepted by Master Rowley who confirmed that the Claimant advanced an alternative case as to quantum.  The Court rejected the Defendant’s argument that the valuation of the case is a good reason to depart from the budget7

It therefore appears that to seek a departure from the approved budget by virtue of hourly rates is not going to be a ‘good reason’ unless there are specifics which can persuade the Court. But as it stands if the costs fall within the budgeted amounts there is no good reason to depart.