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The judgement in Merrix has been upheld in Harrison but where does that leave us in respect of “Good Reason”?

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We heard, last week, that the court of appeal in the case of Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792 agreed with the court in Merrix v Heart of England NHS Trust [2017] EWHC 346 (QB) and found that, where a costs management order has been made, in respect of future costs, the costs budget is seen as definitive when the matter comes for assessment and court will not depart from it unless there is good reason to do so. In respect of incurred costs, it was held that these need to be assessed in the usual way upon conclusion of the case. Lord Justice Davis stated, in respect of future costs:
“Where there is a proposed departure from budget – be it upwards or downwards – the court on a detailed assessment is empowered to sanction such a departure if it is satisfied that there is good reason for doing so. That of course is a significant fetter on the court having an unrestricted discretion: it is deliberately designed to be so. Costs judges should therefore be expected not to adopt a lax or over-indulgent approach to the need to find “good reason”: if only because to do so would tend to subvert one of the principal purposes of costs budgeting and thence the overriding objective. “
But is it really a significant fetter on the court?
My firm does both receiving party and paying party work and, having had a mix of results at provisional assessments and hearings lately, I have been in discussion with my colleagues. It seems that, for all of us, in the majority of cases the court is finding in favour of the receiving party on this point.
It could be argued that, when acting for the paying party, we have just been unlucky, or that in the specific circumstances of the case there was a genuine “good reason”. But at two of the hearings I have attended, the judge made it clear before submissions were even made that they usually find there to be good reason to depart from the budget. How can they do that without hearing submissions, and how can the rules in relation to departure from the budget then be seen to provide a “significant fetter” on the court?
At one hearing I attended, not only did the judge state, at the outset, that he was usually quite lenient and allowed these cases through (ie, found there to be good reason to depart from the budget), he also said that he didn’t agree with costs budgeting and considered it almost impossible to keep within budget. Does that not suggest that he is more likely to find good reason than not? And is this possibly the approach that other judges are taking?
In my view, it remains to be seen what impact Harrison will have on the recovery of costs in budgeted cases, but let’s hope that the rules are now correctly applied so that costs experts acting for both paying and receiving parties are properly able to provide accurate advice to their clients.
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