SENIOR COURTS COSTS OFFICE
Royal Courts of Justice, Strand,
London, WC2A 2LL
B e f o r e :
|- and -
|LONDON BOROUGH OF NEWHAM
Mr Clayton (instructed by Browne Jacobson) for the Defendant
Hearing date: 21 June 2017
Crown Copyright ©
Deputy Master Campbell, Costs Judge:
- 16 July 2015 - Letter of claim;
- 29 October 2015 - Issue of proceedings;
- 2 February 2016 Particulars of Claim and schedule of loss served
- 6 March 2016 - Defence served pleading a limitation point and putting the Claimant to proof of any allegations of abuse in respect of which the perpetrator had not been subject to a criminal conviction in the Crown Court;
- 25 July 2016 Claimant's costs budget filed and served : Precedent H rates per hour stated to be partner £355 to £375, senior solicitors £235 to £280, Associate £295, solicitors £215 to £225, legal assistants £145 to £150
- 3 August 2016 Defendant's costs budget filed and served
- 12 August 2016 Costs Case Management hearing ("CCMC") ; Costs Management Order, inter alia that the Claimant's costs budget is agreed under CPR 3.17 in the sum of £143,692.36 and that the Defendant be deemed to have served a costs budget comprising only applicable court fees under CPR 3.14;
- 23 November 2016 Defendant's Part 36 offer in the sum of £125,000
- 2 December 2016 Claimant's Part 36 offer in the sum of £295,000
- 4 January 2017 - Consent Order settling the claim on terms that the Claimant receive damages of £250,000, plus costs to be assessed if not agreed;
- 8 May 2017 Costs hearing listed for one and a half days commencing on 21 June 2017 in respect of the Claimant's bill of costs seeking £121,051.40; the Defendant's points of dispute take issue with the proportionality of the bill.
- 21 June 2017 - parties attend for detailed assessment; bill assessed : Hourly rates for partners reduced to £340 : senior solicitors reduced to £275, solicitors reduced to £180 and legal assistants to £135 : reserved decision on whether those rates should apply to the budgeted costs as well as the incurred costs [in brief, the reasons for the reductions were that the uplift on outer London guideline rates was excessive on the standard basis, having regard to the CPR 44.4(3) factors, and the increases year on year were too high given the level of inflation, were unexplained and could not be justified by reference to, for example exceptional overhead expenses].
"3.15(1) In addition to exercising its other powers, the court may manage the costs to be incurred by any party to the proceedings.
(2) The court may, at any time, make a "Costs Management Order" where costs budgets have been filed and exchanged, the court will make a Costs Management Order unless it is satisfied that the litigation can be conducted justly and at proportionate cost in accordance with the overriding objective without such an order being made.
By a Costs Management Order, the court will:
(a) record the extent to which the budgeted costs are agreed between the parties;(b) in respect of budgets or parts of budgets which are not agreed, record the court's approval after making appropriate revisions.
(3) If a Costs Management Order has been made, a court will thereafter control the parties' budgets in respect of recoverable costs.
CPR 3.17(1) When making any case management decision, the court will have regard to any available budgets of the parties and can take into account the costs involved in each procedural step.
(2) Paragraph (1) applies whether or not the court has made a Costs Management Order.
CPR 18 In any case where a Costs Management Order has been made, when assessing costs on a standard basis, the court will:
(a) have regard to the receiving parties' last approved or agreed budget for each phase of the proceedings;(b) not depart from such approved or agreed budget unless satisfied that there is good reason to do so."
"Unless the court orders otherwise, a budget must be in the form of Precedent H annexed to this Practice Direction "
"If the budgets or parts of the budgets are agreed between all parties, the court will record the extent of such agreement. In so far as the budgets are not agreed, the court will review them and, after making any appropriate revisions, record its approval of those budgets. The court's approval will relate only to the total figures for each phase of the proceedings, or while in the course of its review, the court may have regard to the constituent elements of each total figure. When reviewing budgets, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs are within the range of reasonable and proportionate costs."
"As part of the Costs Management process, the court may not approve costs incurred before the date of any budget. The court may, however, record its comments on those costs and will take those costs into account when considering the reasonableness and proportionality of all subsequent costs."
"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 a court in the costs management hearing to fix or approve the hourly rates claimed in the budget. The underlying detail in the budget for each phase used by a party to calculate the totals claimed is provided for reference purposes only to assist the court in fixing a budget."
" Where a "CMO" approving a costs budget has been made in the course of civil proceedings, is a Costs Judge on a subsequent detailed assessment precluded from going below the budgeted amount unless satisfied that there is good reason for doing so? Or is there an entitlement to do so without any prior requirement of good reason for going below the budgeted sum?
 Master Whalan took the view that as far as costs budgets were incurred, CPR 3.18 precluded him from subjecting them to "conventional" detailed assessment at the behest of the Appellant as paying party, unless good reason for doing so was shown.
 So far as the first issue before us is concerned, that was precisely the point for the decision in the case of Merrix, decided on 24 February 2017 by Carr J. There is no room for distinction on the facts; either that case was rightly decided or was wrongly decided.
 I am in no real doubt that Master Whalan reached the right conclusion on this issue and that the conclusion of Carr J  in Merrix was also correct, for the reasons she gave.
 Where there is a proposed departure from a budget be it upwards or downwards the court on detailed assessment is empowered to sanction such a departure if it is satisfied that there is good reason for doing so. The 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 principle purposes of costs budgeting and hence the overriding objective. Moreover, in the context of the wording of CPR 3.18(b) is different from that of CPR.9 relating from relief from sanctions, the robustness and relative vigour to be expected in that context (see Denton v White) can properly find the same degree of reflection in the present context. Nevertheless, all that said, the existence of the "good reason" provision gives a value and an important safeguard in order to prevent a real risk of injustice; and, as I see it, it goes a considerable way to meeting Mr Hutton's [counsel for the Appellant] doom-laden predictions of detailed assessments becoming mere rubber stamps of CMOs and of injustice to paying parties if the approach is to be that adopted in the present case. As to what will constitute "good reason" in any given case, I think it is much better not to seek to proffer any further, necessarily generalised, guidance or example. The matter can safely be left to the individual appraisal and evaluation of Costs Judges by reference to the circumstances of each individual case.
 I would dismiss the appeal on the first ground advanced "
" The effect of a Costs Management Order is addressed in CPR 3.18
 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 CPR3.18 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 attention of CPR 3.18 was to reduce the scope of and need for detailed assessment. The Respondent's approach would defeat that object.
 This straightforward conclusion reflects the fact that costs budgeting involves the determination of reasonableness and proportionality (see paragraph 7.3 of Practice Direction 3E and paragraph 3 of the Guidance Notes to Precedent H). It is important to remember at the outset (and also in the context of the debate as to the meaning of the word "budget" addressed below) precisely what a Judge is doing at the costs budgeting stage. He/she is not identifying what is the maximum amount by way of future costs considered to be reasonable and proportionate. He/she is identifying what future costs are reasonable and proportionate.
 Nothing in paragraph 7.3 of Practice Direction 3E, where it is stated that when reviewing budgets the court will not carry out a detailed assessment "in advance", impinges on this approach. The Practice Direction is there setting out the nature of the assessment exercise at the costs of budgeting stage. The court will not carry out any detailed assessment at that stage; rather it will consider whether the budgeted costs fall within the range of reasonable and proportionate costs. It is not stating that, whatever costs budget is approved or agreed, there will be an unfettered detailed assessment in due course. The fact that hourly rates are not fixed at the costs budgeting stage is no obstacle to such conclusion. As the notes to the CPR 3.18 in the White Book reflect, the fact that hourly rates at the detailed assessment stage may be different to those for the budget may be a good reason for allowing less or more, than the phase totals in the budget.
 In my judgment, the answer to the preliminary issue is as follows: where a Costs Management Order has been made, when assessing costs on the standard basis, the Costs Judge will not part 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 or less than the budgeted sums as where the Receiving Party seeks to recover more or less than the sums budgeted. [Original emphasis]."
The Submissions for the Defendant
The Submissions for the Claimant
" the court will (a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; .."
" (a) the sums in issue in the proceedings;
(b) the value of any non-monetary relief in issue in the proceedings;
(c) the complexity of the litigation;
(d) any additional work generated by the conduct of the paying party; and
(e) any wider factors involved in the proceedings, such as reputation or public importance."
" "The proportionality test can be applied at the time of fixing the budget. If there is good reason to depart from that decision, the judge on detailed assessment can do so. Additionally, ... as the notes to CPR 3.18 in the White Book suggest, once pre-incurred costs have been assessed on the basis of reasonableness and added to the budgeted costs, the total figure is then subject to an overall assessment of proportionality. .....""
" "where, as here, a costs judge on detailed assessment will be assessing incurred costs in the usual way and will also be considering budgeted costs ( and not departing from such budgeted costs in the absence of " good reason") the costs judge ordinarily will still , as I see it ,ultimately have to look at matters in the round and consider whether the resulting aggregate figure is proportionate, having regard to CPR 44.3(2)(a) and (5) : a further potential safeguard, therefore, for the paying party. ""