Budgeting: do we now have all the answers?

The Court of Appeal’s ruling this week in Harrison gives some welcome certainty over the status of an approved budget, and also the position relating to incurred costs.

On budgets, the appeal judges backed Mrs Justice Carr and her ruling in Merrix. At detailed assessment, costs judges are bound by the figures in the approved budget, unless there is ‘good reason’ to depart from them.

What will amount to ‘good reason’? Unfortunately the Court of Appeal decided to duck that question. Lord Justice Davis said any guidance he could give would inevitably have to be too generalised, and he believed the question could ‘safely’ be left to the costs judges. That does seem a shame, as having no indication at all of what will be a reasonable excuse for departing from a budget does leave a large question mark hovering over proceedings.

On incurred costs, the Court of Appeal took the opportunity to add a padlock to the Pandora’s box relating to incurred costs that was opened in Sarpd Oil, and snapped shut by the Civil Procedure Rule Committee in April.

In Sarpd, Lord Justice Sales said that if parties have a problem with their opponents’ incurred costs, then the time to raise that was the first CCMC. The senior judiciary was worried about the impact these this could have on the length of CCMCs; hence a change to the CPR in April to ‘decouple’ incurred costs from costs budgets, and ensure that only future costs are budgeted. Previously incurred costs can still be ‘commented’ on by judges, however, and these comments will provide a steer to the costs judge conducting a detailed assessment at the end of the case.

In Harrison, the Court of Appeal also discussed the need for a costs judge at detailed assessment to consider proportionality in the round. The combined total of budgeted and incurred costs must be proportionate. But we’re still no closer to knowing what proportionality really means.

Harrison is a step forward for lawyers and clients who want to know where they stand on costs. But it certainly does not provide all the answers.