Are Hourly Rates ‘Good Reason’ To Depart From A Costs Budget
Recently, Deputy Master Campbell in RNB v London Borough Newham  EWHC B15 (Costs) gave his views on whether Hourly Rates constituted a ‘good reason’ to depart from a Costs Budget. The decision is currently being appealed.
In this White Paper, members of the Senior Team from Civil & Commercial Costs Lawyers debate the issue - Costs Lawyer Tom Mason puts forward his arguments against the decision, Ashley Tezoo defends it, and James Fairclough provides his view of where he thinks the Court of Appeal will go.
The Case Against - Hourly Rates Not A 'Good Reason' To Depart From A Costs Budget
In this case, Deputy Master Campbell was in “no doubt” that the hourly rates allowed for the incurred costs should be reflected in the budgeted costs. It is submitted that such an unequivocal answer is not discernible from the rules; there is a four way conflict between CPR 3 PD 7.10 & PD 7.3, CPR 3.18 and CPR 44.3(5).
The Deputy Master’s reasoning was that if the hourly rates were not reflected in the budgeted costs that would allow the Claimant to recover an hourly rate, post budget at a level that exceeded the figure considered reasonable and proportionate for the pre-budget stage. He determined this to be a ‘good reason’ to depart from the approved costs budget. It is difficult to reconcile his reasoning with the explicit wording of PD 7.3. The Court has already considered the budgeted costs to be reasonable and proportionate. In doing so the Court has considered the constituent elements of the total figure. The hourly rates, being a constituent element, have therefore been considered to be both reasonable and proportionate and should not have been reduced further at Detailed Assessment. The use of the word “good” in CPR 3.18 clearly creates a reasonably high threshold for a reason to depart from the approved costs budget. It is submitted that hourly rates fall some way short of being a good reason to depart.
As a safety net, the Deputy Master considered that if hourly rates were not considered ‘good reason’ then they were the most appropriate mechanism to apply the new proportionality test. The intention of the new ‘stand back’ approach was clearly not to apply a point at the coal face of the assessment.
The four way conflict between PD 7.10, PD 7.3, CPR 3.18 and CPR 44.3(5) can only be resolved by the rule makers. The more pressing issue for the appellate Court is some guidance on what constitutes ‘good reason’ to depart from an approved costs budget.
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