Harrison gives some clarity on the impact of costs management on detailed assessment

The long awaited judgment in the case of Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792 has confirmed that there must be good reason to depart from the approved or agreed budgets.

​This applies whether that is to apply any increase or decrease from the approved budgeted figures, but does not apply to the incurred costs. The incurred costs were not considered to fall within the ambit of CPR 3.18 at all and they must be the subject of detailed assessment in the usual way.

​The Court did not provide any guidance on what might constitute a "good reason" but it was confirmed that the bar should be set high and reference was made to the test set out in Denton v TH White Limited [2014] EWCA Civ 906 relating to relief from sanctions.

​It was also confirmed that, despite proportionality being considered at the budgeting stage, it should also be considered upon detailed assessment. Lord Justice Davis stated:

​"where a costs judge on detailed assessment will be assessing incurred costs in the usual way and will also be considering budgeted costs, the costs judge ordinarily will still ultimately have to look at matters in the round and consider whether the resulting aggregate figure is proportionate" 

​​Davis LJ also confirmed that the comments of Sales LJ in the case of ​Sarpd Oil​ may have gone too far in suggesting that the paying party must raise issue with the incurred costs at the budgeting stage in order to challenge the same at detailed assessment.

​Whilst the judgment gives some welcome clarity on the process of costs management, there is still much to be answered such as what constitutes a "good reason" and how the proportionality test will be applied at assessment.

​The lead case in relation to proportionality, BMG v MGN remains listed in the Court of Appeal for October. We will no doubt get further clarity on another of the main parts of the Jackson reforms in the autumn!