The case of Utting v City College Norwich (2020) EWHC B20 (Costs) rejected the argument that underspend amounted to a good reason to depart from a budget. CPR 3.18 provides that “in any case where a Costs Management Order has been made, when assessing costs on the standard basis, the Court will –
a) have regard to the receiving party’s last approved or agreed budgeted costs for each phase of the proceedings; and
b) not depart from such approved or agreed budgeted costs unless satisfied that there is a good reason to do so.”
The Defendant argued that there was a “good reason” to depart from the budget in respect of two of the phases on the grounds that these phases had not been substantially completed. It was held that, if an underspend were to be a good reason for departing from a budget, it would be liable to substantially undermine the effectiveness of costs budgeting. A Solicitor who had acted efficiently and kept costs within the budget would find their costs subject to assessment whereas less efficient Solicitors who exceeded the budget would absent any other “good reason” receive the budgeted sum and avoid assessment. This would be contrasted with the situation where a phase was not substantially completed where it would be unjust for a receiving party to receive the full amount
of the budgeted sum in circumstances where only a modest amount of the expected work had been done. There had been an underspend in the reports phase in Utting as the phase had been determined on the understanding that agendas would be prepared for the without prejudice experts’ meetings and that those meetings would take place and joint statements would be subsequently prepared. The budget for the ADR phase had assumed there would be a JSM.
It is also worth considering the matter of Salmon v Barts Health NHS Trust (2019). In this case it was held that the fact that the sum claimed was lower than the budgeted figure because of the indemnity principle was itself capable of being a good reason. This case is different from the circumstances in Utting.