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Proportionality in Action

Everything has to have context; you don’t fully appreciate life’s triumphs if you haven’t experienced its failures; you can’t be truly happy without suffering abject misery; you can’t be unhappy without having experienced joy.

Yes, psychologists would debate the validity of these harmless platitudes, but we might be tempted to look back upon the lesser evils, fearsome in their time, of such cases as Kazakhstan Kagazy PLC v Zhunus [2015] EWHC 404 (Comm) and Hobbs – v – Guy’s & St Thomas’s NHS FT [2015] SCCO when considering the downright terrifying decision in BNM – v – MGN Limited [2016] EWHC B13 (Costs).

As the doomsayers may say, ‘we might not have long’ and with the ever increasing need for efficiency, we’ll keep this short:

• Costs claimed = £241,817, including a success fee in respect of the solicitors’ costs of 60%, counsel of 75% and an ATE premium of £58,000 plus IPT of £3,480
• On detailed assessment, subject to the outstanding issue of proportionality, success fees of solicitors and counsel were allowed at 33 per cent and the ATE premium was allowed as claimed.
• A line by line assessment of the whole bill based on what was ‘reasonable’ resulted in overall assessment of £167,389.45

Master Gordon-Saker had to consider how the Court should go about applying the test of proportionality to those additional liabilities that remain recoverable under new agreements post-April 2013, and decided that:

• The ‘new’ test of proportionality applies to additional liabilities where they remain recoverable after 01.04.13 and are not otherwise covered by the saving clause of CPR 44.3(7)
• When applying the new test of proportionality, contrary to the ‘old’ section 11.5 of the costs practice direction, additional liabilities are not to be assessed separately

Having assessed the bill on the basis of what was ‘reasonable’ Master Gordon-Saker turned his (one must assume) stern gaze upon the proportionality of the costs as assessed, and decided that the resulting assessment remained disproportionate to the various considerations under CPR 44.4(3).

Art and science have been left far behind; we have no need of instruments of fine degree now, such as paint brushes and scalpels, and Master Gordon-Saker would appear to have adopted his namesake and used a cannon to devastate the walls of reasonableness and advance the shock-and-awe force of proportionality.

The result was a further reduction in the region of 50% to the costs already assessed as reasonable, including a reduction of the same order on the ATE premium which again had otherwise been assessed as reasonable. So the receiving party would recover half of what had literally been decided as reasonable.

It is worrying to say the least that so much will rest upon the impression of the individual judge and their perception of costs in the particular type of action. It also begs the question whether there is good sense in actually assessing the costs (which in a great proportion of matters may well take several days) if it is permissible for the judge on conclusion to effectively all-but apply a tariff based on a subjective scale peculiar to the individual judge.

In some stark cases, such as the present, insisting on applying the test of proportionality on conclusion of the assessment rather than at the outset will waste substantial costs, where it is suspected that the outcome as to a ‘proportionate’ amount may well be in the mind of the judge at a point in time somewhere approaching the outset of the assessment.

What can you do?

• The importance of well-pitched Part 36 offers that stand a real chance of being beaten at trial and so attracting indemnity costs continues to increase. Make good offers
• If your case has been budgeted, monitor the budget and comply with it, and use the budget as the yard-stick of what is proportionate
• Keep a record of all the ways your opposite number’s conduct has served to increase costs
• Record on each occasion that you spend time in relation to issues that you did not expect to have to deal with, or where the time required is above and beyond what you would ordinarily expect

Question – Do you think this is how proportionality should work?

 

Teresa Aitken

Chairperson