How to avoid a proportionality reduction

You have conducted a piece of litigation and recovered damages for your client on a post-LASPO case (that is, all work conducted post-1 April 2013). Your trusted costs lawyer prepares your bill of costs, which claims base costs at multiple times the level of the damages recovered. You commence detailed assessment. Your opposition paying party offers a sum which is a fraction of your legal spend, on the basis that your claim for costs is disproportionate having regard to the new proportionality rule at CPR 44.3(5).

The law

The starting point on the new proportionality test is Master Rowley’s first instance decision in May v Wavell Group Ltd [2016] EWHC B16 (Costs), followed by the decision of HHJ Dight sitting with Master Whalen (being the appeal of that judgment). HHJ Dight was critical of the approach of Master Rowley, stating that he had ‘misinterpreted and misapplied’ the new proportionality test. It could be said that such criticism was rather unfair, considering that HHJ Dight and Master Whalen appeared to pick a figure entirely at random as the ‘proportionate sum’ to be allowed for costs, having had regard to the factors in CPR 44.3(5). The result of the appeal judgment is that the issue of proportionality remains uncertain. So how can we mitigate the prospect of the bill of costs being cut down by the judge’s ‘broadsword’?

Having regard to both the first instance and appeal decisions in May v Wavell Group Ltd, the steps set out below are a guide as to how to respond to a well-formed proportionality argument.

Step 1: the sum in issue

The settlement sum might be a red herring within the proportionality test. Do not be too pessimistic if the claim settled for less than was pleaded, provided the figure in the prayer attached to the particulars was not one of pure fantasy. The relationship between the financial relief and the legal spend has never seen so much attention on detailed assessment as it does today. This means your response here needs the appropriate level of detail. The settlement range of similar claims and initial valuation discussed with your client are likely to be key factors for consideration on detailed assessment. The fact is that claimants may well accept a lower sum than the sums in issue, for a plethora of reasons. But this does not mean that the evidence obtained and work done in getting the case to a certain point of the procedural pathway was disproportionate, purely because the claim settled for a lower sum than was pleaded.

Step 2: complexity/conduct

Did this claim require expert evidence? Claims involving experts are naturally more complicated than those without. Was liability disputed? Did your opponent conduct the litigation in a way that increased costs or made things more complicated than other claims of this type? This is your opportunity to put your side of the case across to the costs judge. Explain how this case was different and why additional time was spent as a result. This is particularly important for specialist lawyers working on their particular specialism which, as far as costs are concerned, can be an avenue for reduction as they might be held to a higher or more efficient standard. If counsel was not relied upon heavily, say so. If counsel was relied upon, explain that there was no duplication but collaboration (assuming of course that this can be demonstrated).

Step 3: wider factors such as reputation or public importance

If the claim involved a relief other than financial it is seldom easy to contrast the relationship with that relief and the totality of the legal spend. Cases that involve a failure to accept liability or acknowledgment of poor procedure, for example, can greatly increase costs, especially if there is a reluctance by the offending party to show contrition. The fear of inadvertently admitting liability by doing so is a classic example of this. In clinical negligence cases with fatalities, an admission of liability and explanation of what happened is often more important than any financial recompense. Look beyond the settlement sum and highlight the other issues involved in the case (see Marcura Equities FZE & Anor v Nisomar Ventures Ltd & Anor [2018] EWHC 523 (QB)).

Step 4: items in the bill of costs

Make specific reference to items/sections of the bill of costs. If the costs judge has the power to award a lower ‘proportionate sum’, which might seem random, having undertaken the assessment and arrived at a reasonable figure, you could break the bill into sections and show that those sections, taken individually or collectively, are not disproportionate having regard to the facets of CPR 44.3(5). As HHJ Dight stated: ‘I doubt … that the proper interpretation of the rules requires or indeed entitles a costs judge at the end of an item-by-item assessment to impose a very substantial reduction on the overall figure without regard to the component parts.’

In 2012 Lord Neuberger, in his capacity as master of the rolls, said: ‘The law on proportionate costs will have to be developed on a case-by-case basis. This may mean a degree of satellite litigation while the courts work out the law, but we should be ready for that.’ It is very difficult to advise one’s client as to the likely recovery in a case such as this, given that we are more than five years’ post-inception of the new test, with just a handful of cases that might allow us to ‘work out the law’. That said, there is no reason to fear the new test if proper resonance as to the legal spend can be demonstrated.

Philosopher and jurist Jeremy Bentham said: ‘The power of the lawyer is in the uncertainty of the law.’ That being the view of one of the finest legal theorists in history, a lawyer faced with a proportionality argument, as either a paying or receiving party, is an incredibly powerful one.

Richard Foss is a partner and head of the dispute resolution department at Kingsley Napley and committee member of the London Solicitors Litigation Association. Michael Tyler is costs manager at Kingsley Napley.