Latest news
News and Events

Proportionality II: The Court's second reckoning

  • Posted

Following the recent case of BNM v MGN Limited [2016] EWHC B13 (Costs), the court has again shown its power and ruthlessness with regards to proportionality in the case of Dr Brian May v Wavell Group Plc [2016] EWHC B16 (Costs).

In the recent decision by Master Rowley, the Claimants brought proceedings against the Defendants in the County Court for private nuisance. A Part 36 offer was accepted by the Claimants, prior to the filing of Defences, in the sum of £25,000.00. The Claimants subsequently commenced detailed assessment proceedings and served a bill in the sum of £208,236.54. All of the work within the bill was conducted post April 2013, therefore the new test of proportionality applied.

The bill was assessed on an item by item basis and calculations of the reasonable costs were made in the sum of £99,655.74. The Claimants instructed leading Counsel. Master Rowley noted that the big reduction in the costs was, “undoubtedly due in part to the method of representation adopted by the Claimants". Master Rowley further noted that he was satisfied that he had ultimately allowed a reasonable sum for Counsel. He clarified that although the reasonableness and proportionality of the recoverable costs cannot depend upon the method of representation, the point was raised to merely provide some reasoning for the significant level of reduction from the original amount claimed.

Following the item by item test, Mr Rowley then considered the reasonably assessed bill and deliberated whether or not the sum was proportionate. At this juncture, Mr Rowley considered the provisions set in CPR 44.3 (5) (a-e) in detail, which provides:

(5) Costs incurred are proportionate if they bear a reasonable relationship to

(a) the sums in issue in the proceedings;

(b) the value of any non-monetary relief in issue in the proceedings;

(c) the complexity of the litigation;

(d) any additional work generated by the conduct of the paying party; and

(e) any wider factors involved in the proceedings, such as reputation or public importance.

Master Rowley found that the reasonable sum of £99,655.74 was disproportionate and therefore reduced the sum again to the total of £35,000 plus VAT. From the further reduction made by Mr Rowley it is clear that CPR 44.3 (2)(a) was used which provides:

(2) Where the amount of costs is to be assessed on the standard basis, the court will

(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred.

What is clear from the above is that the Senior Courts Cost Office has demonstrated that they are not afraid to apply the new proportionality test.

Whilst providing his Judgment, Master Rowley made further references to the case of Kazakhstan Kagazy PLC v Zhunus [2015] EWHC 404 (Comm) which found that:

“The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently”.

Further, Master Rowley noted that the crux of the argument on proportionality is that disproportionate costs do not become proportionate because they were necessary to bring or defend the claim.

In conclusion, it is clear that the new test of proportionality can be a brutal force depending on the circumstances of the claim. The interesting part of these recent cases on proportionality will be the future actions of the Claimants and Defendants following these Judgments. Will Claimants be reluctant to proceed to assessment and be more reliant on using alternative methods like ADR as is being encouraged by the courts or will Defendants be more stringent in their offers and conduct?

Ultimately these recent cases could be the spark of more matters proceeding to court and as a result giving us a stronger understanding of the new proportionality test, which still remains unclear and difficult to anticipate with any certainty.