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The Court of Appeal's message is clear: The rules don't say it, so proportionality doesn't apply to additional liabilities

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The Court of Appeal has ruled that additional liabilities do not fall under the 'new’ proportionality test on an assessment of costs.

Handing down the judgment on 7 November the Master of the Rolls, Sir Terence Etherton, confirmed that the ‘old’ test set out in CPR 44.4(2) of the pre-2013 rules and the relevant Practice Directions should apply to the assessment of additional liabilities. Lord Justices Longmore and Irwin agreed.

The Court of Appeal were considering an appeal of the decision of Senior Costs Judge, Master Gordon-Saker,  who had initially ruled that an assessment of proportionate costs could include a reduction of additional liabilities even if they had been approved as reasonably incurred and reasonable in amount on a standard basis assessment.

The Senior Costs Judge initially reasoned that there would have been a further exception to the ‘new’ proportionality rules set out in CPR 44.3(7) relating specifically to additional liabilities if the rules committee had intended for these costs to evade the ‘new’ proportionality test. The Court of Appeal disagreed with this because that provision only creates exceptions to the new CPR 44.3(2)(a) and (5), which would never had caught pre-existing additional liabilities. In order words, any express exception in that rule would have no practical use.

The Court of Appeal also disagreed with Master Gordon Saker’s second reasoning that the 'old’ test was not a provision relating to funding arrangements within CPR 48.1 because it was absent from paragraph 1.4 of PD 48. The list provided in paragraph 1 is inclusive and not exhaustive.

In summary the Master of the Rolls ruled that it seemed perfectly clear that any ‘old’ additional liabilities which are still recoverable after 2013 under the transitional provisions would also be subject to the rules that existed prior to 2013. At paragraph 81 he concluded:

“If it had been intended that the new proportionality test was to apply to funding arrangements to which the statutory saving and transitional provisions applied, that would have been made clear in the statutory provisions or the new costs rules or both and it was not.”

The underlying decision of Master Gordon-Saker was set aside and the assessed costs were returned to the Senior Costs Judge for a new proportionality assessment.

See the full judgment here