Proportionality in relation to costs has evolved, the latest overhaul (or reform if you will) came in 2013 with Rupert Jackson’s report. However, many will recall the pre-Jackson Reforms “Lownds” test where necessity trumped proportionality. However, roles are reversed now and the Court’s approach to applying the current test was somewhat of a mixed-bag.
Fast forward to 2019, the Court of Appeal in West v Stockport NHS Foundation Trust provided guidance as to the approach to the “new” proportionality test. Those who regularly litigate Detailed Assessment Proceedings will be aware of the approach, however to confirm, when conducting an Assessment on the Standard Basis, the Court will:
- Assess the claim for costs on a line-by-line basis. Assessing the reasonableness of each item, if appropriate and convenient the proportionality of an item should be considered at the same time;
- At the conclusion of the line-by-line assessment, the global figure should be assessed with reference to the factors at CPR 44.3(5) and CPR 44.4(1), if that global figure is proportionate then no further reduction is required;
- If the global figure is regarded as disproportionate, then a further assessment is required, not on a line-by-line basis, but by reference to various categories of costs or specific period where particular costs have been incurred.
The approach in West is commonly known as a “step back” approach, to look at the global figure allowed on assessment and assess whether that figure is proportionate. After all, proportionality trumps reasonableness and necessity.
However, how keen is the Court to metaphorically “stand back” and reduce the costs? This will largely depend upon what Court the action has been litigated in, the Senior Courts Costs Office and High Court is far more likely to take a “step back” approach than a District Judge in a County Court “up north”; well that is what we find anyway!
When acting for the Paying Party, we find that the Costs Judges of the SCCO are very willing and do follow the guidance in West, applying a further reduction after the line-by-line assessment. However, in the regional County Courts, a District Judge rarely takes a step back; rather they deem their line-by-line assessment to be proportionate.
However, proportionality in costs is not only restricted to the Detailed Assessment of Costs. It also applies to Costs Management, per Para 12 of PD 3D – “When reviewing budgeted costs, the court will not undertake a detailed assessment in advance, but rather will consider whether the budgeted costs fall within the range of reasonable and proportionate costs.”
A very well publicised Judgment from a recent Costs Management Conference is in the Pan NOx Emissions litigation, with Mr Justice Constable and the Senior Costs Judge reducing the Claimants’ Estimated Costs from £207.7m to £51.9m and the Defendants’ Estimated Costs from £211.7m to £113.9m. To most if not all litigators, these reduced sums are still significant. However, the Court did record that the sums sought were “eye watering” and the Court was all too willing to scrutinise the Costs Budgets to ensure the costs of the litigation were kept in-check with the principles of proportionality, with the Judgment noting the £6 billion value of the claim was not the only measure of proportionality.
There have also been sanctions applied where Courts have taken the view that a party’s budget is disproportionate/unrealistically high:
- In Reid v Wye Valley NHS Trust & Anor, Master Brown Ordered the Claimant’s costs of costs management be reduced by 25%;
- In Jenkins v Thurrock Council, Master Thornett Ordered that the Claimant do pay the Defendant’s costs of and occasioned by the Costs Management Hearing, with the any costs of the Claimant that were still recoverable in relation to Costs Management (i.e. Precedent H preparation) be reduced by 35%; and
- In Worcester v Hopley, Master Thornett Ordered that the first Costs Management Hearing be “no order as to costs”, and in relation to a second Costs Management Hearing the Claimant do pay the Defendant’s costs, with the any costs of the Claimant that were still recoverable in relation to Costs Management (i.e. Precedent H preparation) be reduced by 15%
Looking to the future, given the NOx Litigation and the further Judgments coming from the High Court as to sanctioning Claimants for excessive Costs Budgets, will the approach of the High Court and the SCCO start to be applied in the County Courts?