PROPORTIONALITY AND REASONABLENESS: ANOTHER JUDGE ALL OVER THE PLACE
the Competition Appeal Tribunal held that when considering whether to approve the phases in a costs budget, the tribunal should approach those costs on the assumption that eventually there would be an assessment on the standard basis and therefore proportionality should be taken into account at the budget stage.
The tribunal said that that was reinforced by the fact that Precedent H now requires the solicitor to certify that the budget “is a fair and accurate statement of the incurred and estimated costs which it would be reasonable and proportionate for my client to incur in this litigation” (judge’s emphasis).
It follows that costs that could be reasonably and necessarily incurred can still be removed at the budget stage as being potentially disproportionate.
Having said that the court here still fell into the same trap as very many courts of conflating reasonableness and proportionality.
For example at paragraph 14 the judge refers to the total of £300,000.00 for preparing Witness Statements as “unreasonable and disproportionate”. The judge then goes on to say that much of the work should be done by an assistant solicitor rather than a partner, with the assistant solicitor’s charging rate being significantly lower.
The court said:-
“I think it is reasonable to expect that a much greater share of the work would be undertaken by more junior lawyers, subject only to review by the partners.”
That is a “reasonable and necessary” test which has always applied and has nothing to do with proportionality.
The judge then goes on to say:-
“Taking a broad view, I consider a reasonable and proportionate sum under this head is £200,000.”
The problem with that is that it is impossible to tell from that paragraph, and the judgment generally, as to what the court is allowing as reasonable and necessary, or rather disallowing as unreasonable and unnecessary, and what the court is then deducting on proportionality grounds.
The judgment continues in similar vein. For example at paragraph 18 there is reference to the costs of an expert as being “unreasonable and wholly disproportionate”. Again what the judge should have done is to determine a reasonable figure and then, if appropriate, have made a further, specific reduction on the grounds of proportionality.
The judge also seems to have been heavily influenced by comparing the respective budgets of the parties. Such an approach must be taken with great caution. A party that thinks it may lose has an incentive to put in a relatively low budget. A party that thinks it will lose and plans to make a Part 36 offer has every incentive to put in a high future budget so as to put greater pressure on the recipient of the Part 36 offer.
I am not saying that comparing budgets is never appropriate, but it requires far greater thought and consideration than appears to have been given to the exercise by this judge in this case.
The judgment does provide an interesting example of attribution of costs to each phase as set out below.
A B C