PROPORTIONATE COST ORDERS AND PROPORTIONALITY – A HIGH COURT DECISION
the Technology and Construction Court, part of the High Court, considered the interplay between the confusing terms of proportionate costs orders and proportionality.
The key rule for these purposes is CPR 44.2(2) which reads:-
“(2) If the court decides to make an order about costs –
- the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
- the court may make a different order.”
CPR 44.2(4) reads:-
“(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –
- the conduct of all the parties;
- whether a party has succeeded on part of its case, even if that party has not been wholly successful; and
- any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.”
Thus the sort of orders made under these provisions are that, although successful, a party will only receive say 50% of its costs as it lost on certain issues, or recovered a much smaller sum than it had claimed.
In this case the High Court ordered that the successful claimant should recover 85% of its costs.
These orders are generally referred to as “proportionate costs orders” because the successful party is awarded only a proportion of its costs, rather than all of its costs.
This is completely separate from any reduction on detailed assessment; it is a statement in principle that whatever costs are allowed should not be allowed in full but should be subject to a percentage deduction to reflect issues in the case. In other words it is not an “all or nothing” approach.
The key issue in this case, and relevant to other cases, is whether the separate concept of proportionality should come into play at this stage.
Here the court said that if proportionality was intended to be a relevant factor under CPR 44.2 it would have been specifically mentioned in the rule, and it is not.
The court expressed concern about the risk of “double jeopardy” whereby the court took account of proportionality issues at the CPR 44.2 stage and, subsequently the, the Costs Judge assessing the bill further reduced the costs under the well-known proportionality test in CPR 44.3.
This point, in the context of conduct, had previously been considered, with the same concerns being expressed in Ultraframe v Fielding  EWCA Civ 1660.
Nevertheless the court here recognised that considerations of proportionality might feed into the process by which the court discounted what would otherwise have been an order for 100% costs, subject as always to detailed assessment.
The court suggested the following approach:-
- In most, if not all, cases “a clear dividing line” can be drawn between the CPR 44.2 factors and proportionality.
- The trial judge’s task should be limited to addressing the “relevant circumstances” (including conduct, success and admissible offers), their impact on costs, and whether (and how) they should be reflected in the costs order.
- The judge should make a proportionate costs order based on those considerations, but not further consider what costs would have been incurred if the action had been pursued in a proportionate manner.
- Although the judge might have some costs information (for example, from costs budgets in budgeted cases, which this was not), whether, and to what extent, costs had been unreasonably incurred, were matters for the detailed assessment.
- If a trial judge does take account of proportionality when deciding what proportionate costs order to make (and makes a discount reflecting his assessment) that should be clearly stated in the order or judgment, so that, when conducting the detailed assessment, the costs judge knows what the trial judge has taken into account, and why.
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