Kerry Underwood

PROPORTIONALITY: THE OLD TEST AND THE NEW TEST: TWO NEW CASES

with 6 comments


The matters dealt with in this piece are examined in great detail in my three volume, 1,300 page book Personal Injury Small Claims, Portals and Fixed Costs – price £50 and available from Underwoods Solicitors here.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

 

The Old Test

In

East Sussex Fire and Rescue Service v Austin [2019] EWHC 1455 (QB) (10 June 2019)

The Queen’s Bench Division of the High Court considered the old proportionality test, that is the one prior to 1 April 2013, which applied to this case as it had commenced before then.

This was an appeal against the decision of the Senior Costs Master and the appeal was dismissed.

The Master had held that:

  • the base fees looked at globally, were not disproportionate;
  • the instruction of leading counsel was reasonable; and
  • leading counsel’s brief fee of £50,000 was reasonable.

The Master held that under the new test the costs claimed “are indeed obviously disproportionate” but that the old test was “rather gentler and more generous.”

The paying party challenged this statement, stating that the factors to be considered under the new test are not materially different from those under the old test.

It is the consequences which have changed.

The global assessment of proportionality is now typically undertaken after, rather than before, the item by item assessment and, therefore, the current regime is indeed tougher than the old one.

This was also the view of the Chancery Division of the High Court in the case of

Malmsten v Bohinc [2019] EWHC 1386 (Ch) (07 June 2019)

decided three days earlier.

Although the proportionality assessment itself is not substantiality different, the new regime is tougher as necessity and reasonableness do not trump proportionality, as they did under the old regime and the guidance given in

 Lownds v Home Office [2002] EWCA Civ 365. 

 

The New Test

In

Malmsten v Bohinc [2019] EWHC 1386 (Ch) (07 June 2019)

the Chancery Division of the High Court allowed an appeal in relation to a detailed assessment of costs, reducing the profit costs sum assessed by the Master from £47,500 to £15,000 on the ground of proportionality and held that the Master’s failure to make any deduction to reflect the disproportionality of the costs was an error of law.

The High Court also held that VAT and the costs of drawing up the bill should be excluded when considering proportionality.

It also confirmed that proportionality should be considered at the end of the assessment process, rather than at the start, a point also made in the case of

East Sussex Fire and Rescue Service v Austin [2019] EWHC 1455 (QB) (10 June 2019)

in a judgment delivered three days after this one.

This is believed to be the first time that the High Court on appeal has considered the law in relation to the new test of proportionality, that is the test that has been in since 2013 for cases commenced after April 2013.

The judgment contains a detailed analysis of how the proportionality test should be applied and this is contained at paragraphs 51-58 of the judgment.

“51. The present rules are very different. It is quite clear, from the express wording of CPR 44.3(2)(a) that there may be a reduction in costs on grounds of disproportionality even if those costs were reasonably or necessarily incurred.

52. That, to my mind, inevitably indicates that under the new rules a proportionality assessment must occur at the end of the process, whereas under the old rules it occurred at the beginning. In Lownds, when considering the old rules, Lord Woolf MR said this:

“…In a case where proportionality is likely to be an issue, a preliminary judgment as to the proportionality of the costs as a whole must be made at the outset. This will ensure that the costs judge applies the correct approach to the detailed assessment…Once a decision is reached as to proportionality of costs as a whole, the judge will be able to proceed to consider the costs, item by item, applying the appropriate test to each item.”

Self-evidently that must be right where proportionality determines the approach on a detailed assessment, but does not otherwise affect the outcome of that assessment.

53. It is already clear from Lord Woolf’s analysis in Lowndsthat proportionality is essentially a tool that controls the overallbill of costs. That is confirmed by the definition of proportionate in CPR 43.3(5). The five factors listed there are only meaningful when considered in relation to the overall bill of costs, rather than in relation to a specific item of costs. What the new rules require is for the judge, having completed a detailed assessment of costs, to take a step back, look at the assessed bill, and ask whether a further reduction is required on grounds of proportionality.

54. Although I have reached this conclusion on the basis of the wording of the rules, my conclusion is consistent with the views expressed by others extra-judicially. I quote the following passage from Friston, which quotes a speech from Senior Master Gordon-Saker, himself quoting Jackson LJ:

“In the editor’s view, the starting point is a keynote speech given in 2014, in which Senior Master Gordon Saker (speaking extrajudicially) said the following:

“It is said that we will need guidance on how to apply the new test. I disagree. The guidance is already there. It is likely that somebody will in some case or other seek to appeal the approach that has been taken. But I would suggest that there is no reason to suppose that the court hearing the appeal will do other than restate the guidance that has already been given by Jackson LJ in his final report.

“…I propose that in an assessment of costs on the standard basis, proportionality should prevail over reasonableness and the proportionality test should be applied on a global basis. The court should first make an assessment of reasonable costs, having regard to the individual items in the bill, the time reasonably spent on those items and the other factors listed in CPR 44.5(3). The court should then stand back and consider whether the total figure is proportionate. If the total figure is not proportionate, the court should make an appropriate reduction. There is already a precedent for this approach in relation to the assessment of legal aid costs in criminal proceedings: see R v. Supreme Court Taxing Office, ex parte John Singh and Co [1997] 1 Costs LR 49.”

In the 15th implementation lecture on 29 May 2012 – the lecture entitled “Proportionate Costs” – Lord Neuberger, then MR, quoted that passage and said that it seems likely that the courts will develop the approach to proportionality “as Sir Rupert described it” in that paragraph.”

Thus, if Master Gordon-Saker is right, it would seem that proportionality will now revive “the Singh adjustment”. This is noteworthy, because this was precisely the test that was urged upon the Court of Appeal by the paying party in Lownds more than 15 years ago.”

55. My conclusion is also consistent with the notes in the 2019 edition of Civil Procedure, which says this at [44.3.3]:

“As yet no guidance has been provided by the Court of Appeal as to how the test of proportionality introduced on 1 April 2014 by [CPR 44.3(2) and (5)] should be applied. The general practice on detailed assessment is to consider the reasonableness of each item that has been challenged and then to consider whether the total sum that would be allowed on that basis is proportionate or not. If it is not proportionate, the court will then reduce the total figure to a sum which is proportionate.”

56. The new rules accordingly replace the ex ante Lowndstest, with a new ex post test. Costs are assessed according to a reasonableness standard (see CPR 44.3(1): “the court will not…allow costs which have been unreasonably incurred or are unreasonable in amount”), with the final costs assessment then being subject to the proportionality test.

57. It would seem that the distinction between “reasonable” costs and “necessary” costs – intrinsic to the Lownds test – has been eliminated, given that CPR 44.3(1) refers only to costs “unreasonably” incurred or “unreasonable” in amount. The reference, in CPR 44.3(2)(a), to costs “reasonably or necessarily incurred” does not preserve the Lownds distinction, but simply makes clear that even costs necessarily incurred are subject to the overriding criterion of proportionality.

58. The approach that I have described will work equally well in the case of a summary assessment, albeit that there is, in the case of such assessment, no item-by-item consideration of costs.

(ii) When considering proportionality, is it appropriate to exclude VAT and the costs of drawing the bill?”

The court also held that it was in a position to effect a proportionality analysis without remitting the question of costs to another Costs Judge:

“This is because such an exercise does not involve, as I have explained, an item-by-item assessment, but rather taking a step back and asking whether, in light of the various factors that go to proportionality, the sum of £47,500 ought to be reduced on the grounds of proportionality. I consider that I can carry out such a proportionality assessment despite the presence, in the figure of £47,500, of costs that should not be recoverable at all.” 

The High Court reduced the costs, on proportionality grounds, from £47,500 to £15,000.

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Written by kerryunderwood

July 3, 2019 at 8:34 am

Posted in Uncategorized

6 Responses

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  1. The Court of Appeal in our case of West & Demouilpied v Stockport NHS Trust is likely to give guidance on the ‘new’ proportionality test (not just re: post LASPO clin neg premiums but generally too). Judgment expected at the end of this month.

    Nick McDonnell

    July 3, 2019 at 9:31 am

    • Did it go the Claimant’s or the Defendant’s way? I currently have around 20 stayed cases due to West and Demouilpied.

      Richard Ferguson

      July 10, 2019 at 5:00 pm

      • Judgment reserved. Expected end of this month.

        Nick McDonnell

        July 10, 2019 at 5:32 pm

      • Thanks Richard

        kerryunderwood

        July 12, 2019 at 6:38 pm

    • Thanks Nick

      kerryunderwood

      July 12, 2019 at 6:38 pm

  2. Surprised that Bohinc was awarded any costs given that Malmsten offered to mediate.

    Anon

    July 7, 2019 at 2:06 pm


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