Proportionality - Opening a can of worms

"Metaphorically speaking, to open a can of worms is to examine or attempt to solve some problem, only to inadvertently complicate it and create even more trouble. Literally speaking, opening a can of worms, as most fishermen can attest, can also mean more trouble than you bargained for". (How Did the Term “Open a Can of Worms” Originate? – Matt Soniak 28.06.12) I do not consider that there is a better way of evaluating the Court’s initial attempts to apply the new test of proportionality since its introduction.

Lord Justice Jackson has previously commented on proportionality in his final report at section 5.10 and 5.12 respectively when he stated:-
“Disproportionate costs do not become proportionate because they were necessary.”
“In my view, that disproportionate element of the costs cannot be saved, even if the individual items within it were both reasonable and necessary”

The new relevant rules state:-

CPR 1.1

“(1) These Rules are a new procedural code with the overriding objective of enabling the court to deal with cases justly and at proportionate cost.” (emphasis added)CPR 44.3

“(1) Where the court is to assess the amount of costs (whether by summary or detailed assessment) it will assess those costs –

(a) on the standard basis; or

(b) on the indemnity basis,

but the court will not in either case allow costs which have been unreasonably incurred or are unreasonable in amount.

(2) Where the amount of costs is to be assessed on the standard basis, the court will –

(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred;”

Prior to the new rule being introduced, Master of the Rolls Lord Neurberger gave a speech to the Law Society on the 29th May 2012 giving his views on proportionality. He said:-

“Any question relating to proportionality and any question relating to costs is each very case-sensitive, and when the two questions come together, that is all the more true. The law on proportionate costs will have to be developed on a case by case basis. This may mean a degree of satellite litigation while the courts work out the law, but we should be ready for that, and I hope it will involve relatively few cases.

We are now nearly four years into the changes presented by the new test of proportionality and we appear to be no closer to ’working out the law.’ We provide two examples of the contradictions between Judges, which is nothing more than alarming:-

In BNM v MGN Limited [2016] EWHC B13, Master Gordon-Saker

i)    included additional liabilities when applying the new test of proportionality at paragraph 32 when he states:-

“Ringfencing and excluding additional liabilities from the new test of proportionality would be a significant hindrance on the court's ability to comply with its obligation under CPR 44.3(2) (a) to allow only those costs which are proportionate.”

ii)    on finding the costs disproportionate he reduced all items by a similar amount at paragraph 54 which states:-

“In my judgment no more than one half of that amount could be considered proportionate”.

However in respect of (i) fellow costs judge, Master Rowley in the case of King v Basildon & Thurrock University Hospitals NHS Foundation Trust (JR/1505789) rejected this approach. In King at paragraph 28, Master Rowley specifically referred to his rejection of this principle set out in BNM.

“Consequently, I think the reasonable costs so far can be assessed using the 44.3(5) test for proportionality on the basis that the costs to which it refers are only the base costs. The additional liabilities would then fall outside that proportionality test”. 

We also look at how the appropriate reduction as referred to by Lord Justice Jackson is applied. In Hobbs v Guy’s and St Thomas’s NHS Foundation Trust [2015] EWHC B20 (Costs), the Court considered individual items which led to the costs being disproportionate and  reduced appropriately, whereas in May  BNM a reduction was made on a global basis to all items.

In respect of point i), there is clear disagreement between Costs Masters in the Senior Courts Costs Office as to a fundamental element in the application of the test of proportionality. In relation to point ii) the situation is compounded by an inability of the Judiciary to agree on something as simple as how to apply an appropriate reduction once costs have been found to be disproportionate.

Why the concern?

Why the concern you may ask? Simply put how can this uncertainty have anything other than a detrimental effect on us, the practitioners and our clients? How can a practitioner provide accurate advice to a client on the application of the test, when the Judges themselves cannot reach a consensus?

Referring back to Lord Neuberger's 2012 speech about the development of the application of proportionality, there seems to be a monumental amount of “British understatement” with reference to the ‘degree of satellite litigation.’ Nearly 4 years in and the Courts have made little headway on this fundamental issue. It should be noted that the Civil Procedure Rules were first introduced in 1999 and Lownds v Home Office (2002) EWCA Civ 365, which firmly established the application of the pre April 2013 test of proportionality, was heard in March 2002. It appears that as the importance of the new test of proportionality grows, so does the delay in providing practitioners with guidance on how to apply the same.

Who foots the bill?

Numerous questions continue to whirl around practitioners heads. The most important of these are:-

Who will be responsible for the costs of ’working out the law’? The rule makers? The court? No, it will be the practitioners and our clients.

Can it be honestly said with reference to the new overriding objective that the costs of ’working out the law’ on the issue of proportionality are themselves just and proportionate? Many would say it cannot. The lay clients and practitioners suffer while the Court's struggle to grasp and implement the new test. 

Written by Chris Stephenson - Costs Lawyer



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