14 February, 2013
Filed UnderLegal Costs
We now have the post-Jackson amendments to the Civil Procedure Rules. We still don’t have the new Costs Practice Direction.
I’m trying to resist the temptation of commenting on the Rules until we see the CPD. It may all become clear in due course.
However, we definitely do have the new proportionality test:
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
(5) Costs incurred are proportionate if they bear a reasonable relationship to—
(a) the sums in issue in the proceedings;
(b) the value of any non-monetary relief in issue in the proceedings;
(c) the complexity of the litigation;
(d) any additional work generated by the conduct of the paying party; and
(e) any wider factors involved in the proceedings, such as reputation or public importance."
It is no secret that the new CPD will give no guidance on how this should be applied.
At the risk of repeating myself, if it is deemed disproportionate to incur costs of £100,000 to recover £25,000 damages (as surely it must be) what level should the judge reduce the costs down to if he decides £100,000 was reasonably or necessarily incurred?
The interesting provision that jumps out is the transitional one dealing with this new proportionality test:
“Paragraphs (2)(a) and (5) do not apply in relation to cases commenced before 1 April 2013 and in relation to such cases, rule 44.4(2)(a) as it was in force immediately before 1 April 2013 will apply instead.”
What does “cases commenced” mean?
It is arguably drafted more widely than simply “cases where proceedings have been commenced”.
The old transitional provisions, when the CPR was first introduced, were clear:
“the general presumption is that no costs for work undertaken before 26 April 1999 will be disallowed if those costs would have been allowed in a costs taxation before 26 April 1999”
Therefore, the relevant date was when the work was undertaken.
A similar approach could have been adopted in relation to proportionality by excluding work done before 1 April 2013 from the new proportionality test. This has not been expressly done.
It is certainly arguable that where work has been done in anticipation of a claim that amounts to the case commencing.
However, it seems to be equally arguable that the relevant date is the date of the letter of claim. Until that date there is no claim that has been commenced. At most it is a possible case being investigated/considered.
We therefore have at least three possible definitions: “cases where proceedings have been commenced”, “cases where any work has been undertaken” or “cases where the claimant sent a letter of claim to the defendant containing a summary of the facts on which the claim is based”.
Given the potentially massive amounts at stake this issue will run to the Court of Appeal. At the same time the Court can tell us how the hell the new proportionally test is meant to be applied.
Here we are with the new rules due to come into force in around 30 working days and not only do we not know how the key proportionality test will be applied but we do not even know which cases it will apply to.
You couldn’t make it up.