Are additional liabilities subject to new proportionality test?

The run up to Christmas brought us a number of interesting costs developments.

A decision from Master Rowley in the Senior Courts Costs Office throws new confusion onto the issue of proportionality.  In King v Basildon & Thurrock University Hospitals NHS Foundation Trust he expressly disagreed with the decision of Master Gordon-Saker in BNM v MGN that additional liabilities should be subject to the new proportionality rule.

This would be less of a problem if the appeal in BNM v MGN was to proceed in early 2017, as appeared to be the position until recently.  The date for the hearing has now been pushed out to October 2017.  We are now faced with the prospect of having to wait almost 4½ years from the introduction of the new proportionality test until any kind of guidance is given by the higher courts.  This makes the comments of Lord Neuberger, made back in 2012, all the more farcical:

“It would be positively dangerous for me to seek to give any sort of specific or detailed guidance in a lecture before the new rule has come into force and been applied. 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.”

Since when was it dangerous for litigants or litigators to know how the law was to be applied?

Having decided that additional liabilities were to be excluded from consideration of proportionality, Master Rowley found that base costs of £88,337 would “almost always” be proportionate for the type of clinical negligence case he was assessing that proceeded to a 3-day trial and settled for £35,000.  However, he held that if additional liabilities had been subject to the new test, the total assessed costs of £234,000 would have been unlikely to be proportionate.  This does rather beg the question as to where between £88,337 and £234,000 the tipping point is for damages of only £35,000.

I have not seen the full judgment, but the decision that £88,337 would “almost always” be proportionate for this type of case is not easy to understand.  It is no doubt correct that the new proportionality test is not limited to consideration of the sums in dispute only, but also the value of any non-monetary relief, the complexity of the litigation, any additional work generated by the conduct of the paying party and any wider factors involved in the proceedings, such as reputation or public importance.  In this case it appears that “complexity” was probably the only relevant factor (plus possibly conduct).  However, this is the conceptual problem with these other factors.  What additional amount in costs are proportionately incurred to reflect non-monetary factors?  If this had been a routine personal injury claim that had settled for £35,000, what would have been the maximum proportionate figure?  How much additional complexity is required to justify each additional £10,000 worth of costs?

I rather suspect that Master Rowley’s conclusion that base costs of £88,337 would “almost always” be proportionate to incur for a case such as this was based on his experience that this level of costs was not unusual for a clinical negligence that proceeded to a 3-day trial.  If that is correct, it seems there is a distinct danger that pre-Jackson levels of costs will be taken as a bench-mark for what is proportionate.  Surely the whole purpose of the new Jackson proportionality test was to stop previously disproportionate levels of costs being recovered, not to rubber-stamp similar levels of expenditure.

No doubt part of his reasoning mirrors his earlier proportionality decision in May v Wavell Group that:

“The proportionate amount of costs must inevitably be smaller for a case which concludes early than one which reaches a final hearing.”

Given King proceeded to a 3-day trial, this was no doubt a factor that influenced his decision that the costs here were proportionate.  I am not sure this should be a relevant factor.  It runs the danger of confusing what work was reasonable and necessary (the old proportionality test) with what total costs are proportionate.  Inevitably, a matter that proceeds to trial will involve additional costs compared to one that does not, but that is simply part of the first stage of the assessment process.  It is noteworthy that CPR 44.3(5) does not list the amount of work undertaken or the stage at which the matter settled as being relevant factors when considering whether costs are proportionate.