Legal Cost Specialists

New proportionality test – Transitional Provisions

By on Feb 14, 2013 | 7 comments

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:

“44.3
(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

(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.

    7 Comments

  1. Simon, your last comment, is the key
    We WILL have to make it up!!

    Anonymous

    14th February 2013

  2. Same problem on costs budgeting? Applicable to “…all multi-track cases commenced on or after 1st April 2013…”

    Anonymous

    14th February 2013

  3. I already have a point of dispute just in which says along the lines of “should the detailed assessment hearing take place after the implementation of the new test on proportionality we reserve the right to raise the same”

    Surely it wont apply retrospectively if the assessment hearing is the only aspect of the file to take place after the rules come in??

    Anonymous

    14th February 2013

  4. The reference in the costs budgeting rules to “…all multi-track cases commenced on or after 1st April 2013…” considerably strengthens the argument that is means “cases where proceedings have been commenced”. How else is the court to know which cases to apply it to in relation to costs budgeting?

    Simon Gibbs

    14th February 2013

  5. As far as I can see, the rule charges to the proportionality test will render a lot more bills disproportionate (no surprises there, it was always going to happen).

    However, the rules still provide a Judge with a huge discretion on what to allow and wht not to allow. The status quo is therefore maintained, there is no real change.

    A disproportionate ruling even today hardly makes a difference. I’m sceptical this change will do anything at all.

    The only chance for a real change is if a few cases reach the Court of Appeal and they impose some stringent guidance on what path the lower Courts should be taking against a bill on a disproprotionate ruling.

    Just you wtch, the Budget test will be reduced to a detailed assessment half way through a case.

    Well done Jackson, Government and the rules committee. Budget and Proportionality messed up 0/2… perhaps third time’s a charm.

    Anon

    14th February 2013

  6. I may be missing something (possible, given the sheer volume of stuff to keep an eye on) but on first reading the rules seem to have allowed Defendant’s costs on discontinued cases (44.9) to fall out of the QOCS regime.

    Could be cases where the both parties might get “locked in” to cases.

    Any thoughts?

    PJB

    15th February 2013

  7. The SI will be amended in March (no rush then to lay it before parliament, incorporate the Portal decisions due 8th March and, of course, finish and release the PDs) and the new proportionality rule will be clarified by a revised transitional provision i.e. that it will not be applied retrospectively.

    As with the introduction of the CPR, we shall have bills of costs, where bills are needed of course, split as at 1st April.

    See the CPRC’s response to The Law Society here: https://www.dropbox.com/s/2u0s6835rfszbvt/CPRC%20%26%20LS%20Letters.pdf

    Jon Willams

    16th February 2013

Trackbacks/Pingbacks

  1. New proportionality test – Further transitional amendments | - [...] my post on the ambiguity as to which claims would be subject to the new proportionality test it now…
  2. New proportionality test for costs | - [...] This caused two problems. Firstly, the phrase “cases commenced” was ambiguous. Secondly, it appeared to be retrospective in effect…

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