Legal Cost Specialists

New proportionality test in costs

I am grateful to Professor Dominic Regan, writing in Litgation Funding magazine, for providing some welcome clarification on how the new proportionality test will work in practice:

“No one has a clue.”

28 thoughts on “New proportionality test in costs”

  1. Base costs must be proportionate to the damages, in that the means must justify the ends. Ergo, £6000 profit costs for a £1200 settlement is clearly disproportionate. Simple, really.

    What’s the fuss?

  2. Northern Monkey, I think the issue is what does a Judge do once a ruling of disproportionate costs is applied.

    Does it give the judge carte blanche to hack 50% off following a strict test of necessity assessment against the bill? By what measure would a particular percentage reduction by justifyable?

    There is unlikely to be anything tangeable for a wronged party (paying or receiving) to hang their hat on to say, that decision was unreasonable (it should have been more / it should have been less).

    I think this may be the “no one knows” Prof Regan was referring to.

  3. recent DA
    £3000.00 base costs, settled just post issue for £1100.00
    DJ said definitely disproportionate
    I said easy test was PCR plus a bit for issue, say £1400.00. He said no, “old” test applied and he had to test every item for necessity.

    he did. and got to £1450.00.

    after the hearing i asked about the new test, he said simply “summary assessment”

    there’s no issue,the DJ’s know the test and how to deal with costs, they just now have the power to do it without some draftsmen jumping up and whinging “you cant do that Sir, you have to assess in detail”

  4. “Ergo, £6000 profit costs for a £1200 settlement is clearly disproportionate. Simple, really.”

    Frankly I couldn’t disagree more. You have to look at the facts.

    What if the Defendant denies everything and pushes it all the way? Should a defendant with no limits be able to happily defend with wanton disregard and then still be able to push the proportionality point/ If the courts let that go then we should all pack up now

    Its precisely these sort of cases that the new proportionality test and the unknown factor as to how it will be applied which will suffer the most

  5. @annon 7:28

    That’s why the CPR now also focuses heavily on a parties CONDUCT when assessing whether costs are disproportionate – and why if defendants do fight to the hilt over a small claim, the courts will find the conduct outweighs the proportionality issue

    Frankly, I have always asked a court to find in those situations the costs ARE disproportionate. – for THE reason of conduct. The defendants knew the value too. Their conduct is thereby indefensible, ergo no reductions

  6. Can someone explain why certain, large but stupid costs firms are producing split bills “to take account of the differing proportionality rules pre & post 01.04.13”???

    Objection 1 – Proportionality. The receiving party has split it’s bill for proportionality differentials in the rules, despite Amendment No 2 to the CPR 2013. It follows clearly the receiving party accepts unequivocally that it’s base costs per 01.04.13 ARE disproportionate, and the Court is obliged to apply the strict test of necessity…

  7. @ Anonymous 9:38

    I accept CPR refers heavily to conduct – my point is the conduct renders the work proportion.

    Therefore it isnt clearly disproportionate – it was proportionate on that case and its facts

  8. Can someone point to the rule that says proportionality test is only relevant to the amount “recovered” for damages. I dont see that the rule says that!!!! I thought it is the sums in issue as just one of the factors and not the “only” factor. See CPR 44.3(5)(a) which seems to confirm the test relates to the sums in issue not the sums recovered!!

  9. @ Anonymous

    the sums “in issue” technically are the amounts (1) the case is realistically settled at as opposed to over or undervalued, or (2)the difference between the parties valuations (as that’s the bit “in issue”)

    either way, the court will only look at the value it places on a case, and in anything in the fast track these days, they’ve been told/conditioned to limit costs payable

  10. many thanks 2.26pm but still a massive difference between recovered and claimed in my view. There are many reasons why a claim settles for less than the amount claimed and therefore the proportionality test will in my view be case specific! Defendants please stop telling everyone its doom and gloom on proportionality. Its not just value! Hopefully our well trained DJ will not have narrow vision and look at the wider picture. They can only do that if they have the full file on provisional assessment!!

  11. But 44.3(5) clearly says that ALL the list of things (a) to (e) need to be satisfied to make costs proportionate. So no matter how complex, if the value is tiny and costs are huge, it IS disproportionate because that’s exactly what the new rule says.

  12. Personally I disagree that have to satisfy all the factors listed in 44.3(5)

    to do so means a robustly contested low value claim will always be disproprtionate.

    That clearly is not the intention

  13. That’s what the rule says. From the wording there is not other possible interpretation. Just because you don’t like it, doesn’t mean that isn’t the rule. As for whether it was intended, I think actually the rules on proportionality were indeed intended to stop cases costing many times their value! Otherwise, what’s the point of the rule!

    Don’t get me wrong – it’s not like I’m delighted by the rule. It’s one of the things that will lose me and many others their jobs when smaller claims are no longer being made. Of course, most will be caught by fixed costs anyway 🙁

  14. annon, 7:28

    That rather puts the onus back on the Claimant to make reasonable settlement proposals at an earlier date, does it not?

  15. Yes, on that front I agree

    However they could offer £6k but get £5.75

    They would not get indemnity costs and so would be stuck with “proportionality” issues

    If the defendant fights it all the way they should reap what they so and not have the get out of jail free card of proportionality so they can act unreasonably but then have a Deputy DJ assess the costs and then hack off a further 50% to make costs a 2:1 ratio or what other sacntion they apply

    that’s simply is unjust

  16. posters appear to be missing what is behind the reforms – its all very well running cases and getting “Access to Justice” against big bad Defendants (and believe me, I know how bad many are), but there is a cap, artificially imposed or otherwise, on what is proportionate to be paid BETWEEN THE PARTIES for costs.

    sure, bill your client, he wants the damages at all cost – but that doesn’t make it reasonable to get it from a defendant. And if the Defendant is behaving in a way to increase costs, then the Court has the mechanism to make them pay for that, you just need to have the sense to couch the argument right

    so stop bleating injustice please

  17. With respect …

    a Court decides that work was necessary and allows a reasonable amount of time for it. The court has therefore deemed that reasonable

    They they hack again at in a second round of reduction on proportionality becuase they are obliged to

    Thats not bleating injustice – its just perverse

  18. Look its simple in my view! Defendant should stop pratting about pushing unsustainable issues causing the claimant to investigate and incur disproportionate costs!! Then Defendant gets the comfort of the proportionality test! sorry but its not just value its issue based and so it should be!!!

    Lets not forget Defendants are just getting their own back for the years they had to get paid buttons for doing panel work! bless!!! I can see many more partners having to contribute to the fund to keep afloat!

  19. @annon 12/09 7:11

    It is not about whether the work is reasonable or necessary

    It is whether it is proportionate for the paying party to have to pay that amount having regards for the sums at issue

    Which is why I say, how you couch the argument is all important. If the amount in issue was so all important to the defendant to conduct itself in a manner causing the costs to be incurred, then if you are wise you will argue that before the judge

    As opposed to sitting bleating ” but sir that’s perverse”!!! I foresee you having many (disappearing) clients in the circumstances

    With respect

  20. I love the fact that people get so personal on here and presumptious

    The situation is perverse – it doesnt follow that my argument would be that. It may include reference to it but that would not be its extent

    clearly the argument is conduct is all importmant.

    We are however faced with a scenario, given the unknowns as to how this test will be applied, that irrespective of conduct that work will be deemed necessary and reasonable in amount but still hacked off at the end irrespective of the conduct issues that are raised in rebuttal

    It is that which perverse

  21. Annon @12:40

    You haven’t got to grips with the proportionality argument at all. It’s pretty straightforward. The “means” must justify the “ends”.

    Right now I have a case that settled for £1500. yes, liability was denied throughout. Yes, it almost got to trial. However the Defendant’s position was vindicated as the Claimant had been holding out for £5000.

    It is not therefore proportionate to charge the £9000 profit costs that have been charged.

    Claimant’s need to better re-assess their positions and make realistic settlement proposals early doors.

    They cannot expect to get paid the ludicrous sums they charge if they do not.

  22. Northern Monkey – I agree with your stance if the Claimant was holding out for £5k and recovered significantly less.

    However, what would your position be if, instead of £1.5k, the Claimant had recovered close to the £5k sought but had still incurred the £9k profit costs?

  23. If the Claimant makes fanciful offers then like the defendant they reap what they sow

    At all stages I have been talking about claimants who make sensible offers but secure just a little bit less at trial / immediately before trial and after the Defendant has made them jump through hoops

    The Defendant drives the costs up and then gets the protection of proportionality.

    Simply wrong. That is why conduct must play its part in this too.

    In terms of getting to grips with proportionality its interesting seeing as we dont know how the new test will pan out – we are speculating

  24. “Simply wrong.” Yet it IS the new rule. You’re just going on about necessity, essentially. That has gone from the rules and is now irrelevant. Whether it is fair or not, it HAS gone. So conduct does not have to play a part in this. The idea of the new rule is to stop cases where costs are likely to be so much more than the value of the case (and the others things (a) to (e)).

  25. 26 posts later it seems that the quote that no one has a clue how to deal with the new proportionality test is correct.

    Leaving what is proportionate to be decided on a case by case basis rather than a mandatory cap for the ratio of costs to damages is obviously going to lead to lots of anomalous outcomes even after the Court of Appeal gives guidance, which will be some time. In some cases even assessing on an item by item basis may become pointeless if the costs held to be reasonable and necessary* can still be disallowed at the end.

    What is the formula?

    Good Defendant conduct + medium value damages = costs limited to level of damages recovered

    Or Defendant alleges fraud and low value damages = 250% of damages held to be proportionate

    Answer = no one knows

    *surely the Lownds approach of an initial view as to whether costs are disproportionate is no longer needed as “necessary” costs can still be disallowed and the Judge will have to consider proportionality at the end of the assessment if costs remain disproportionate rather than at the beginning.

  26. there is no “formula”
    there is no “answer”
    it is a matter purely of Judicial Discretion, thus bringing costs in line with the rest of what happens in a court – parties have a rough idea of quantum, through experience and guides. They still leave it to a Judges discretion to decide, after hearing arguments to persuade more to be given. Why is it so hard not to accept the same will happen with costs?
    DJ’s have been dealing with SA of costs for years. They know what proportionate figures to allow, through experience, and are open to argument as to why the figure they believe to be proportionate, is in fact not.You cant all seriously be now claiming, that you don’t know roughly what figure certain DJ’s in certain courts will give in advance?? What have you all been doing the last 10 years!!
    So sad so many draftsmen cant get this into their head

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