New costs proportionality test
Mr Justice Ramsey, speaking at the IBC Solicitors’ Costs Conference, suggested that under the new proportionality test parties should bear in mind that combined costs should not normally exceed the sum in dispute.
We have been waiting for some helpful guidance on the new test and now we have it. If we assume that the ratio between claimants’ costs and defendant’s costs is roughly 60/40 in favour of claimants, we now have a simple formula for calculating the maximum cap that should be allowed when setting budgets or undertaking assessment under the new test:
• Claimant’s costs capped at 60% of the realistic valuation of the claim when setting a budget or 60% of the damages recovered when assessing costs.
• Defendant’s costs capped at 40% of the realistic valuation of the claim when setting a budget or 40% of the damages recovered when assessing costs.
There are some arguments as to whether the defendant’s costs should be capped at the level of the pleaded case rather than the likely or actual damages, but you get the general idea.
The need for detailed assessment will disappear in a large number of lower value cases as it will be obvious the cap will bite.