Proportionality in costs

Even a stopped clock tells the correct time twice a day.

And so it has come to pass that even I have turned out to be correct on a couple of occasions.

Back in June, reporting in the Solicitors Journal on Master Hurst’s preliminary ruling on proportionality in Motto v Trafigura Ltd [2011] EWHC 90201 (Costs), I started by paraphrasing Humpty Dumpty:

“proportionality means just what I choose it to mean – neither more nor less”

It will be recalled that Master Hurst had relied on Morland J’s judgment in Giambrone v JMC Holidays [2002] EWHC 2932 (QB):

“For my part I do not accept that if a costs judge has ruled at the outset of a detailed assessment that the bill as a whole is not dispropor-tionate he is precluded from deciding that an item or a number of items are or appear disproportionate having regard to the ‘matters in issue’.”

Based on this passage Master Hurst had concluded:

“Therefore, in my view, there is no reason why a costs judge, having found at the outset on a global view, that the costs have the appearance of being disproportionate, should be precluded from deciding that an item or number of items are in fact proportionate, and thus that the test of necessity should not apply to them.”

I concluded the article:

“So we now, apparently, have the situation whereby:

1. If the costs overall are deemed to be proportionate, individual items will be allowed if they were reasonable even if not necessary, unless the court decides that individual items are disproportionate, in which case they may be disallowed if they are reasonable but not necessary.

2. If the costs overall are deemed to be disproportionate, individual items will be allowed if they were both reasonable and necessary, unless the court decides that the individual items are proportionate, in which case they may be allowed if they are reasonable but not necessary.

At this stage you may want to have a quiet lie down in a dark room. If a costs judge can allow or disallow individual items depending on whether they are individually deemed to be proportionate or disproportionate, what is the point of the global approach, as required by the Lownds judgment, at the outset of the detailed assessment? The courts have progressively managed to render the concept of proportionality entirely meaningless.”

The Court of Appeal reached a similar conclusion in Motto v Trafigura [2011] EWCA Civ 1150 when allowing the Defendants’ appeal from Master Hurst’s decison. They concluded that once a court has determined that the costs overall are disproportionate then the test of necessity must be applied to each item within the bill.

6 thoughts on “Proportionality in costs

  1. Whatever happened to the proposition that it was vital to the interests of justice that the law should be certain? Is the purpose of the law to enable people to plan their lives and avoid conflict with the law or is it to generate a healthy living for lawyers? This type of ruling does rather suggest the latter.

  2. Jonathan,

    In my view the Court of Appeal has reintroduced an element of certainty where Master Hurst’s decision has introduced uncertainty.

    Where a lawyer is acting in a matter where the total costs are likely to be disproportionate to the amount at stake the lawyer needs to be careful that each item of costs being incurred in the matter is necessary to the successful pursuit of that claim. Is that third conference with counsel really necessary? Is it really necessary for a Grade A fee earner to handle the claim or could a Grade B deal with it perfectly competently?

    On the other hand, the new Jackson test for proportionality, that is now being drafted, really will create uncertainty.

  3. When have Costs Judges been anything but uncertain. It is after all the uncertainty that keeps them in work and indeed those that appear before them.

  4. What happens if for some reason you do not wish to run the proportionality argument overall but individual items are clearly disproportionate. Do you have to make the submission that costs overall are disproportionate for risk that if you do not you cannot then raise it in respect of individual items?

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