The new proportionality test, due to come into force in April 2013, has now been formally unveiled in a speech by Lord Neuberger:
“44.4(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.”
Lord Neuberger summarised the aim of the new test as:
“effectively reversing the approach taken in Lownds. In this way, as Sir Rupert said, disproportionate costs, whether necessarily or reasonably incurred, should not be recoverable from the paying party. To put the point quite simply: necessity does not render costs proportionate.”
He anticipates that:
“As such it seems likely that, as the courts develop the law, the approach will be as Sir Rupert described it:
‘. . . in an assessment of costs on the standard basis, proportionality should prevail over reasonableness and the proportionality test should be applied on a global basis. The court should first make an assessment of reasonable costs, having regard to the individual items in the bill, the time reasonably spent on those items and the other factors listed in CPR rule 44.5(3). The court should then stand back and consider whether the total figure is proportionate. If the total figure is not proportionate, the court should make an appropriate reduction.”
It is acknowledged that the failure to give any detailed guidance as to how the test will operate may mean:
“there may be a period of slight uncertainty as the case law is developed. … 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.”
A “a period of slight uncertainty” and “a degree of satellite litigation”? I know who gets my nomination for understatements of the year.