Falling foul of proportionality by Nishma Shah

The recent case of Hobbs v Guy’s and St Thomas’ NHS Foundation Trust [2015] EWHC B20 (Costs), has highlighted a key consideration that the Court may take into account when assessing costs.

The issue of proportionality is often a thorny one. It should be remembered by both parties that the costs claimed should be proportional not only to any monetary sums awarded but also to any importance that the claim may have and any skills and expertise required.

The matter of Hobbs v Guy’s and St Thomas’ NHS Foundation Trust is interesting because Master Hurst used CPR 44.3(2) which states “Where the amount of costs is to be assessed on the standard basis … Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred”. This is incredibly important because it means that costs can be reduced even if they are reasonable and necessary should the Court deem them disproportional.

The claim was a low value clinical negligence claim which settled for £3,500.00 before the issue of proceedings. Subsequently the Claimant produced a Bill of Costs in the sum of £32,329.12. The matter was assessed on a Provisional basis by Master Hurst. The first two thirds of the Bill of Costs were reduced on Provisional Assessment under the ‘old test’ of Lowndes v Home Office. The final third of the Bill was also reduced as Master Hurst used the post Jackson test. He then  ‘stood back’ and considered the costs were still disproportional.

The overall bill was reduced to £9,879.34 including VAT. This was a reduction of approximately 69%.

Breakdown of disallowances:

–       Fee Earner Grades

Master Hurst reduced the prevailing Grade A rate to a mid-range Grade B rate at £200.00. The Master indicated that this was because there was nothing outside of a Grade B fee earner’s knowledge and should the Grade B have needed assistance then they could have deferred to advice from a more experienced fee earner.

–       Counsel conference

The Master disallowed costs of a conference between the fee earner and Counsel. The reasoning was that the Master felt “it achieved no advantage in the conduct of the claim”.

–       Costs Pre/Post Jackson

The Master considered costs claimed both pre and post Jackson. The Master then indicated that no issues of proportionality arose in relation to the earlier work which was subject to the Lowndes test.

However, under the post Jackson proportionality test, the costs of the final third of the Bill could be disproportionate. The Master found three items that should be reduced to ensure that the costs claimed where proportional.

There were: the fee for a consultant anaesthetist, work done in relation a making a Part 36 offer and finally, reducing the fee earner grade to a Grade C (having already reduced the same to a Grade B from a Grade A). The Master found that although it would have been necessary and reasonable to allow a Grade B to undertake the work, the issue of proportionality meant that only a Grade C was recoverable.

However, Master Hurst, went on to indicate that it would be wrong to disallow any pre Jackson costs on the basis of the new Proportionality test. He also indicated that VAT should not be taken into account when considering the issue of proportionality and rejected an argument that proportionality did not apply to matters that were absolutely necessary.

So what does this mean for Receiving and Paying Parties? Master Hurst has clearly set out that proportionality trumps everything including necessity and reasonableness when considering costs post Jackson. It is vital to Receiving Parties that they consider whether it would be proportional to assign matters to lower grade fee earners, to ensure all Counsel conferences materially progress the claim and to consider the fees incurred by experts.

As a Paying Party it is important to remember the conclusions made by Master Hurst especially when preparing Points of Dispute. However, it is also important to note that costs pre Jackson will still be assessed under the old Lowndes Test and therefore proportionality for these costs will not trump necessity and reasonableness.