Proportionality is one of the major issues that we find we are dealing with at the end of a matter, particularly in the small to medium value claims. Why was it introduced? It was considered that the then existing system was not working and that a system needed to be put in place which would, “…promote access to justice at proportionate cost.”
“Assessments which have to concentrate retrospectively on what the winning party has spent will always risk producing a disproportionate result.” (Sir Anthony May, June 2009)
Lord Justice Jackson believed that the costs of litigation needed to be at the forefront of the parties minds at a much earlier stage and not just an after thought arising at the detailed assessment hearing.
“ …the forthcoming new approach to proportionate costs…will operate before the issue of the claim form, throughout the life of proceedings, and then at the end of proceedings when costs come to be assessed.” 15th Implementation Lecture.
44.3(2) Where the amount of costs is to be assessed on the standard basis, the court will:
(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred;
(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…
There has been little or no guidance and this has led to inconsistency in the approach of the Courts, but what we do know is that proportionality trumps necessity.
“ The amount that can be recovered from the paying party is not the minimum sum necessary to bring or defend the case successfully. It is a sum which it is appropriate for the paying party to pay by reference to the five factors in CPR 44.3(5). It is not the amount required to achieve justice in the eyes of the receiving party but only a contribution to that receiving party’s costs in many cases.” May v Wavell Group PLC
Initially, additional liabilities were considered to be beyond the scope of proportionality. Not so now.
“Recoverable costs are liable to be disproportionate in every case brought under a CFA. This is because additional sums are added to that which is reasonable and proportionate (viz the base costs) without regard to the proportionality of the total figure.” (Final Report, paragraph 5.23)
In BNM v MGN Ltd  EWHCB13 (Costs) application of ‘new’ test of proportionality was found to apply to both base costs and additional liabilities – though separately (Court of Appeal October 2017). In King v Basildon & Thurrock  EWHCB32 (Costs) – proportionality was found not to apply to additional liabilities and likewise in Murrells v Cambridge University NHS Foundation Trust (SCCO,17th January 2017). In both of these cases though the additional liabilities were arguably ‘incurred’ pre April 2013.
However, in Rezel Clarke v Moorfields Eye Hospital  EWHCB5 – proportionality was found to apply to additional liabilities. The Premium of a post April 2013 policy was assessed separately. All of the work was post 1 April 2013 and found to be subject to the new rule on proportionality which meant that even if work was reasonably and necessarily done it can still be disproportionate. The Master criticised the Claimant’s solicitors for not planning the necessary work and the way to approach the matter, given that they knew that this was a low value claim which, at its highest, was worth £5,000.00.
Here the court quoted with approval the passage from HH Judge Alton in Birmingham County Court on 22 June 2000 in an unnamed case, itself approved by the Court of Appeal in Jefferson v National Freight Carriers Plc  EWCA Civ 2082:
“In modern litigation, with the emphasis on proportionality, it is necessary for parties to make an assessment at the outset of the likely value of the claim and its importance and complexity, and then to plan in advance the necessary work, the appropriate level of person to carry out the work, the overall time which will be necessary and appropriate to spend on the various stages in bringing the action to trial, and the likely overall cost. While it is not unusual for costs to exceed the amount in issue, it is, in the context of modern litigation such as the present case, one reason for seeking to curb the amount of work done, and the cost by reference to the need for proportionality.” (Paragraph 19 of the judgment).
Where does this leave us? The new proportionality test was intended to help provide a degree of predictability as to what costs would be payable if a case was lost for those claims not subject to fixed fees. Parties would know that the total would not be more than was proportionate to the claim. However it has not provided such certainty and if anything has only muddied the waters further.
The solution, according to Lord Justice Jackson (23rd May 2016) is:
“The best way to satisfy the requests for clarification is to convert the five identified factors into hard figures: in other words, to create a fixed costs regime…those seeking certainty about how rule 44.3(5) will apply are seeking something akin to a fixed fee regime for all cases.”
What should we be telling our Clients?
We should be warning them of the uncertainty of costs recovery.
“…it seems to me that the new test of proportionality…will require legal representatives to inform their clients that, even if successful, they will receive no more than a contribution to the costs that will be incurred.” May v Wavell Group PLC & Anor  EWHC B16 (Costs)
That proportionality will bite in appropriate cases and that the quantification and measure of proportionality is an inexact science.
What should we be aiming for?
Litigation conducted by the appropriate level of fee earner, efficiently and with due regard from the early stages of the likely outcome and conducted appropriately. This can be achieved in part, by obtaining approval of a realistic costs budget and litigating within its boundaries.