06 October, 2016
Since the new 'proportionality test' was introduced on 1 April 2013, we have been left wondering how it will work in practice. There is no guidance as to how the principle should operate in practice. Cases on this issue are now beginning to emerge, but is the position any clearer?
What is the proportionality test?
The main concept is that costs ought to be proportionate to the dispute. The court may reduce or disallow costs that are disproportionate in amount even if they were reasonably or necessarily incurred. Costs incurred are proportionate if they bear a reasonable relationship to:-
BNM v Mirror Group Newspapers Ltd (2016) Sen Cts Costs Office (Master Gordon-Saker) 11 January 2016
The claimant was a primary school teacher who had a relationship with a Premier League footballer. She lost her mobile phone, which ended up in the hands of the Mirror Group. She brought proceedings seeking an injunction, damages and an order for delivery up of confidential information.
MGN undertook not to disclose the confidential information and the claim was settled for £20,000 plus the claimant's costs.
The claimant submitted a bill of costs of £241,817, including a 60% success fee for her solicitors, a 75% success fee for her counsel and a £58,000 ATE premium.
Master Gordon-Saker carried out a line by line detailed assessment of the costs, and the parties agreed that the total costs were £167,389.
At a subsequent hearing, MGN argued that the sums reached after the line by line assessment were disproportionate and should be reduced further. The Senior Costs Judge stood back and held that the sums which had been allowed as reasonable on the line by line assessment were disproportionate and he reduced each of the items, apart from the court fee, by roughly half. He also held that the new test of proportionality applies to additional liabilities and that, when applying the new test, the court did not have to consider the amount of any additional liability separately from the base costs. The bill was reduced by approximately 50% to £83,964.80.
May and another v Wavell Group plc and another  EWHC (B16) Costs (Master Rowley) 16 June 2016
The claimant, Brian May, the guitarist from Queen, and his wife, Anita Dobson, brought a private nuisance claim. The claim settled for £25,000 and costs were claimed in the sum of £208,000.
At the detailed assessment the costs were initially reduced from £208,000 to £99,655.74. The Court then applied the proportionality test and they were further reduced to £35,000 plus VAT. Master Rowley held that there was no notable factual or legal complexity in this case, no additional costs caused by the defendant's conduct, nor any wider factors to be considered. Therefore the reasonable costs allowed of £99,655.74 were undoubtedly disproportionate. In reaching his decision, Master Rowley considered the issue of proportionality on a global basis and emphasised the "broad-brush nature of the exercise".
These two recent decisions demonstrate how arbitrary the test of proportionality is. The costs in both cases were severely reduced in the name of "proportionality" without an explanation as to how the final figure had been reached. Going forward, no-one can say for sure how each judge will apply the test of proportionality which leaves parties in an increasingly uncertain position.