Bacon: Lack of guidance on proportionality test five years on is “unacceptable”

It is “unacceptable” that there is still no guidance on the proportionality test more than five years after it came into force, a leading costs silk has argued.

Nick Bacon QC (pictured) of 4 New Square was speaking in the wake of a circuit judge ruling where assessed costs of £116,000 were reduced to £75,000 on application of the test, in an employer’s liability case which settled at the doors of the court for £50,000.

Speaking at last week’s Costs Law Reports conference in London, Mr Bacon complained that it was impossible to divine how judges reached decisions such as this. “Judgments are very good about what the rules say, but not how they ended up at the final figure.”

Citing the comments of His Honour Judge Dight in May v Wavell, he said: “Why are we in a position where judges are saying ‘the rules are difficult to apply’? There needs to be something done to make the rules easy to apply.”

Mr Bacon expressed frustration that the Court of Appeal had refused permission to hear May, given that Sir Rupert Jackson had opposed the issue of guidance on the test because he said case law would explain how it should be applied.

“We are in a very unhappy place… Nearly six years have passed and I am still standing here saying I don’t know what your costs are going to be allowed at in your case…

“For me, that it is a completely unacceptable state of affairs. Justice can only be administered with some certainty and judges have got proper parameters in which to exercise their judicial judgment.”

Reynolds v One Stop Stores Limited, handed down last month by His Honour Judge Auerbach in Cambridge, was an appeal over a budgeted case with a pleaded claim for special damages of £175,000. It ultimately settled for £50,000.

The budget was £120,000, with £116,000 allowed following a line-by-line assessment. But District Judge Reeves awarded only £75,000 on the basis of proportionality, finding that the claimant had overstated her case.

Mr Bacon said that former costs judge Colin Campbell, who was chairing the conference, had calculated that this sum was “just £285 more than the claimant would have got had the defendant won every single point of dispute… I’ve never won every single point of dispute… These guys did in effect because of the proportionality rule”.

HHJ Auerbach emphasised that rule 44.3(2) said the court “will” – “therefore must” – only allow costs which are proportionate. “The fact that this provision goes on to say that costs which are disproportionate ‘may be disallowed or reduced’ does not mean that the court has a discretion to award disproportionate cost.”

While proportionality was a question of law, he said, the rules did confer a discretion on the judge who applied them. “That does not, of course, mean that the judge can come up with any figure they like, without applying any form of reasoning. All discretions conferred on judges must be exercised judicially: in a reasoned and not an arbitrary fashion, taking account of relevant considerations, and not taking account of irrelevant considerations; and, of course, by applying the overriding objective…

“In presenting its decision, in order that the parties have a sufficient understanding of its reasons, the court must demonstrate that it has engaged with the rule in the required manner, and followed the above approach. If the provisional total is found disproportionate, and a different final figure found proportionate, the final figure must be one that can be seen to be in keeping with the court’s reasoning leading up to it, and not perverse or irrational. But the court does not have to set out a precise mathematical calculation by which it is reached.”

HHJ Auerbach found no error in law in the district judge’s decision. “DJ Reeves did not err in taking proportionality at the end, and in the round, nor in applying it to the whole of the provisional total, that is, to both incurred and budgeted costs. He did not fail to consider each of the 44.3(5) factors in turn, and he properly then turned to draw the threads together, coming to a decision on proportionality in the round.

“I also consider that he sufficiently conveyed how those factors interacted and fed into his view on proportionality, when giving his oral decision, building on the earlier discussions during the hearing. In short, it is quite clear that he considered that the costs were disproportionate to the sums in issue (about which he took a properly-reasoned view), and that this was not a case where the complexity of the litigation, additional work generated by the paying party’s conduct, nor any other factors in the rule 44.3(5) list, had a countervailing impact, such as to lead to a different overall conclusion…

Further, he ruled, DJ Reeves was right to reject the argument that it would be wrong to apply proportionality to the budgeted costs and that he did not take into account the argument that the claimant’s budget had already been made subject to a “swingeing” reduction.

HHJ Auerbach also dismissed the suggestion that this approach made it very hard for parties in multi-track cases to predict the outcome of the proportionality exercise and, hence, to settle costs without taking them to a detailed assessment.

“That is an empirical question. DJ Reeves’ comments, during the course of the conduct of this assessment, on his own experience, however, suggest otherwise. But, in any event, my task was to decide whether DJ Reeves had erred in law in his decision on proportionality. For all the reasons I have given, he did not, this appeal fails, and the final costs award made by him therefore stands.”

Andrew Hogan (instructed by BLB Solicitors) for the appellant, Robin Dunne (instructed by Keoghs) for the respondent.


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Costs News
Published date
04 Oct 2018

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