SENIOR COURTS COSTS OFFICE
London, WC2A 2LL
B e f o r e :
|- and -
Mr Jamie Carpenter (instructed by RPC) for the Defendant
Hearing dates: 29th April 2016
Crown Copyright ©
The detailed assessment
Base profit costs £46,321 Base Counsel's fees £14,687.50 Court fees £1,310 Base costs of drawing the bill £4,530 Atkins Thomson's success fee £16,780.83 Counsel's success fee £4,846.88 ATE premium £61,480 VAT £17,433.24 Total base costs £62,318.50 Total costs £167,389.45
Base profit costs £24,000 Base Counsel's fees £7,300 Court fees £1,310 Base costs of drawing the bill £2,250 Atkins Thomson's success fee £7,920 Counsel's success fee £2,409 ATE premium £30,000 VAT £8,775.80 Total costs £83,964.80
The new test of proportionality
(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; and
(b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.
(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.
(7) Paragraphs (2)(a) and (5) do not apply in relation to –
(a) cases commenced before 1st April 2013; or
(b) costs incurred in respect of work done before 1st April 2013,
and in relation to such cases or costs, rule 44.4(2)(a) as it was in force immediately before 1st April 2013 will apply instead.
When the Civil Procedure Rules replaced the Rules of the Supreme Court, and encouraged active intervention by the court and the application of public values and not merely those values with which the parties were comfortable, it was hoped that that practice might change; and that hope was reinforced when this court said, in  of its judgment in Lownds v Home Office  1 WLR 2450:
'Proportionality played no part in the taxation of costs under the Rules of the Supreme Court. The only test was that of reasonableness. The problem with that test, standing on its own, was that it institutionalised, as reasonable, the level of costs which were generally charged by the profession at the time when professional services were rendered. If a rate of charges was commonly adopted it was taken to be reasonable and so allowed on taxation even though the result was far from reasonable.'
However, in the event nothing seems to have changed. That is because, as explained in  of the same judgment, 'proportionality' is achieved by determining whether it was necessary to incur any particular item of costs. And then 'When an item of costs is necessarily incurred then a reasonable amount for the item should normally be allowed': and the reasonable amount per hour of the professional's time continues to be determined by the market.
In my experience, there is no doubt at all but that costs are assessed with nodding respect only to proportionality. An application of rule 44.5 of the Civil Procedure Rules and section 11 of the Costs Practice Direction can scarcely expect to do better than that.
In other words, I propose that 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. There is already a precedent for this approach in relation to the assessment of legal aid costs in criminal proceedings: see R v Supreme Court Taxing Office ex p John Singh and Co  1 Costs LR 49.
The issues between the parties
i) Does the new test of proportionality apply to additional liabilities?
ii) If it does, should it be applied to additional liabilities separately, rather than by the global basis described above?
iii) Are the costs allowed on the line by line assessment disproportionate?
Does the new test of proportionality apply to additional liabilities?
The provisions of CPR Parts 43 to 48 relating to funding arrangements, and the attendant provisions of the Costs Practice Direction, will apply in relation to a pre-commencement funding arrangement as they were in force immediately before 1 April 2013, with such modifications (if any) as may be made by a practice direction on or after that date.
Whether the new test of proportionality should be applied to additional liabilities separately
Factors to be taken into account in deciding the amount of costs: Rule 44.5
11.5 In deciding whether the costs claimed are reasonable and (on a standard basis assessment) proportionate, the court will consider the amount of any additional liability separately from the base costs.
11.9 A percentage increase will not be reduced simply on the ground that, when added to base costs, which are reasonable and (where relevant) proportionate, the total appears disproportionate.
Are the costs allowed on the line by line assessment disproportionate?
While the change in culture should reduce the scope of costs assessments at the conclusion of proceedings, it will not obviate the need for a robust approach to such assessments. Again the decision as to whether an item was proportionately incurred is case-sensitive, and there may be a period of slight uncertainty as the case law is developed.
That is why I have not dealt with what precisely constitutes proportionality and how it is to be assessed. It would be positively dangerous for me to seek to give any sort of specific or detailed guidance in a lecture before the new rule has come into force and been applied. Any question relating to proportionality and any question relating to costs is each very case-sensitive, and when the two questions come together, that is all the more true. 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.
… starting point is that a case would have to be wholly exceptional to render a costs budget of £824,000 proportional for the recovery of £805,000 plus interest.
I accept that it is not possible to approach the costs budgeting exercise in a case of this kind by assessing a case as relatively modest in scale, and the costs as high, and then simply reducing the costs to match the perceived importance of the case. As I observed in Yeo, many would suggest that the costs of litigation in this category become disproportionate at an early stage. There is no avoiding that, in many cases. So I agree that an approach based purely on financial proportionality would run the risk of disabling litigants from fairly presenting their cases.