Proportionality – How This Has Changed Post Jackson

Following the Jackson Reforms (1st April 2013), the issue of proportionality has seen big changes.

Pre-April 2013

Before 1st April 2013, proportionality was clearly defined under CPR 1.1(c):

“(c) dealing with the case in ways which are proportionate-

  • to the amount of money involved;
  • to the importance of the case
  • to the complexity of the issues; and
  • to the financial position of each party

(d) ensuring that it is dealt with expeditiously and fairly; and 

(e) allotting to it an appropriate share of the Court’s resources, while taking into account, while taking into account the need to allot resources to other cases”. 

In addition to the above principles Costs Practice Direction Section 11 under CPR 44.5 provided that the following factors would be considered:

“11.1 – The relationship between the total of the costs incurred and the financial value of the claim may not be a reliable guide. A fixed percentage cannot be applied in all cases to the value of the claim in order to ascertain whether or not the costs are proportionate.

11.2 – In any proceedings there will be costs which will inevitably be incurred and which are necessary for the successful conduct of the case. Solicitors are not required to conduct litigation at rates which are uneconomic. Thus in a modest claim the proportion of costs is likely to be higher than in a large claim, and may even equal or possibly exceed the amount in dispute.

11.3 – Where a trial takes place, the time taken by the Court in dealing with a particular issue may not be an accurate guide to the amount of time properly spent by the legal or other representatives in preparation for the trial of that issue.

11.6 – In deciding whether the base costs are reasonable and (if relevant) proportionate the Court will consider the factors set out in Rule 44.5”.

Prior to the Jackson reform, Lowndes v The Home Office (2002) clearly set out the principles whereby the Court would assess a Bill of Costs using a two-stage test.

Using the principles in Lowndes the Court would first look at the costs claimed on a global approach. If the costs were deemed to be proportionate and inline with CPR 44(2), the Court would allow each item if reasonably incurred and reasonable in amount. Should the Judge see these to be disproportionate then the Court would assess each item individually and allow only the items which were necessary as well as reasonable.

Post-April 2013

Following the CPR amendments which came into force from 1st April 2013, proportionality is now defined under CPR 44.3 (2):

“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 incurred or necessarily incurred”.

CPR 44.3 (5) provides that:

“(5) the costs incurred are reasonable if they bear reasonable relationship to:

  • the sums in issue in proceedings;
  • the value of any non-monetary relief in the issue in the proceedings;
  • the complexity of the litigation
  • any additional work generated by the conduct of the party; and
  • any wider factors involved in the proceedings, such as reputation or public importance”.

What does this mean for Costs Lawyers?

Where a Bill of Costs prior to the Jackson reforms would be split according to the applicable VAT rates, different funding arrangements, previous Solicitors etc., the Bill of Costs post Jackson must be split from 1st April 2013 to allow the Court to apply the new proportionality tests.

One question which appears to be an area of uncertainty within the costs world is when the proportionality split should apply. In my experience it has been widely understood that the Bill of Costs should be split where Court Proceedings are issued after 1st April 2013. Any work which has been undertaken after this date will be subject to the new proportionality rules. Work undertaken where Proceedings were issued prior to 1st April 2013 will fall under the scope of CPR 44.5.

Where Proceedings have not been issued prior to settlement of the Claimant’s damages, a split should also apply from 1st April 2013. These cases would fall within the new proportionality rules.

Conclusion

It is highly important that the new proportionality principles are fully understood and complied with accordingly. Non-compliance with the new rules may lead to various problems commencing Detailed Assessment Proceedings, potentially resulting in the Judge’s refusal to assess the Bill of Costs.

If you have any questions or queries in relation to this blog please contact Kirsty Black (kirsty.black@clarionsolicitors.com and 0113 222 3245) or the Clarion Costs Team on 0113 2460622.

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