New Test for Proportionality

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Lord Neuberger has unveiled the new test to be applied in relation to costs which are challenged as being disproprtionate. The new test – to be contained in CPR 44.4(5) – will come into force in April 2013 and will read as follows:

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. 

The Master of the Rolls went on to say….

“Obviously, the amount of money involved will normally be a very significant factor, but it will not be determinitive, and there will be issues such as whether one looks at the sum reasonably claimed or the sum recovered. Difficult questions may arise when one party claims that the point at issue is very important to him or her even though, objectively speaking, it is of little significance. Objective perspectives may well be more important than subjective ones in this area, but that remains to be assessed. And is the approach to proportionality to be the same for defendants’ costs as it is for those of claimants? Such issues will have to be worked out, but the working out will involve judges exercising that quality which they are pre-eminently expected to have, namely judgement” 

Read Lord Neuberger’s full speech here.

Costs Management Consultation

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The Civil Procedure and Rules Committee have launched a public consultation into costs budgeting and costs management.

A sub-committee chaired by Coulson J will meet on 10 and 16 July 2013 to consider:

  • the desirability of retaining the Admiralty and Commercial Courts’ blanket exception to the mandatory requirement to produce costs budgets at CPR Part 3.12(1)
  • the current value-based exception for the TCC, the Chancery Division and the Mercantile Courts; and
  • whether or to what extent Part 8 claims (including Judicial Review) should be excluded from the mandatory costs budgeting regime.

The sub-committed will also consider whether any other claims currently within the mandatory costs budgeting regime should be exempted. The aim is to produce a new definitive rule for inclusion in the CPR to replace the existing rule 3.12(1) with its reference to exemptions from mandatory costs budgeting as defined in directions made by the President of the Queen’s Bench Division and the Chancellor of the High Court.

Particiapation is invited and the closing date for written representations is 20 July 2013.

See the Consultation Paper.

Court of Appeal overturns Senior Costs Judge in landmark decision on costs budgeting

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To the surprise of some the Court of Appeal has overturned the Senior Costs Judge’s ruling inSylvia Henry -v- News Group Newspapers LTD [2012] EWHC 90218 (Costs).

Background

The Claimant social worker had brought libel proceedings against The Sun newspaper after it published articles concerning her involvement in the cases of Victoria Climbié and Baby P. The proceedings were settled and the Claimant was entitled to recover her costs on the standard basis. Both parties had exceeded their budgets. The Claimant’s solicitors had gone over by almost £300,000, largely as a result of witness statements and disclosure.

Master Hurst’s Decision

Master Hurst had to decide whether there was a “good reason” to depart from the Claimant’s budget. He found that there was not…

” It is clear that the Claimant did not keep either the Defendant or the Court informed of the fact that its budget was being exceeded… The fact that both sides exceeded their budgets does not assist the Claimant… The provisions of the Practice Direction are in mandatory terms… Whilst … I have no doubt that the Claimant could make out a very good case on detailed assessment for the costs being claimed, the fact is that the Claimant has largely ignored the provisions of the Practice Direction and I therefore reluctantly come to the conclusion that there is no good reason to depart from the budget. “

Appeal

In overturning this decision Lord Justice Moore-Bick said…

“[Budgets] are intended to provide a form of control rather than a licence to conduct litigation in an unnecessarily expensive way. Equally, however, it may turn out for one reason or another that the proper conduct of the proceedings is more expensive than originally expected.”

He did however go on to point out that the the rules coming into force on 1 April 2013 differ “in some important respects” to those of the defamation costs management pilot, under which Henry v NGN was conducted… 

“In particular they impose greater responsibility on the court for the management of the costs of proceedings and greater responsibility on the parties for keeping budgets under review as the proceedings progress. Read as a whole they lay greater emphasis on the importance of the approved or agreed budget as providing a prima facie limit on the amount of recoverable costs… although the court will still have the power to depart [from it] if it is satisfied that there is good reason to do so.”

The Court found that the Senior Costs Judge had taken too narrow a view as to what amounted to “good reason” to depart from the Claimant’s budget.

Instant reward for ‘immaculate’ budget control

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HHJ Simon Brown QC, the pioneer of costs budgeting, has given instant reward for keeping within a court approved budget, with a summary assessment of costs in the sum of £351,000 payable within 14 days.

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Coulson J declines to approve a post-trial application to almost double an approved costs budget

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The High Court rejected a bid by a successful defendant to nearly double its approved costs budget of almost £270k after trial.

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