Proportionality Assessment Rejects Mathematical Approach

Background

The claimants, William Thomas Stockler and Alexander Charles Stockler, were holders of permanent seats at the Royal Albert Hall. They brought proceedings against The Corporation of the Hall of The Arts and Sciences, which operates the venue, concerning payments due under the Hall’s Ticket Return Scheme (TRS). Under this scheme, introduced in 1993, seat-holders could return unwanted tickets in exchange for payment.

Following amendments to the TRS payment terms in April 2018, the claimants disputed the defendant’s calculations and commenced proceedings in September 2022 seeking an account and payment of monies allegedly due. The claim was initially valued at less than £10,000, with the claimants indicating on the claim form that it fell within the small claims track limit. The defendant counterclaimed seeking, amongst other matters, a declaration as to the proper construction of the contractual arrangements.

Both parties issued applications for summary judgment in late 2022. On 23 February 2023, Deputy District Judge Kirby KC granted summary judgment to the defendant on the interpretation of the 5 April 2018 letter, stayed the balance of proceedings to enable agreement on an account, and allocated the matter to the fast track. Significantly for costs purposes, he ordered the claimants to pay the defendant’s costs of the hearing, including the summary judgment applications limited to the interpretation issue, subject to detailed assessment if not agreed.

When settlement negotiations failed, the matter returned before DJ Mauger on 24 May 2024. The judge refused the claimants permission to amend their particulars of claim, dismissed the balance of their claim, and gave judgment for the defendant on the counterclaim in the sum of £3,054.24. The judge made a further costs order requiring the claimants to pay the defendant’s costs of the claim and counterclaim on the standard basis until 8 June 2023 and on the indemnity basis thereafter.

The defendant commenced detailed assessment proceedings on 6 September 2024, serving a bill totalling £162,789.37. The bill was divided into three parts: Part 1 for standard basis costs (£76,066.38), Part 2 for indemnity basis costs, and Part 3 for bill preparation costs. Points of Dispute were served on 1 October 2024, followed by Replies, with the assessment hearing requested on 10 December 2024.

Costs Issues Before the Court

The primary issue before Deputy Costs Judge Joseph was whether the defendant’s costs should be reduced on grounds of proportionality following the line-by-line assessment. This issue arose specifically in relation to Part 1 of the bill, which covered costs incurred on the standard basis up to 8 June 2023.

The court was required to apply CPR 44.3 and 44.4, which mandate that on a standard basis assessment, only costs that are proportionate to the matters in issue should be allowed. Under CPR 44.3(5), proportionality requires costs to bear a reasonable relationship to various factors including the sums in issue, value of non-monetary relief, complexity of litigation, conduct of the paying party, and any wider factors such as reputation or public importance.

A preliminary issue concerned whether the court should assess proportionality across the entire bill or focus solely on Part 1. This was significant because Part 2 costs were assessed on the indemnity basis, where proportionality does not apply. Additionally, the court had to determine the appropriate approach to proportionality assessment following the guidance in West and Demouilpied v Stockport NHS Foundation Trust [2019] Costs LR 1265.

The line-by-line assessment had already addressed various contested issues, including the reasonableness of instructing London-based solicitors, appropriate fee earner grades, and the dismissal of numerous Points of Dispute for insufficient particularisation under Ainsworth v Stewarts Law LLP [2020] EWCA Civ 178. Following this assessment, Part 1 of the bill had been reduced from £76,066.38 to £55,581.38.

The Parties’ Positions

The claimants, represented initially by Counsel and subsequently by the first claimant acting in person, argued that the assessed costs were manifestly disproportionate. Their primary submission was that proportionate costs should be calculated by reference to a multiple of the monetary value of the claim. They proposed that a base figure should be between one and a half to two times the £3,200 monetary claim value (producing £4,800-£6,400), with additional allowances of £1,000-£1,500 for non-monetary relief and similar amounts for conduct-related work. This methodology produced a range of £6,800-£9,400, with a mid-point of £8,100 representing their view of proportionate costs.

The claimants relied on the fact that the claim had been initially valued at less than £10,000 and would ordinarily have fallen within the small claims track. They pointed to comments by DDJ Kirby suggesting concern about costs being incurred in relation to potential claims by other seat-holders, and to DJ Mauger’s ultimate dismissal of the account claim as disproportionate. They maintained that spending approximately £55,000 on a claim worth £3,200 was wholly disproportionate regardless of other factors.

The defendant, represented by Mr Paul Hughes, rejected the claimants’ mathematical approach to proportionality. He argued that all factors in CPR 44.3(5) should be considered without giving special weight to monetary value alone. The defendant emphasised that the DDJ had allocated the matter to the fast track despite its monetary value, indicating the case’s unsuitability for the small claims track. This allocation decision suggested a total claim value, including non-monetary elements, potentially up to the fast track limit of £25,000.

The defendant highlighted the complexity of the contractual interpretation issues, evidenced by detailed skeleton arguments and the instruction of Counsel throughout. He argued that decisions already made during the line-by-line assessment – including approval of London solicitors’ instruction and appropriate fee earner grades – demonstrated reasonableness that should not be undermined through proportionality. The defendant also stressed wider factors, including potential reputational damage and the risk of similar claims from other seat-holders among the Hall’s 320 seat-holders who returned 179,000 tickets in 2022 alone.

The Court’s Decision

Deputy Costs Judge Joseph rejected the claimants’ mathematical approach to proportionality assessment. The court held that there was no basis in West and Demouilpied for calculating proportionate costs using arbitrary multiples of claim value. Such an approach was deemed fundamentally flawed and contrary to CPR requirements, which mandate consideration of multiple factors without attributing special significance to any single element.

The court determined that proportionality assessment should focus solely on Part 1 of the bill, as proportionality does not apply to indemnity basis costs. Following West and Demouilpied, the court examined the work reasonably undertaken during the relevant period, finding it included substantial tasks: reviewing proceedings, drafting pleadings, considering documents, preparing for and attending the summary judgment hearing, responding to requests for information, and conducting settlement negotiations.

On the monetary value factor, whilst acknowledging the claim’s small financial component, the court held this should not carry special weight. The DDJ’s allocation to the fast track despite the low monetary value indicated the claim’s overall significance. The court accepted that when monetary and non-monetary elements were combined, the total claim value approached £25,000.

Regarding complexity, the court found the contractual interpretation issues required specific expertise and justified Counsel’s instruction. The earlier decisions allowing London solicitors and grade B fee earners supported this assessment. The court noted that having found these costs reasonable during line-by-line assessment, it would be difficult to subsequently deem them disproportionate.

The court accepted that the defendant was entitled to consider potential reputational damage and the risk of similar claims from other seat-holders as genuine wider factors. The Hall’s considerable public status meant the defendant could legitimately take the proceedings seriously. However, this did not entitle unlimited expenditure, and the court noted the bill had already been reduced by nearly 27% during line-by-line assessment.

A significant factor was the dismissal of numerous Points of Dispute for insufficient particularisation. The court held it would be inherently unfair to allow the claimants to achieve through proportionality what they had failed to achieve through properly formulated challenges. This would effectively permit reduction “through the back door” despite the claimants’ procedural failures.

The court concluded that the assessed costs of £55,581.38 for Part 1 were not disproportionate when all factors were properly considered. The reasonable costs were also proportionate costs, and no further reduction was warranted. The court emphasised that proportionality had already been partially considered during line-by-line assessment, particularly regarding hourly rates and fee earner grades, making further reduction inappropriate.

Implications

This case demonstrates several principles for costs practitioners. Mathematical formulae based on claim value multiples will not survive scrutiny – courts must consider all CPR 44.3(5) factors without giving special weight to monetary value alone. Track allocation decisions carry weight in proportionality assessment, particularly where judges depart from normal expectations based on case characteristics.

The decision reinforces that properly particularised Points of Dispute remain essential. Attempting to achieve reductions through proportionality arguments after failing to mount specific challenges during line-by-line assessment will not succeed. Courts will consider whether allowing such reductions would be unfair to the receiving party.

The case also shows how wider factors like reputational damage and potential satellite litigation can influence proportionality assessment, provided the receiving party can demonstrate genuine concerns rather than speculative risks.