New Test for Proportionality

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.