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Updates, Insight & Analysis

 
     
Jan 10 2018
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Proportionality – Further clarification on the application of Rule 44.3(5)

In 2016 Master Rowley gave judgment in the case of May & May v Wavell & Bizarri [2016] EWHC B16 (Costs). proportionality. However, whilst the costs were still held to be disproportionate HHJ Dight CBE and Master Whalan have confirmed that the methodology in reaching the decision was not correct. Daniel Jones of Civil & Commercial Costs Lawyers discusses the judgment, which should give further clarity how the proportionality test is to be applied.


The main action and the SCCO

Queen guitarist, Dr Brian May and his actress wife, Anita Dobson's claim for costs, which was reduced from more than £200,000 to a mere £35,000 plus VAT following application of the new test of proportionality, has been successfully appealed.


By way of brief background, the substantive action arose by way of Dr May bringing proceedings against his neighbour for nuisance caused by their "super basement" development. Following acceptance of a Part 36 offer, in the sum of £25,000, the claim proceeded to detailed assessment with Dr May submitting a Bill of Costs totalling £208,236.54. It came as no surprise that the parties were unable to reach an agreement in respect of costs so the matter proceeded to a hearing.


Master Rowley, sitting at the SCCO, applied a two stage test; firstly he conducted a line by line assessment of the Bill and arrived at a figure of £99,655.74. He thereafter reduced these "reasonably and necessarily incurred" costs to a meagre £35,000 plus VAT following application of the new test of proportionality.


In reaching his decision Master Rowley gave consideration to the five factors listed in CPR 44.3(5) and advised that:-


"In summary, this is a case worth in the region of £25,000 and for which there was a modest prospect of an injunction at least early in the case. There was no noteworthy complexity in the litigation of either a legal or factual nature. There were no additional costs caused by the defendant's conduct nor were there any wider factors to be considered. In these circumstances the reasonable costs allowed of £99,655.74 are undoubtedly disproportionate".


Master Rowley considered a global approach appropriate and advised that the figure he considered to be a proportionate one for the first defendant to pay, bearing in mind all of the factors in 44.3(5), was £35,000 plus VAT.


In concluding his finding the learned Master declared that:-


"There is only so much finesse that can be employed when using a broadsword rather than a rapier. A concluding global assessment of proportionality as envisaged by the new approach involves the court wielding a blunt instrument rather than a precision tool."


Unsurprisingly, a blunt broadsword is not the appropriate tool for the Court to wield.


The Appeal

The central issue on the appeal was whether the new test of proportionality had been correctly interpreted and properly applied. The appeal was confined to four specific aspects of Master Rowley's decision namely:-


1. The sums in issue in the proceedings - CPR 44.3(5)(a)


In reaching his decision Master Rowley had advised that the sum of £25,000 (the settlement value) reflected the sums in issue in the proceedings. The paying party stated that the claim was worth the sum for which it settled - an all too common adage enthusiastically resonated by paying parties.


It was Dr May's case however that the learned Master had failed to give proper consideration to all factors affecting the sums in issue including the diminution of rental value of the property (c. £500,000 pa).


Upon review it was found that whilst the Master was entitled to have regard to the figure at which the case settled, this was not the singular element to be derived from CPR 44.3(5)(a).


It was found that it would not have been unreasonable to note that the annual letting value of each house was £500,000 and that a reduction due to the alleged nuisance for the period claimed would have been in the range pleaded by Dr May and Mrs Dobson, namely £50,000 - £100,000.


In essence the learned Master had erred in having no regard to the value upon the claim form, the pleadings and the entirety of the evidence before him.


In his judgement HHJ Dight stated that:-


“A settlement figure might provide some indication of the former battle ground but it is the battle ground which is to be identified when looking at the “sums in issue” and not the final figure which brought the battle to an end.”


HHJ Dight provided further helpful guidance as to the method to be adopted by the Court:-


“The task of the court is, in my judgement, to undertake an objective evaluation of the sums which are in issue having regard to all the material before it, including the highest figure put on his claim by the claimant and the lowest figure, if any, admitted by the defendant.”


2. The complexity of the litigation - CPR 44.3(5)(c)


Master Rowley had found the case neither legally nor factually complicated.


HHJ Dight, in consideration of CPR 44.3(5)(c), juxtaposed this case with road traffic accident claims of a similar value (£50,000 - £100,000) but less complex and lower value clinical negligence claims which would be more complex.


In essence if one compared a claim of this nature to the range of claims frequently made in the County Court it could be readily seen that this matter was towards the more complex end of the range.


Whilst this case was not complex within its category it was complex when compared with other claims of similar value.


3. The relevance of the stage reached at settlement


In applying the global reduction to proportionality Master Rowley had applied an additional reduction on the basis that the claim settled at an early stage. In his judgement Master Rowley stated that:-


“The proportionate amount of costs must inevitably be smaller for a case which concludes early than one which reaches a final hearing.”


Whilst a Court is entitled to take into account all the factors of the case, HHJ Dight respectfully disagreed that early settlement required a greater reduction in the overall costs.


4. The global approach


Finally, it found that a global reduction to the costs, without having regard to the component parts and providing a specific mathematical calculation of specific explanation of how consideration of the various factors resulted in the final figure, was a misapplication of the rules.


Conclusion

FFollowing consideration of the four specific issues raised by Dr May, HHJ Dight found that the learned Master had misinterpreted and misapplied the new proportionality test. In particular he found that he had undervalued the sums in dispute, had given too little weight to the complexity of the litigation, had incorrectly reduced the costs because of early settlement and had incorrectly utilised a global reduction.


His Honourable Judge Dight and Master Whalan gave greater weight to the sums in issue and to the factor of complexity and after taking all matters into consideration concluded that a proportionate figure was £75,000 (plus VAT). HHJ Dight did not apply a global proportionality reduction by not reducing either the Court fees or the costs of preparing the Bill.


The judgement stands as further guidance as to how to new test of proportionality is to be applied having regard to the four specific issues raised in the appeal.


It is doubtful that Dr May will be picking up his guitar for a rousing rendition of We are the Champions as this decision will no doubt be regarded as a pyrrhic victory.


If you would like to discuss this issue in more detail, or any other Costs matters, contact Daniel Jones on 0161 255 2788 or our Head of Costs Anil Virji on 0207 842 5950 or email us.