Proportionality: a view from the High Court

Malmsten v Bohinc [2019] EWHC 1386 (Ch)

It’s been six years since the introduction of the “new” proportionality rule in CPR 44.3(5). In that time there have been a handful of decisions at circuit judge level but none from the higher courts, until now.

On appeal from Master Whalan in the Senior Courts Costs Office, The Hon. Mr Justice Marcus Smith was tasked with determining a number of issues arising from the of costs, including proportionality.

Unfortunately, but not entirely surprisingly, the decision does not offer much in the way of general guidance to practitioners.

However, on the facts of the case before him the judge found that the Master’s decision to entertain no further proportionality reduction at the end of the assessment was one that could not be sustained.

He went on to reduce the “reasonable” assessed figure of £47,500 to £15,000 plus VAT.

On its face, a worrying decision for claimant lawyers. However, it perhaps needn’t be given some important fact-sensitive features of the case, including:

  • The costs related to “a narrow and straightforward application” brought under s306 of The Companies Act 2006 and determined after a 30 minute hearing less than three weeks after it had been brought. In all, the work covered a period of just 10 weeks from time of instruction to conclusion.
  • The judge found that the Master had failed to exclude costs of advice given and work done by the receiving party’s legal team in relation to various matters other than the section 306 application itself, a factor he specifically bore in mind when determining a proportionate costs figure.
  • He further held that having determined that costs had been increased as a result of the paying party’s conduct (CPR 44.3(5)(d)) the Master had erred in failing to identify precisely how such conduct had resulted in additional costs.
  • In his view “perhaps more by luck than judgment” the paying party’s conduct had not in fact had any effect on the level of costs incurred.

“given the narrowness and straightforwardness of the application – resulting in a clearly correct outcome after a hearing of half-an-hour (including a ruling and submissions on costs) – costs of £47,500 require some justification, and pretty cogent justification at that.”

Although not particularly contentious issues in practice the judge did clarify by way of general guidance that:

  • Under the new rules a proportionality assessment must occur at the end of the detailed assessment.
  • The approach is the same whether on a summary or detailed assessment of costs.
  • VAT and the costs of preparing the bill are to be excluded for the purposes of determining proportionality.

The decision also examined the meaning of “costs of and incidental to” an application.

MALMSTON v BOHINC [2019] EWHC 1386 (Ch)