PROPORTIONALITY AND
HOURLY RATES -
A CASE LAW UPDATE
Oliver Moore, Guildhall Chambers
RELEVANCE OF PROPORTIONALITY
• Overriding objective - enable the Court to
deal with cases justly and at proportionate
cost
• Proportionality applies to costs and case
management at all stages
COSTS MANAGEMENT
• Rule 3.15 (2): Where budgets filed the Court will make a
costs management order unless the litigation can be
conducted justly and at proportionate cost without such an
order
• PD 3E:
• when reviewing budgets the Court will consider
whether the budgeted costs fall within the range of
reasonable and proportionate costs (para 7.3)
• Court will take into account incurred costs in
considering the reasonableness and proportionality of
all subsequent costs (para 7.4)
BASIS OF ASSESSMENT OF COSTS
• Rule 44.3
• Court will not allow costs which have been
unreasonably incurred or unreasonable in amount
• On standard basis: only allow costs which are
proportionate to the matters in issue
• Costs which are disproportionate may be disallowed
or reduced even if they were reasonably or
necessarily incurred (r.43.3 (2))
JACKSON FINAL REPORT
“… in an assessment of costs on the standard basis,
proportionality should prevail over reasonableness
and the proportionality test should be applied on a
global basis. The court should first make an
assessment of reasonable costs, having regard to the
individual items in the bill, the time reasonably spent
on those items and the other factors listed in [what is
now CPR 44.4(3)] and consider whether the total
figure is proportionate. If the total figure is not
proportionate, the court should make an appropriate
reduction.” (para.37).
THE PROPORTIONALITY TEST
• Rule.44.3 (5) - Costs incurred are proportionate ifthey bear a reasonable relationship to:
• sums in issue;
• the complexity of the litigation;
• any additional work generated by conduct ofpaying party;
• wider factors in proceedings - reputation or publicimportance.
• What is a “reasonable relationship”?
• No further guidance – “case by case basis”
FACTORS TO BE TAKEN INTO ACCOUNT IN
DECIDING THE AMOUNT OF COSTS
• Rule 44.4 - Court will have regard to all circumstances in
deciding:
• Whether costs were proportionately and reasonably
incurred; or were proportionate and reasonable in
amount (if assessing costs on standard basis)
• Will also have regard to the “8 pillars of wisdom”:
conduct; value; importance; complexity or difficulty or
novelty; skill, effort, specialised knowledge and
responsibility involved; time spent; place where and the
circumstances in which work was done; and last approved
or agreed budget.
Kazakhstan Kagazy PLC v Zhunus
[2015] EWHC 404 (Comm)
“Leggatt J gave guidance on the approach to
proportionality which should be taken in hard fought
litigation, with neither side showing any sense of
moderation, where the sums in issue exceeded many
millions of pounds” (as stated by Master O’Hare in
Hobbs v Guy’s and St Thomas’ NHS Trust)
• Worldwide freezing injunction – assets £72 million
• Alleged fraud c $45 million
• Defendant succeeded – costs c £945,000
• Application for payment on account of costs -
£220,000 allowed
Kazakhstan Kagazy
• May be entirely reasonable to spare no expense that might possibly
help to influence result. BUT does not follow, such expense is
reasonably or proportionately incurred or reasonable and proportionate
in amount on inter partes basis.
• Must be judged objectively: touchstone is lowest amount which could
reasonably have been expected to spend to have case conducted and
presented proficiently, having regard to all relevant circumstances.
• Costs above this is are party’s own choice and not reasonably
attributable to other party.
• Approach is: fair, discourages waste and seeks to deter escalation of
costs for overall benefit for litigants.
CIP PROPERTIES V GALLIFORD & ORS
[2015] EWHC 481 (TCC) (Coulson J)
• Construction dispute - damages claimed c£18 million
• Claimant’s costs budget £9.5 million
• Disproportionate to value and complexity of claim.
Complexity more important in a case of this type
• Claimant’s budget approved at £4.28 million
• Defendant’s budget £4.22 million after minor
reductions. Four additional parties’ budgets totalling
£5.45 million approved as sought
GSK v QPR [2015] EWHC 2274 (TCC)
• Stuart-Smith J: “My starting point is that a case would
have to be wholly exceptional to render a costs
budget of £824,000 proportional for the recovery of
£805,000 plus interest. This case is not exceptional in
any material respect.”
• His initial reaction: good reason would need to be
shown to justify more than about half that figure on
proportionality grounds. Something had gone wrong.
• Costs budget approved at total of £425,000
Savoye v Spicers Limited [2015] EWHC
33 (TCC) (Akenhead J)
• Construction dispute – adjudication
• Damages c£900,000. Costs claimed c£200,000
• Costs were disproportionate
• Had regard to various factors with reference to r.44.3
(5) and r.44.4, including:
• duplication of costs incurred in other “contractual
dispute resolution machinery” where party paid
own costs
• It was of commercial importance but not test case
• Costs summarily assessed at £96,465
BP v CARDIFF and VALE UNIVERSITY
LHB [2015] EWHC B13 (Costs)
• Senior Costs Judge – Master Gordon-Saker
• Clinical Negligence claim. Claimed £440,000; settled
£205,000. Complex claim which settled 2 weeks
before trial
• Base costs assessed as reasonable post 1 April 2013
c£138,000 (pre 1 April 2013 c£20,000)
• Proportionate: no further reduction necessary
• N.B.: base costs claimed c£295,000. Budget
(incurred and estimated) c£321,000
Hobbs v Guy’s and St Thomas’ NHS
Trust (Master O’Hare SCCO Nov 15)
• Clinical negligence case. Settled pre-issue.
• Damages agreed at £3,500. Costs claimed £32,329.
• Reasonable costs assessed at £11,000 plus VAT
• Costs Judge considered reduction to make on
grounds of proportionality
• Costs reduced by £1,200 plus VAT
Hobbs
“When considering what reduction to make on
grounds of proportionality I decided against chopping
off a slice of all of the costs I had just found to be
reasonable.
In my view it is better to target particular items of
work which it was disproportionate to do in the
particular circumstances of the case in hand. In the
result I disallowed the costs of three items which now
appear, with hindsight, to be inconsistent with the
true value of the claim.”
Hobbs
• Disallowed: costs of anaesthetist, Part 36 offer and
difference in rates between Grade B and Grade C
• Although it was reasonable for Claimant to incur
costs it was unfair to expect Defendant to pay
• “The rule against the use of hindsight in costs
assessment (Francis v Francis and Dickerson [1955]
3 All ER 836) is a rule based upon reasonableness,
which, today, is trumped by proportionality (see
r.44.3(2)).”
Hobbs
• Whilst costs of c£10,000 high for claim for £3,500 which
settles pre-issue not disproportionate in circumstances.
• Not right to disallow expenditure on medical records or
expert reports. Even in modest value clinical negligence
claims it is necessary to incur costs on these items, but
not allowed on grounds of necessity as trumped by
proportionality.
• Allowed as clinical negligence claims have more
complexity and involve more work than other claims of
similar value.
HOURL-Y RATES - HOBBS
• City of London solicitors - Grade A fee earner.
• Guideline rate £409 p/h. Central London £317 p/h
• Rate of £300 p/h claimed
• “Grade A rates only for Grade A fee earners doing
Grade A work”
• Outer London rate for Grade B with no enhancement
• Hourly rate allowed was £200 p/h until April 2014 and
£210 thereafter
Kelly v Hays [2015] EWHC 735 (QB)
• Personal injury claim pleaded at c£433,000.
• After service of surveillance evidence settled for
£50,000 plus costs
• Preliminary issue over reasonable hourly rates
• C (who lived near Croydon) instructed City firm and
claimed rates between £160 and £450 p/h
Kelly v Hays
At first instance Master Campbell asked himself: “which
firm would it have been objectively reasonable for the
claimant to have instructed” and held:
• It was not reasonable to instruct a City firm
• Claimant was not required to approach cheapest
solicitor
• Reasonable to approach Central London firm.
• Uplifted rates by 20% to take into account multi-
track and some complexity.
• Rates allowed ranged between £140 and £380
Kelly v Hays - Appeal
• Baker J. sitting with Master Haworth as an assessor
(who agreed with judgment)
• Question to ask: What was the category of solicitors
which should have been retained? (referred to Wraith
v Sheffield Forgemasters)
• Master Campbell failed to give reasons for selecting
Central London or rejecting National One rates
• Conclusion Master Campbell reached he was not
entitled to reach
Kelly v Hays
• Considered r.44.3 together with Wraith
• Should have retained firm in National One.
• However, guideline rates only a starting point – “they
are a guide”
• Some complexity to be taken into account: limitation,
extent of prospective damages, surveillance evidence
• Reasonable rates: A - £295; B - £230; C - £175; D -
£120
• Uplift may be appropriate for main decision maker but
less likely to apply further down the pecking order