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High Court issues proportionality ruling


High Court: DJ not wrong to apply the test of necessity

A costs judge is entitled to consider if individual items of costs claimed are proportionate and necessary even if the costs of the litigation overall appear proportionate, the High Court has decided in the first ruling on the issue.

Mr Justice Cranston said there was nothing in the authorities which confines proportionality to costs as a whole and excludes its application to individual items.

The case of Finglands Coachways Ltd v O’Hare [2014] EWHC 1513 (QB) [2] concerned a £3m-plus claim for personal injury which was discontinued in February 2012 after the claimant’s accident reconstruction expert altered his opinion and supported the defendant’s position.

The defendant served a bill of £60,101, which following a two-day detailed assessment by District Judge Iyer was reduced to £37,803 plus interest.

Before the High Court, the defendant argued that the judge had erred in principle by assessing the costs by reference to the stricter test of necessity, as opposed to reasonableness, when there had been no finding or argument about the costs being disproportionate.

Cranston J said the district judge was not wrong to apply the test of necessity. “To my mind, CPR 44.4(2) of the old rules meant that the court would of its own initiative disallow disproportionate costs even if the paying party had not raised the point. That follows from Morland J’s judgment in Giambrone v JMC Holidays Ltd [2002] EWHC 2932 [3] (para 28), he said.

“Morland J also said even if a bill overall does not appear to be disproportionate, that does not preclude a judge from concluding that specific items are disproportionate and then applying the dual test of necessity and reasonableness to those items.”

Cranston J said Lord Neuberger’s decision in the Motto case did not disapprove that dictum, while nothing in Lownds ruled it out either.

“Lord Woolf CJ [in Lownds] certainly contemplated that normally, if costs as a whole were proportionate, all that was normally required was that each item should be reasonably incurred. But use of the qualification ‘normally’ makes clear that this was not a hard and fast rule.

“Nor could it be given that, even under the pre 2013 rules, proportionality was the centrally important factor when assessing costs… [and that] under paragraph 11.2 of the Costs Practice Direction whether costs, in a general sense, were necessary was integral to whether they were proportionate.”

Cranston J concluded: “In my judgment, therefore, in assessing costs under the old version of the CPR a court could consider on an item by item basis whether a particular item of costs was proportionate and necessary even if costs were proportionate on a global basis.

“As demonstrated by this case, there is nothing difficult in deciding whether particular items of a bill of costs are proportionate or necessary to the conduct of litigation.”

That was what District Judge Iyer had done here and so the appeal was dismissed.