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