Proportionality – latest ruling given in interim costs application
The issue of proportionality has been one which has been at the forefront of the assessment process ever since the inception of the Civil Procedure Rules in 1999, but never more so than since the latest major reforms in April 2013, when the principle that litigation should be conducted, inter alia, “…at proportionate cost…” was enshrined within the Overriding Objective. Since then, and more so than ever, the doctrine of proportionality has sought to permeate through more and more aspects of litigation, even arguably including the hallowed ground of the Indemnity Basis (by virtue of the operation of the Overriding Objective).
It is therefore not entirely surprising that the latest area to receive scrutiny in relation to proportionality is that of interim costs applications.
In this recent ruling, involving a negligence claim over treatment delay, a claim which settled for £450,000.00 and in which the claimant was seeking an interim payment on account of costs of £574,000.00 (including a £107,000.00 ATE premium) from an overall costs claim of £1.13 million, Mr Justice Garnham adopted the approach of Christopher Clarke LJ in the matter of Excalibur Ventures LLC v Texas Keystone Inc  EWHC 566 (Comm) in suggesting that a reasonable interim payment would represent an estimate of the likely level of recovery upon assessment, applying a suitable margin of error to recognise the long-established view that assessment was not a precise science.
Giving his ruling in the matter of Rallison v North West London Hospitals NHS  EWHC 3255 (QB), and taking into account the defendant’s views that the costs were disproportionate and that “…a substantial proportion…” of the individual items claimed in respect of costs could not be justified, the defendant contending for an alternative interim payment of £250,000.00, Garnham J sought to apply the doctrine of proportionality whilst “…not expressing any final conclusion on the propriety of the claimed costs…” effectively warming litigants that, even on an interim basis, a firm handle should be kept on the costs both being incurred and being claimed.
In approaching the appropriate amount to award, Garnham J adopted a two-stage test for assessing the same, noting that
“In my view, there is an argument of real substance here that the total costs claimed is not proportionate to the complexity of the case, to the amount which it might reasonably have been anticipated would be recovered and to the amount actually recovered.”
Having regard to the fact that the claim before him represented a “…fairly typical clinical negligence claim with significant, but not unusual, causation difficulties…” finding further that the amounts claimed within the substantive action of, initially, £3.9 million and thereafter £3,000,000 to be “…at least at first blush, to have been substantially greater than the genuine value of the claim…“.
Having taken an overall view at the first stage of his test, Garnham J then proceeded to the second stage of his test, which was to adopt “…a fairly broad brush approach…” to the necessity of the individual items claimed within the schedule of costs, noting that the claimant’s schedule of costs provided for some 472 hours of preparatory work ahead of the trial, whereas the defendants had only spent 189 hours on preparation and consideration, together with a further 107 hours in respect of correspondence, and in respect of this comparison, noted
“In those circumstances, in my view, it is necessary to consider the actual sums claimed in a little more detail. In that regard I accept the submissions of [counsel for the defence] that the hours allegedly devoted to the preparation of this case seem, at least at this stage, excessive.”
“That is the equivalent of a solicitor working almost every working hour of some 23 weeks exclusively on the preparation of this case before it even got to trial. Of incidental interest is that that preparation produced a trial bundle consisting of just three lever arch files.”
“Those figures as to time spent by the solicitors preparing this case for trial are all the more remarkable given that it is evident that they relied heavily on counsel in preparing the case for trial. The costs schedule claims that 177 hours work was done by leading counsel and 199 by junior counsel (although presumably that includes a substantial allowance in respect of their brief fees).”
“At least at this stage it is not easy to see how all these figures can be justified. In those circumstances I reject the claimant’s claim for an interim award of costs in the sum of £574,000.”
thus concluding that the defendant’s proposal of £250,000.00 by way of an interim payment was “…much more realistic…” although he would not be persuaded to limit the payment to that amount as the ATE premium was, in his view, also “…highly likely…” to be recovered in full, thus the award for the interim payment was made in the sum of £307,000.00.
In this regard, and with reference to the above, it is therefore imperative that parties are mindful of the fact that, when making applications for interim payments in respect of costs, the courts are likely to have both eyes on proportionality, not only in relation to the amounts being awarded, but also the costs overall. This is likely to substantially affect both parties at any subsequent assessment as, it is entirely plausible that any ruling or indications given upon such interlocutory matters, are likely to be brought to the fore within the substantive assessment process.