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Assessing Proportionality After May V Wavell

25 January 2018

There was much hope that the appeal of Master Rowley’s decision in Dr Brian May and Anita May v Wavell Group Limited and Dr Farid Bizzari [2016] would result in clear guidance, albeit not binding, on how the courts  should now assess proportionality.  Certainly questions had been asked about access to justice when a bill of costs for over £208,000 was reduced to £35,000.00 plus VAT.

Unsurprisingly Dr Brian May (one of the receiving parties) was extremely critical of Master Rowley’s decision, writing in The Times on 28 July 2016 “This proportionality rule is a nonsense, and makes a mockery of justice; it is yet another way of ensuring that the super-rich can do anything they like to increase their wealth, including destroying the quality of life of those around them. What was in the mind of the people who introduced this ridiculous rule of proportionality?” The full article can still be found on Dr Brian May’s website www.brianmay.com.

HHJ Dight’s appeal decision has now been handed down but unfortunately it has not provided all the clarity hoped for.  Indeed it has proved to be an unenviable task to provide a proportionate report on this 34 page proportionality judgment!

Background

The background of this case is now well known, but to summarise, Dr Brian May and his wife Anita May (Appellants) had sought damages from the Respondents due to excessive noise and vibration created by works being carried out at a property adjacent to theirs. The Claim Form valued the claim at £50,000.00 to £100,000.00 and before a Defence was filed the claim was settled for £25,000.00 after the Appellants accepted the Respondents’ Part 36 offer. 

As a consequence of the settlement the Respondents were liable to pay the Appellants’ standard basis costs up to the date on which the notice of acceptance was filed. The Appellants submitted a bills of costs for £208,236.54 comprising of £131,138.00 profit costs, £42,578.28 disbursements and VAT.  Points of Dispute and Replies were served and the detailed assessment was heard by Master Rowley on 12 and 13 May 2016.  The Master assessed the bill of costs applying a two stage test, the first determining the reasonableness of the items of costs in dispute and the second the proportionality of the total sum assessed.

At the conclusion of the reasonableness test the Master had allowed £99,655.74 and after hearing submissions on proportionality the Master handed down judgment on the second proportionality test on 16 June 2016 when he reduced the sum to £35,000.00 plus VAT, which he considered the proportionate global sum. The reasons for this decision were set out in the Master’s judgment and the Appellants challenged the decision on the basis that the Master had misdirected himself and misapplied the new test of proportionality as set out in CPR 44.3 (5).  The Appellants did not appeal the Master’s item by item ruling on reasonableness.

The Appeal

The Appeal was confined to four specific aspects of the Master’s approach to proportionality and the decision of HHJ Dight sitting in the County Court at Central London given on 10 January 2018 can be summarised as follows:

1.  The Sums in Issue – Master Rowley had valued the case to be worth £25,000.00 but it was held on appeal that the Master had misinterpreted the meaning of “sums in issue” (CPR 44.3 (5) (a) and he should have assessed value by reference to the diminution of rental value of the appellants’ property due to the nuisance caused by the respondents. Thus it would not be unreasonable to value the claim between £50,000.00 to £100,000.00.

2.  Complexity of the Litigation – In his judgment the Master held that there was no noteworthy complexity in the litigation of either legal or a factual nature. Whilst the issues in this case were no more complex than other nuisance claims of this nature it was argued by the Appellants that this claim was complex when compared against civil claims generally of a similar value. On appeal it was held that although this case may not have been complex within the category of nuisance claims, it seemed complex when compared with other claims of similar value within the county court. In such circumstances the Master had given insufficient weight to the complexities of the case.

3.  The stage reached when the claim settled – The Master had held that the proportionate amount of costs must inevitably be smaller for a case which concludes early than one which reaches a final hearing and it was argued by the appellants that this was not a factor for consideration as it is not listed in CPR 44.3 (5). In his decision HHJ Dight did not disagree with the principle that proportionate costs to take a case to trial are likely to be different to proportionate costs where there has been early settlement and the rules require the court to have regard to all circumstances in the case, which must include early settlement. However HHJ Dight interpreted paragraph 46 of the Master’s judgment to be that early settlement required a greater reduction in the overall costs, in respect of which he disagreed. Thus it was held that the Master had reduced costs disproportionately due to early settlement.

4.  The Global Approach - In his judgment the Master stood back to consider if the £99,655.74 allowed as reasonable was also proportionate. In doing so he decided that he did not need to revise individual items nor remove the cost of drawing the bill of costs and VAT when undertaking a global approach to proportionality. Indeed it was the Master’s judgment that “There is only so much finesse that can be employed when using a broadsword rather than a rapier. A concluding global assessment of proportionality as envisaged by the new approach involves the court wielding a blunt instrument rather than a precise tool.”

In his judgment HHJ Dight concluded that the new proportionality test is not a “blunt instrument” but required a costs judge to assess costs on an item by item basis and to consider whether the total figure is proportionate having regard to the factors set out in CPR 44.3 (5). When asked to stand back and decide if the costs allowed on an item by item basis are proportionate, the court should reach a judgment as to whether the amount allowed is proportionate in relationship to each subsection of CPR 44.3 (5).

Whilst this judgment supports the two tests of reasonableness and proportionality, HHJ Dight also felt that the test of proportionality should take into account factors outside of CPR 44.3 (5) resulting in a considerable degree of overlap between the assessments of reasonableness and proportionality. In his judgment he found that the tests of reasonableness and proportionality are intended to work together, each with their specific role, with the intention of achieving what is fair. Furthermore, this process requires the costs judge to use judgment, not discretion. HHJ Dight added that a proper interpretation of the rules does not require or entitle a costs judge at the end of an item by item assessment to impose a very substantial reduction on the overall figure without regard to the component parts of CPR 44.3 (5).

It was held that the final figure of £35,000.00 plus VAT in this case did not appear to be based on any specific calculation nor a specific explanation of how the weighting of the various factors resulted in the final figure. 

Conclusion

It was perhaps unfair to expect this unbinding County Court judgment to be the post-Jackson version of Lownds v Home Office.  However Lownds was decided by Lord Chief Justice Woolf at a time when lawyers and the courts were desperately seeking guidance as to how the then new proportionality test should be applied and it is not unreasonable to say we are in a similar position today!

The judgment does support the notion that there are two tests, one as to reasonableness and the other proportionality. The judgment is also helpful in describing the factors that should be considered when deciding reasonableness and proportionality.  However the judgment does not set out a firm process to be followed when applying those tests.

HHJ Dight’s approach to proportionality is best set out in paragraph 58 of his judgment:

“The rules do not specifically state that the assessment has to be undertaken in two stages but they do require the costs judge to apply two tests, namely reasonableness and proportionality, and it is open to the costs judge to have an eye to both as he or she undertakes an item by item assessment having in mind a figure or range of figures which would be proportionate but it is equally open to the judge to apply the tests sequentially. I suspect that in practice a costs judge will have both tests in mind when undertaking the item by item assessment but he or she will undertake a form of cross-checking when the total is ascertained to see whether it falls within the range of proportionate totals and then undertake an adjustment if it does not.”

This approach does seem workable and also maintains the position of allowing the court to step back at the end of the item by item assessment and decide, based on a judgment of each individual sub-section of CPR 44.3 (5), if the amount allowed is proportionate. Such approach is consistent with other decisions, in particular that in Harrison v University Hospitals Coventry & Warwickshire NHS Trust [2017] EWCA Civ 792 when Lord Justice Davies commented that “the costs judge ordinarily will still, as I see it, ultimately have to look at matters in the round and consider whether the resulting aggregate figure is proportionate, having regard to CPR 44.3 (2)(a) and (5): a further potential safeguard, therefore, for the paying party.”

Although this judgment is not binding, we believe the approach described is effective and should be followed in detailed assessments as follows:

  1. The points of dispute should ask the court to allow an amount that is reasonable and proportionate for each item opposed in the points of dispute.
  2. The court should not be asked to consider the proportionality of every item in the bill of costs individually as that will overlap the global proportionality test set out below.
  3. At the conclusion of the item by item assessment the court should be asked to consider whether the amount allowed is globally proportionate to the factors set out in CPR 44.3 (5).
  4. That global proportionality test should be considered against profit costs, counsel fees, expert fees and disbursements separately and those items that will not be altered by the proportionality test, possibly court fees and the costs of preparing the bill of costs, should be excluded.
  5. When giving its decision, the court should be asked to give its judgment in respect of each individual sub-section of CPR 44.3 (5).

Eventually we will no doubt receive a decision from the Court of Appeal that will give us the much needed post-Jackson Lownds.  The BNM v MGN Limited detailed assessment that has been remitted back to the Senior Costs Judge following appeal may also provide more helpful guidance.  However until such time, the approach set out above and in paragraph 58 of HHJ Dight’s judgment does provide an effective approach.