Drew, Sharon --- "Costs column: Proportionality of costs an update on the UK perspective" [2019] PrecedentAULA 64; (2019) 154 Precedent 52

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PROPORTIONALITY OF COSTS – AN UPDATE ON THE UK PERSPECTIVE

By Sharon Drew

Following the introduction of the Legal Profession Uniform Law (LPUL) in Victoria and NSW in July 2015, the requirement for legal costs to be ‘proportionate’ has become a focal point.

In 2016, the position in the UK – where the principle of ‘proportionality of costs’ originated – was considered by Peter Rosier,^[1] including the matter of May v Wavell Group PLC.^[2] Dr May’s costs of the proceedings, claimed at more than £200,000, were reduced on assessment to £35,000. The approach adopted by Master Rowley was to conduct a detailed assessment of the costs claimed to identify those which were reasonable, and then to further reduce the costs to a level proportionate to the matters in issue.

The UK Civil Procedure Rules specifically state:

‘Costs incurred are proportionate if they bear a reasonable relationship to –

(a) the sums in issue in the proceedings;

(b) the value of any non-monetary relief in issue in the proceedings;

(c) the complexity of the litigation;

(d) any additional work generated by the conduct of the paying party;

(e) any wider factors involved in the proceedings, such as reputation of public importance.’^[3]

While this level of specificity is not currently reflected in the LPUL, some guidance may be found in the way in which courts have approached the issue of proportionality.

May v Wavell Group PLC was the subject of an appeal by Dr May. On appeal before Dight J, it was held that in assessing costs it was necessary to apply two tests – namely, reasonableness and proportionality:

‘the tests of reasonableness and proportionality are intended to work together, each with their specified role, but with the intention of achieving what is fair”.^[4]

The ‘two-step’ approach was more recently endorsed by Smith J in Malmsten v Bohinc,^[5] who stated:

‘when consideration [sic] proportionality, one is seeking to determine whether there is a proper – a proportionate – relationship between the overall costs and the action or the application giving rise to those costs’.^[6]

The judgment in Malmsten describes the methodology used as a ‘broad-brush test at the end of a detailed assessment’.

It is also clear that the monetary amount in issue is only one aspect of proportionality, which will be given more or less weight in particular circumstances. Costs may be proportionate if they exceed the amount in issue, or where other factors such as the complexity of the litigation or the conduct of the other party are given greater weight in the overall consideration of the costs claimed.

While the UK cases are concerned solely with costs as between parties, the LPUL also requires costs to be reasonable and proportionate as between practitioner and client. It is likely that these same factors will be relevant for an assessment of costs under the LPUL.

Sharon Drew is Principal of Blue Ribbon Legal – specialising in legal costs disputes. PHONE [phone] EMAIL [e-mail] WEB www.blueribbonlegal.com.au.

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^[1] P Rosier, ‘A new order or same old, same old? Reasonable and proportionate: Tricky concepts to enforce’, Precedent, Issue 137, 2016, 38 (also available on Austlii at [2016] AULA 79.

^[2] May & May v Wavell Group PLC & Bizarri [2016] EWHC B16.

^[3] Civil Procedure Rules (UK), 44.3(5).

^[4] May & May v Wavell Group Ltd & Bizarri (2017) CC (Central London).

^[5] [2019] EWHC 1386 (Ch).

^[6] Ibid, [60].