‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’
‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’
-Through the Looking Glass
As a society, we engage from time to time in collective delusions. A collective delusion is an idea, which works as along as enough people understand it and subscribe to it. When people stop believing in it, it disappears, sometimes overnight.
The collapse of democracy and the rule of law in Weimar Germany, the disappearance of the gods of the religion of Ancient Greece or republican Rome, are all examples of collective delusions coming to an abrupt end.
Although not in the same bracket, the current belief that proportionality is a meaningful concept that can be consistently deployed by the courts to enhance access to justice, is another such delusion. It is one that I detect is already starting to creak, hence the enthusiasm for fixed costs and the unstated desire to reduce the role of costs budgeting, as faith in an individually applied approach to proportionality in budgeting or on detailed assessment starts to fade.
More positively fixed costs could be viewed as the new incarnation of proportionality: instead of “fixing” proportionate costs on a case by case basis through assessment, a fixed costs regime constitutes the expression in the rules of an award of proportionate costs applied across the board to a range of cases.
Granted that there will be swings and roundabouts, but across an entire class of litigation, the theory is that proportionate costs will not only be awarded, but will be predictable in advance and the transactional or frictional costs of assessment and budgeting can be avoided altogether, representing a more efficient deployment of resources.
I regard proportionality as an essentially meaningless concept which adds nothing to the concept of reasonableness in theory or as formulated in the rules. The importance of proportionality is its existence as a concept, meant to encourage the judiciary that legal costs claimed between the parties to litigation are too high and that they should use the concept as a reason to reduce them, to make justice more affordable.
But a robust application of the principle of reasonableness would achieve the same result. In a detailed assessment hearing I argued in Hastings last summer where an RTA case settled for £50,000 the Bill of Costs claimed no less than £271,000 of costs and was assessed down on the basis of reasonableness to £73,000:comfortably below the paying party’s offer of £80,000.
The District Judge declined to reduce the sum further by reason of proportionality, noting that a significant part of the costs allowed related to experts fees and the solicitors costs/counsels fees of dealing with the expert evidence.
There have been a number of decisions in the last 9 months or so, where the principle of proportionality has been expressly applied and which have had the consequence of “setting the cat amongst the pigeons” and also precipitating satellite litigation.
The first of these, and due to be heard by the Court of Appeal in the autumn is that of BNM -v-MGN Limited  EWHC B13 (Costs) a decision of Master Gordon-Saker:
8.The Claimant commenced proceedings against the Defendant on 31st July 2013, having obtained an anonymity order the day before. She claimed an injunction to restrain the Defendant from using or publishing confidential information taken from her phone, damages and an order for delivery up of any confidential information.
9.The Defendant made substantial admissions in the Defence and the claim was concluded by a consent order dated 14th July 2014, under the terms of which the Defendant undertook not to use or disclose the confidential information, agreed to pay damages of £20,000 and agreed to pay the Claimant’s costs of the action.
10.The costs claimed were in the sum of £241,817. That included a success fee in respect of the solicitors’ costs of 60 per cent, success fees in respect of the costs of both counsel of 75 per cent and an after the event insurance premium of £58,000 plus insurance premium tax of £3,480.
Such were the facts which underpinned the assessment of the winning claimant’s costs:
13.Following the hearing in November 2015 the parties agreed the figures resulting from the line by line assessment as:
|Base profit costs||£46,321|
|Base Counsel’s fees||£14,687.50|
|Base costs of drawing the bill||£4,530|
|Atkins Thomson’s success fee||£16,780.83|
|Counsel’s success fee||£4,846.88|
|Total base costs||£62,318.50|
14. At the hearing in April 2016 the Defendant argued that these sums were disproportionate and should be reduced further. I concluded that the sums which had been allowed as reasonable on the line by line assessment were disproportionate and were about twice the sum which would be proportionate. As I had been given the breakdown set out above I gave separate figures for the sums allowed:
|Base profit costs||£24,000|
|Base Counsel’s fees||£7,300|
|Base costs of drawing the bill||£2,250|
|Atkins Thomson’s success fee||£7,920|
|Counsel’s success fee||£2,409|
15. At the hearing the parties calculated the total as £84,855.80, a difference of £891.
16. Apart from the court fee, each of the items was reduced by about one half. The success fees are 33 per cent of the respective base costs allowed.
18.The new test of proportionality was introduced because the old test did not promote access to justice at proportionate cost. In Willis v Nicolson  EWCA Civ 199 Buxton LJ, delivering the judgment of the court, said:
When the Civil Procedure Rules replaced the Rules of the Supreme Court, and encouraged active intervention by the court and the application of public values and not merely those values with which the parties were comfortable, it was hoped that that practice might change; and that hope was reinforced when this court said, in  of its judgment in Lownds v Home Office  1 WLR 2450:
‘Proportionality played no part in the taxation of costs under the Rules of the Supreme Court. The only test was that of reasonableness. The problem with that test, standing on its own, was that it institutionalised, as reasonable, the level of costs which were generally charged by the profession at the time when professional services were rendered. If a rate of charges was commonly adopted it was taken to be reasonable and so allowed on taxation even though the result was far from reasonable.’
However, in the event nothing seems to have changed. That is because, as explained in  of the same judgment, ‘proportionality’ is achieved by determining whether it was necessary to incur any particular item of costs. And then ‘When an item of costs is necessarily incurred then a reasonable amount for the item should normally be allowed’: and the reasonable amount per hour of the professional’s time continues to be determined by the market.
19.At a public seminar held in Cardiff on 19th June 2009 as part of Sir Rupert Jackson’s Review of Civil Litigation Costs, Sir Anthony May, then President of the Queen’s Bench Division, said:
In my experience, there is no doubt at all but that costs are assessed with nodding respect only to proportionality. An application of rule 44.5 of the Civil Procedure Rules and section 11 of the Costs Practice Direction can scarcely expect to do better than that.
20.It is clear that the new test of proportionality was intended to bring about a real change in the assessment of costs.
The Master then went on to note, after a review of such authority as there was:
36.Presently there is little guidance on how the new test of proportionality should be applied.
37.In the 15th implementation lecture Lord Neuberger said:
While the change in culture should reduce the scope of costs assessments at the conclusion of proceedings, it will not obviate the need for a robust approach to such assessments. Again the decision as to whether an item was proportionately incurred is case-sensitive, and there may be a period of slight uncertainty as the case law is developed.
That is why I have not dealt with what precisely constitutes proportionality and how it is to be assessed. It would be positively dangerous for me to seek to give any sort of specific or detailed guidance in a lecture before the new rule has come into force and been applied. Any question relating to proportionality and any question relating to costs is each very case-sensitive, and when the two questions come together, that is all the more true. The law on proportionate costs will have to be developed on a case by case basis. This may mean a degree of satellite litigation while the courts work out the law, but we should be ready for that, and I hope it will involve relatively few cases.
The Master then considered how the principle of proportionality was to be applied in this case:
40.Had it been intended that costs should never exceed the sums in issue the rule could easily have stated that. There will be cases in which the costs bear a reasonable relationship to the sums in issue even though they exceed those sums.
41.This is such a case; and the Defendant did not seek to argue otherwise. Mr Carpenter, on behalf of the Defendant, contended that a proportionate figure for base costs to the stage that the claim reached would be £20,000.
42.The sum in issue in these proceedings was always going to be modest. The claim settled for £20,000. The Claimant’s first offer was £40,000.
43.The value of the non-monetary relief claimed is not easy to quantify, but in my judgment it was not substantial. The Claimant knew in March 2011 that the Defendant had access to the information on her phone. The phone was returned to her in May 2011. Yet it was not until March 2013 that the Claimant’s father approached Atkins Thomson “to sound out whether any civil action could be brought”. That enquiry was prompted by press reports of a similar case in which Atkins Thomson had acted.
44.No information taken from the phone had been published in the intervening 2 years. When proceedings were issued no application was made for an interim injunction. The anonymity order was required only because of the issue of proceedings. While the undertakings and the apology given by the Defendant as part of the settlement will have been of comfort to the Claimant, this was not a claim for substantial non-monetary relief. But for the claim for damages, it is unlikely that a claim would have been pursued.
45.Nor was it a particularly complex case. I accept that a privacy case is more complex than the run of the mill. In the course of the detailed assessment I accepted that this case was of importance to the Claimant, that it was specialist “Londoncentric” work, that the allegations against the Defendant were serious, that it was reasonable for the Claimant to issue proceedings without prior warning given that she did not know what use the Defendant had made or would make of the confidential information, and that it was reasonable for her to apply for an anonymity order. It is these factors which make this a case where the costs can bear a reasonable relationship to the value of the claim even though they exceed that value and even though the claim was concluded at an early stage.
46.Little additional work was generated by the conduct of the Defendant. There was some correspondence between the parties following the service of the anonymity application with an unfortunate allegation that the court had been misled, but the amount of that correspondence was limited to a few letters. The same can be said of the Defendant’s requests for extensions of time to serve the Defence and the Defendant’s failure to respond to a Part 18 request. I do not think that the conduct of the Defendant added significantly to the costs.
47.Nor do I think that there were any wider factors involved in these proceedings. There was no real threat of publication and the Claimant was not seeking in any real way to protect her reputation. While the Defendant’s conduct can fairly be categorised as reprehensible, so much of civil litigation is based on the bad behaviour of others. I cannot see that there was any wider public importance.
48.This claim settled at a relatively early stage, a year after the issue of proceedings and 16 months after solicitors were first instructed, before the first case management hearing, before disclosure of documents or exchange of witness statements, before any hearing other than the application for an anonymity order. The scope of the evidence would be very limited and the case was neither factually nor legally complex.
49.In these circumstances base profit costs of £46,000 and base counsel’s fees of £14,000 must be disproportionate under the new test, being over 3 times the amount of agreed damages, and covering work which fell far short of trial. In my judgment costs of about one half of those figures would be proportionate.
50.The ATE premium of £58,000 excluding tax is also disproportionate. For the reasons that I gave in the course of the detailed assessment, I could not conclude that the premium was unreasonable. I also accept that it was necessary for the Claimant to purchase after the event insurance. But costs may be disproportionate even though they were necessary: CPR 44.3(2)(a).
51.This was not the premium which would cover the whole claim. £58,000 was the premium payable at the fourth of seven stages. Had the claim proceeded to judgment, the premium would have risen to £112,500 plus tax.
52.As is common, the policy insures the Claimant against her liability to pay the premium in the event that she does not succeed; and, if she does succeed, the premium is limited to the amount allowed by the court on assessment. However the court approaches the new test of proportionality, if the premium is reduced on the basis that it is disproportionate, it is important that the court should identify the figure allowed.
53.The premium has added significantly to the costs that were reasonably incurred, broadly matching the aggregate of base profit costs and counsel’s fees. I concluded in the course of the detailed assessment that, at the outset, the Claimant’s prospects of success were “significantly in excess of 50/50”. Those prospects did not reduce. The Defendant made substantial admissions in its Defence. A premium of £58,000 at the stage that the claim settled, potentially doubling to £112,500, cannot be said to bear a reasonable relationship to a claim which settles for £20,000, where there was no substantial claim for non-monetary relief, which was not particularly complex, where no significant additional work was generated by the conduct of the paying party and where there were no wider factors involved.
54.In my judgment no more than one half of that amount could be considered proportionate.
Since that decision there have been a number of other decisions which repay careful examination, and many of which turn on the application of particular aspects of the transitional provisions for pre-and post 1st April 2013, and also the provisions relating to those categories of cases, which involve recoverable success fees. Cases worth reading are Dr Brian May -v- Wavell Group Plc  EWHC B16 (Costs) Master Rowley and Murrells -v- Cambridge University NHS Foundation Trust (SCCO 17th January 2017) Master Brown. The Brian May case is also on its way to the Court of Appeal, to be heard in the autumn along with BNM.
A lot of time, money and ink is being expended on debating what proportionality actually means. This is because the application of the rule is untested in the higher courts and a binding formulation of general application has not been made.
As I write this, I also note with interest that the 88th set of revisions to the Civil Procedure Rules which are getting longer and longer, every year, has recently been published. The single topic which absorbs the biggest number of pages in the Rules is the topic of costs.
Do all these amendments reduce the cost of litigation, enhance access to justice and contribute to the public good? I doubt it. There is no evidence to support such a conclusion.
Why not put a moratorium on any further amendments and expansions to the Rules? Just stop changing them. Recognise that no system will ever be perfect, but that it costs people a lot of money in frictional or transactional costs arising from uncertainty over what new provisions mean.
And instead of encouraging satellite litigation between privately funded parties to determine what the costs rules mean, why not invest in training for the judiciary on what the rules should mean and what they are intended to achieve through the Judicial College. So a common view emerges? Why not spend some time considering how reasonableness should be applied in a disciplined, predictable, meaningful sense?
In a sense the judges share the key quality of Humpty Dumpty: they can pronounce what they want a word to mean, and if by “reasonableness” they meant a tough detailed assessment which balances the interests of both parties, cutting out wasteful activity, making paying parties pay for the costs of work they have caused through misjudging the strength of their case, I suspect the principle of proportionality could be safely left in Wonderland.