PROPORTIONALITY – A LITIGATOR’S SURVIVAL GUIDE V – A ROUND UP: 12 KEY POINTS TO TAKE YOU INTO OCTOBER (AND BEYOND)
The issue of “proportionality” is central to contemporary litigation. However it is rarely examined in detail and rarely discussed. Attempts to analyse how proportionality can be achieved are even rarer. For the fifth in this (slow burning) series I review the previous posts and set out 12 key points for the proportionate litigator.
“It is therefore time to say, in the clearest terms, that parties and their solicitors can no longer conduct litigation in a manner which does not keep the proportionality of the costs being incurred at the forefront of their minds at all times.”
(Coulson J in GSK Project Management -v- Galliford  EWHC 481 (TCC).)
WHAT IS PROPORTIONALITY?
The issue of what “proportionality is” was considered in the post “What is meant by ‘proportionality””. This considered the judgment of Master O’Hare in Hobbs -v- Guy’s and St Thomas’ NHS Foundation Trust  EWHC B20. The issue of proportionality was central to the decision being made.
…persuasive guidance has been given by Lord Neuberger in a lecture delivered on May 29, 2012.
“… the obvious way of introducing proportionality is that … adopted in the [Final Report], namely by effectively reversing the approach taken in Lownds. In this way, as Sir Rupert said, disproportionate costs, whether necessarily incurred or reasonably incurred, should not be recoverable from the paying party. To put the point quite simply: necessity does not render costs proportionate. Reference to necessity can be said to be positively misleading as it suggests necessary to achieve justice on the merits: substantive justice. A fundamental tenet of both Woolf and Jackson, accepts that that aim must be tempered by the need for economy and efficiency, and, above all proportionality. On one view, once one has a proportionality requirement, necessity may add nothing; on another view, any test which incorporates necessity is one which will all too easily see necessity trump proportionality. However, it may well be that it is right to retain necessity as a requirement, provided that it is borne firmly in mind that it is one of two hurdles which have to be cleared.“(Lord Neuberger MR)
In Kazakhstan Kagazy PLC v Zhunus  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.
“ In a case such as this where very large amounts of money are at stake, it may be entirely reasonable from the point of view of a party incurring costs to spare no expense that might possibly help to influence the result of the proceedings. It does not follow, however, that such expense should be regarded as reasonably or proportionately incurred or reasonable and proportionate in amount when it comes to determining what costs are recoverable from the other party. What is reasonable and proportionate in that context must be judged objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party. This approach is first of all fair. It is fair to distinguish between, on the one hand, costs which are reasonably attributable to the other party’s conduct in bringing or contesting the proceeding or otherwise causing costs to be incurred and, on the other hand, costs which are attributable to a party’s own choice about how best to advance its interests. There are also good policy reasons for drawing this distinction, which include discouraging waste and seeking to deter the escalation of costs for the overall benefit for litigants.”
LITIGATING IN A PROPORTIONAL MANNER
In December 2014 the series “Proportionality & Survival for Litigators” started.
“I have not found any guidance for litigators on how the requirement for “proportional” costs will affect their work and practices. In short there is, so far as I can tell, no guidance at all on how litigators can, and undoubtedly must, change to adapt to the fact that “disproportionate” costs are not going to be recovered.”
- The first post looked at “litigating within a budget”
- The second post looked at, among other things, “The TOWIE effect” and set out five practical steps that could be taken.
- The third asked – Does every firm need a “Proportionality Tsar?”
- The fourth post put forward one argument “Claim only what you can prove”
- The fifth post gave a further eight points for litigators to consider.
SO WHERE ARE WE NOW?
Still very much in the same situation.
I said when I started this series I stated
“I have not found any guidance for litigators on how the requirement for “proportional” costs will affect their work and practices. In short there is, so far as I can tell, no guidance at all on how litigators can, and undoubtedly must, change to adapt to the fact that “disproportionate” costs are not going to be recovered”
This still remains the case nearly three years later. The cases reported in the interim show that bills are being reduced dramatically. New ways of working have to be developed.
TWELVE PRACTICAL STEPS
It is easy to point to cases where the courts have criticised parties for disproportional conduct. It is far more difficult to point to practical steps that litigators can take to avoid criticism.
1. Tell the client about proportionality
The client should be warned about the need for costs to be proportional at the outset and of the real dangers of disproportional costs will not be recovered.
2. Any step or strategy must be considered against the requirement for proportionality
There are numerous examples of cases being conducted where applications are made “strategically” rather than with the aim of helping a party prepare for trial. Before any strategy is adopted consider:-
(i) The costs involved;
(ii) Whether there is any possibility that the costs could be classified as disproportional;
(iii) Whether the steps proposed could lead to a total costs
3. Remember that litigation is essentially about preparing for trial
Given the extensive nature of the pre-action protocols the court is entitled to assume that, once proceedings are issued, the parties are going to trial. The parties should really be preparing for trial. The rules should not be used as an end in themselves but as a mechanism to ensure a fair trial
4. If you are the claimant make an early, and realistic, Part 36 offer as early as you can
If the claimant beats its own offer then costs are awarded against the defendant on an indemnity basis for the period after the offer expired. The “proportionality” test does not apply to indemnity costs.
5. Make proportionality your watchword
Proportionality does not mean “cheap” or “without value” or “the lowest possible price”. In essence it means “value for money”. The need to ensure that the litigation strategies adopted represent value for money should be central to the litigation strategy.
6. Claim only what you can prove
- Merely putting figures in a Schedule supported by a statement of truth does not prove damages.
- Putting a section in the witness statement stating “I agree the figures in the schedule” does not prove damages.
- The evidence (witness or documentary) has to set out the factual foundation for the loss.
- This includes a factual foundation to show that there was a loss and the amount of that loss.
7. If in doubt don’t take the case on
Every litigator I know has cases that they wish they had never taken on. They suck energy, motivation (and money) from the practice. They are often (wrongly) given (or demand) priority over other clients.
I recommend you read Lawyerist The Bad Clients You Don’t Take Will be the Best Money You Never Made.
8. Every step has to be taken with proportionality in mind.
POSTS ON PROPORTIONALITY ON THIS BLOG
- Don’t stop me now: Cliff’s costs budgeting:incurred costs; the cap on the costs of budgeting and preparation for trial.
- Incurred costs proportionality and budgeting means a case should not be struck out.
- Extraordinary amount of costs causes judge great concern: RBS costs estimates greatly exceeded – now £129 million.
- Proportionality, assessment and premiums: The need for careful case planning: £72,320 reduced to £24,604. (Considers the case of Rezek-Clarke -v- Moorfields Eye Hospital NHS Foundation Trust  EWHC B5 (Costs)).
- Proportionality: We will, we will rock you.
- Proportionality II : The extended album edition.
- Proportionality does not affect a proportionate costs order.
- Proportionality and costs: a judgment on appeal
- Costs management and proportionality in action. (Considers Agents’ Mutual Limited -v- Gascoigne Halman  CAT 21)
- Costs budgeting: Proportionality; city firms & counsel when there is £16 million at stake (Considers the case of Group Seven Limited -v- Nasir  EWHC 629 (Ch)
- Costs budgeting, proportionality and group litigation (Various Claimants -v- Sir Robert McAlpine & others  EWHC 3543 (QB)).
- Proportionality, assessment and the costs of budgeting: senior courts costs office decision today (BP -v- Cardiff & Vale University Local Health Board  EWHC B13 (Costs)).
- Receivers, Extensions of time and rigorous costs budgeting to ensure proportionality
- A clever ploy: hire expensive lawyers and then argue costs are disproportional.
- Proportionality, costs and payments on account: a High Court decision.
- Proportionality, assessment and the costs of budgeting
- Proportionality, bundles & £3 million spent on costs.
- More on summary assessment of costs and proportionality.
- A working example of proportionality in practice.
- Rigorous costs budgeting to ensure proportionality.
- Enterprise, Proportionality, witness statements & unnecessary costs.
- Proportionality and survival for litigators Part 1
- Proportionality and survival for litigators Part 2.
- Proportionality and survival for litigators 3
- Costs, proportionality and getting the budgets right.
- Costs, parties & Proportionality
- An assessment of costs bites the dust.
- Proportionality and costs: it applies to big cases as well.
- What is meant by proportionality?
- Costs budgeting & proportionality when there is £16 million at stake.