FIFTH BIRTHDAY REVIEW 6: PROPORTIONALITY: THE POSTS AND 12 PRACTICAL STEPS
The series “Proportionality & Survival for Litigators” started in December 2014. At the outset I said it could be a long-running and difficult series – it is definitely still ongoing. It remains the case that little written is on proportionality, particularly on how to achieve proportionality, and yet it is often the first thing that a costs judge (or paying party) will say when faced with a bill of costs. I cannot say that we are anywhere near to finding the answers to the conundrum posed by proportionality. Part of the reason may be that the questions are not being asked, or addressed, and only become acute when costs are sought on assessment.
“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 considet
- The sixth post asked could project management help?
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.
“Proportionality” has to be the litigator’s watchword. The test is – can I justify this to the most parsimonious of costs judges? If so how? Record your decision on proportionality and be prepared to justify it twice (on budgeting and on assessment).
9. Always keep in mind how much a case is really worth
Value is only one part of proportionality. The reality is that it will become the dominant element in most cases. The cases on which (claimant lawyers in particular) are going to lose money are those which are pitched high but where damages were low.
Read F and S -v- TH [2016] EWHC 1605 (QB) where a claimant was cross-examined in relation to the schedule of damages:-
“The thrust of Mr Fewtrell’s cross examination was that the schedule was a fiction. I have little doubt that is the case. Indeed, the point was recognised on behalf of both Claimants…”
“F said that the figures were not his. The difficulty for him is that the claim is his. The documentation was verified with a statement of truth. I must take it that the schedule was prepared on his instructions and in accordance with them, and put forward with his authority. I had no evidence it was not.”
Also read Duncum -v- Churm (HH Judge Harris QC, Oxford County Court 12th September 2014)
“ It is appropriate to observe that, when composing schedules of damages in personal injury cases, the authors of such schedules will of course put the case towards the top end of the bracket which it may legitimately inhabit. It is tactically unsound to cast a case too low at an early stage and all professional litigators clearly understand that reductions are likely to be necessary from theoretically arguable calculations in order to quantify a realistic view of the value of the claim, in order to negotiate productively, and in order to appear reasonable and thus persuasive should the case come to trial. But there must be a sound and honest evidential basis for an initial schedule. It is not appropriate, as a tactic, to quantify, for example, a case with a true worth of £200,000 at £1,000,000, five times as much. This is because questions of honesty apart, which are of course important, such a discrepancy will be unsupported by evidence and will go far beyond putting a valuation at the top end of a legitimate bracket, and because such an approach is likely to produce an unfruitful negotiation and an unnecessary trial. A Defendant might quite understandably say, well if that is what you are after, there is no point in our talking. Another consequence, though not an inter-parties matter, is that an honest Claimant is likely to be acutely disappointed.”
10. Know when you have exceeded any phase of the costs budget.
Few firms have a system in place to let it know when a particular phase had been exceeded. A phase is a good guide to proportionality.
Read:-
- Costs budgeting: It’s just a phase I’m going through.
- Overspending on your costs budget? Better tell your client.
11. Proportionality is not an excuse to do a bad job
Undoubtedly the litigator’s job is more difficult. It now requires a considerable amount of judgment. It is not possible to run a case on “autopilot” following procedure. Each step has to be costed and justified.
My view is that this offers considerable opportunities to litigators. Those with judgment in particular. (The ones without judgment will not be reading this post so no-one should feel insulted). To run litigation profitably will require considerable knowledge, nouse and skill. A process of simply handing the case to the lowest level possible without training and supervision, is unlikely to be effective.
12. When planning a case: start at the end and work backwards
I have always been sceptical of “case plans”, however these are now essential. In essence they are the “advice on evidence”. Before proceedings are issued (if you are the claimant):-
- What will you need to prove at trial?
- What evidence is needed to prove it?
- How much will it cost to obtain that evidence?
It helps to remember that civil procedure is, essentially, preparation for trial. In the vast majority of cases that trial never, in fact, takes place. However proportionality means, in essence, the minimum steps that can be taken to get the matter to trial.
- 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 considet
- The sixth post asked could project management help?
PROPORTIONALITY OUTSIDE THE SERIES
There have been a large number of posts outside the series.
- The Brian May costs case: Proportionality appeal did not bite the dust.
- Clinical negligence: recoverability of premiums and proportionality: Court of Appeal decision
- Costs budgeting – proportionality test applies – even in a case for £350 million.
- Solicitor and own client assessments: proportionality considered.
- 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 [2017] 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 [2016] CAT 21)
- Costs budgeting: Proportionality; city firms & counsel when there is £16 million at stake (Considers the case of Group Seven Limited -v- Nasir [2016] EWHC 629 (Ch)
- Costs budgeting, proportionality and group litigation (Various Claimants -v- Sir Robert McAlpine & others [2015] EWHC 3543 (QB)).
- Proportionality, assessment and the costs of budgeting: senior courts costs office decision today (BP -v- Cardiff & Vale University Local Health Board [2015] 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
It seems to me that there is some danger of the cart leading the horse here. The client should only incur costs which he is happy to pay, as happens in jurisdictions where there is no costs recovery. Of course it is right to warn the client if certain costs are unlikely to be recovered on assessment, but there will be instances where the client nevertheless (properly) instructs that the work should be done. It would be disturbing if the client was expending costs in the expectation that they would be fully recovered, not least because a favourable outcome should never be assumed.
I would add that in my experience, litigation more often suffers from being underfunded than overfunded (although of course there are some clients who insist on leaving no stone unturned).