Client Alert: Guidance on the new proportionality rule

Savoye and Savoye v Spicers Ltd (2015) EWHC 33 (TCC)

Judge Akenhead sitting in the Technology and Construction Court (TCC) provided some much needed guidance on the application of the new proportionality rule on assessment of costs. In Savoye and Savoye v Spicers Ltd [2015] EWHC 33 (TCC) the court more than halved the costs claim on summary assessment.

Circumstances

The claimant had obtained a judgment in the sum of £889,300 and claimed costs in the sum of £201,791.

The amount of time claimed for by Savoye's solicitors was:

Judgment

Judge Akenhead held that:

In light of CPR r 44 and for the purposes of costs assessment, the court should have regard to the following when assessing proportionality and the reasonableness of costs:

• The relationship between the amount of costs claimed and the amount in issue: "...for example, if the amount in issue in the claim was £100,000 but the costs claimed for are £1 million, absent other explanations the costs may be said to be disproportionate".
• The amount of time spent by solicitors and barristers in relation to the total length of the hearing. "For example, if 3,000 hours of lawyers’ time is incurred on a case which involves only a one day hearing, that might well point to a disproportionate incurrence of time spent".
• The court can have regard to the extent to which the lawyers (for the party claiming costs and the party itself) have incurred cost and spent time before the court proceedings in connection with any other contractual dispute resolution machinery agreed upon between the parties.

This case revolved around a relatively narrow issue (the interpretation of a term in a particular statutory provision) which the parties had been unable to resolve despite an arbitration prior to commencement of proceedings.

“The issue and arguments in the court proceedings were substantially the same which had previously been raised in the arbitration between the parties ...the costs of the court proceedings could have been relatively modest, taking into account that the legal team knew exactly what the issue was about.”

• The extent to which the case was a test case. The present was not, though it elicited some helpful points.
• The importance of the case to either party. “If for instance an individual or a company is being sued for everything which he, she or it is worth, it may not be disproportionate for that individual to engage a QC even if the amount in issue is objectively not very large". Here, the commercial existence of the parties did not depend on the outcome of the case.
• In light of the above, a costs claim of £201,791 albeit in relation to a claim worth just under £900,000, was disproportionate. Excessive partner, associate and counsel time had been spent on a narrow and already known issue.

The costs were reduced on summary assessment as follows:

Keoghs comment

This is an important judgment for paying parties in relation to the application of the new test of proportionality upon assessment, especially where the number of hours spent by partners, levels of counsel fees and the "team approach" to case handling are in issue.