1st August 2019
In this latest in our series of articles on this topic , Gwendoline Davies reviews a recent case which sheds some light on the courts’ practical application of the notoriously elusive concept of ‘proportionality’ in the assessment and recovery of litigation costs.
Malmsten v Bohinc  is the first High Court case to consider the proportionality test set out in the Civil Procedure Rules (CPR) and it confirms a number of important elements of the assessment. In particular, whilst the assessment of any reduction in recoverable litigation costs made on grounds of proportionality will be highly dependent upon the facts of any individual case, this decision offers some useful practical insight as to how and when the courts ought to apply the proportionality test.
Under the CPR , costs incurred in the course of litigation are considered proportionate if they bear a reasonable relationship to:
The appellant in Malmsten v Bohinc was ordered to pay the respondent’s costs following a relatively brief dispute. (The parties were the sole shareholders in a small jewellery company and did not see eye-to-eye on the future of the business. The litigation lasted only 3 weeks and was concluded at a 30 minute hearing.)
Despite the swift resolution of this matter, the respondent claimed in excess of £60,000 in costs, which were reduced to £47,500 by the Master in the first instance. On appeal, the High Court criticised the Master’s approach to proportionality, setting out some key practical points in the process. The High Court then ultimately slashed the bill even further to the significantly lower (and more ‘proportionate’) amount of £15,000.
The judge noted the following points, which should help any party involved in litigation to better assess the likelihood and level of any costs recovery:
This latest case evidences an attempt, on the part of the High Court, to inch ever-closer to a reliable and conclusive approach by which parties, practitioners and the courts can attempt to accurately assess proportionality and therefore the level of likely costs recovery.
In any event, whilst every case will turn on its own facts, parties should note that reductions made on proportionality grounds can often be significant indeed. To protect themselves as much as possible, parties should take specialist advice as to settlement and/or alternative dispute resolution tactics which might be able to offer pre-emptive costs protection; and they should manage their cases efficiently and effectively at all times so that, when it comes to costs assessment and recovery, their conduct cannot be used against them.
 Our previous articles on this topic are available here.
  EWHC 1386 (Ch)
 CPR 44.3(5)