On 15 January 2015 the Technology and Construction Court (Akenhead J) clarified some significant issues surrounding the application of the new proportionality rule as regards costs assessment.
In Savoye and Savoye the court had to make a summary assessment of the costs. The claimant had secured its judgment for the full sum claimed (c. £900,000). The only outstanding issue was the meaning of a term in the Housing Grants, Construction and Regeneration Act 1996. The claimant's costs bills totalled c. £200,000 for four hearings. Three of the hearings were for the application for summary judgment issued by the claimant. The time billed by the claimant's solicitors included 111 hours of partner time (c. £58,000), 223 hours of associate time (c. £83,000) and counsel's fees of £27,800.
Akenhead J 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".
- "In the context of time spent, the Court can have regard to the extent to which the lawyers for the party claiming costs and the party itself has incurred cost and spent time before the Court proceedings in connection with any other contractual dispute resolution machinery agreed upon between the parties. Here, for instance, there was provision for adjudication, in which the parties were required to pay their own costs of that process. If and to the extent that the work in connection with the adjudication duplicates the work done in the Court proceedings, or, put another way, if the same issue arises and was addressed in the Court proceedings as in the adjudication, it may be disproportionate to expend anew what is repetitious effort and time in the later proceedings". The case revolved around a relatively narrow issue (the interpretation of a term in a particular statutory provision). 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 bill of over £200,000, 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 as follows: partner time to 20 hours, associate time to 160 hours and counsel’s fees to £18,800. Overall, the costs were effectively halved (c. 96,000).
This is an important judgment for paying parties in relation to commercial cases where the number of hours spent by partners, costs against hearing length ratios, levels of counsel fees and the "team approach" to case handling are the main points of contention.