Two recent appeal decisions on the proportionality of costs under Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) have shifted the balance back slightly in favour of the receiving party, but still represent a substantial benefit to paying parties compared to the pre-LASPO regime.

BNM v MGN Limited [2017] EWCA 1767 was decided in November. The defendant had settled an injunction claim on terms that included a payment of £20,000 in damages, plus costs. The initial bill of costs came to slightly over £241,000. The Senior Costs Judge undertook a line-by-line assessment and arrived at a figure of just over £167,000. In a second stage, he further reduced the bill to just under £84,000 on grounds of proportionality. He also held that the LASPO proportionality test applied not only to the base costs incurred on an hourly rate basis, but also to additional liabilities in the form of any success fee or ATE premium incurred before LASPO came into effect on 1 April 2013. Additional liabilities incurred after that date are no longer recoverable under the LASPO regime. On appeal, the Court of Appeal unanimously held that the new test did not apply retrospectively to pre-LASPO liabilities.

Meanwhile, decisions in a number of further cases had followed the Senior Cost Judge’s two-stage approach, notably May & May v Wavell Group PLC & Bizarri [2016] EWHC B16 (Costs). In a claim for private nuisance, the former Queen guitarist Brian May accepted the defendant’s Part 36 offer of £25,000. He initially sought costs of slightly over £208,000. On assessment, the costs judge first reduced the costs on a line-by-line basis to just under £100,000 before making a further reduction to £35,000 on grounds of proportionality.

On appeal ([2018] EWHC 23), HHJ Dight held that the two-stage approach was incorrect. Rather, the proportionality test had to be applied alongside the line-by-line analysis. It was not a ‘blunt instrument’, but had to be assessed by reference to the specific factors set out in CPR44 as well as the overall picture presented by the case. He criticised the costs judge for failing to specify how he had weighted each factor in arriving at the final figure and increased the costs award to £75,000.

Paying parties will be concerned to see the most publicised case of a significant reduction on the grounds of proportionality being reversed and the costs liability more than doubled. However, paying parties must not lose sight of the wider facts that the final award was only 36 per cent of the costs claimed and still nearly £25,000.00 lower than the figure the cost judge arrived at on a line by line assessment. This means that the proportionality test still delivered a substantial reduction. Paying parties can maximise their chances of a satisfactory outcome by drawing the attention of the costs judge to any factors set out in CPR44 that point towards the need for a substantial reduction on the facts of the case at hand.