At Last! A High Court Decision on Proportionality

June 7, 2019

At Last! A High Court Decision on Proportionality

In Malmsten v Bohinc [2019] EWHC 1386, the High Court has considered the new proportionality test and used it to make a swingeing reduction. A bill which on an item by item assessment had been assessed at about £47,500 + VAT was reduced to £15,000 + VAT.

The underlying litigation was a dispute between the two shareholders of a small company which led to a simple application for an inevitable order to break the deadlock. The litigation lasted 3 weeks and led to a 30 minute hearing. The bill for this was c.£62,500 + VAT. On provisional assessment the figures were reduced a little and at the detailed assessment re-hearing reduced a little more, but remained substantial.

On appeal to the High Court, Marcus Smith J decided that much of the work done was not “incidental” to the eventual proceedings since they were not “subordinate” to them. But most readers will be interested in his approach to proportionality.

He made the following points:

• The principles to be applied at a summary assessment and detailed assessment were the same, albeit the latter was with greater detail.

• The proportionality test should take place after the item-by-item assessment. This could also apply to a summary assessment.

• VAT and costs of drawing the bill should be excluded from the proportionality assessment.

• The criteria in 44.3(5) was the test on proportionality.

• If conduct was going to justify recovery of a figure which was prima facie disproportionate, it is necessary to identify how the conduct resulted in additional costs.

• Approving an extract in Friston, the Court might find it helpful to consider what a client of adequate but not extravagant means might pay.

• Proportionality is a separate check on costs, beyond that of reasonableness and necessity.

Comment

So although this decision is not revolutionary, it does confirm a few things: (1) it reasserts that proportionality can be used to apply a large reduction and should be a separate test at the end (cf May v Wavell); (2) it applies to non-money cases as well as money cases; (3) VAT and costs of drawing the bill are not relevant; (4) incidental cannot be used to massively widen the scope of recoverable costs.

Imran Benson represented the successful appellant.

Click here to read the full judgment

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