In the recent case of Malmsten v Bohinc, the High Court confirmed for the first time its approach in relation to the ‘new’ proportionality test on the assessment of legal costs (as set out at CPR 44. 3(5)).
Case details
The case involved a dispute between two company shareholders. The litigation took just 3 weeks and resulted in a 30 minute hearing. The successful party’s claimed costs amounted to roughly £62,500, which was reduced following detailed assessment to £47,500.
On appeal to the High Court, Marcus Smith J gave a higher Courts’ view of the new rules on proportionality for the first time, and upon applying those principals sliced the recoverable costs down to £15,000 plus VAT.
Proportionality test
In summary, Marcus Smith J:
- Confirmed proportionality of the whole bill of costs claimed should be considered at the end of the assessment, after the reasonableness of each entry has been considered;
- Commented with approval on a passage from Friston on Costs giving an albeit “oversimplified” summary of the relevant question as “what would a reasonable client have been prepared to pay in all of the relevant circumstances?”; and
- Confirmed these principals apply to summary, as well as detailed assessments.
Comment
This guidance will be of wide interest to litigators and the broad brush reduction available will no doubt become a common argument deployed in submissions during summary assessments and in negotiations between parties on costs, particularly in cases where cost budgeting may not have happened.
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