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Additional Liabilities reduced on basis of Proportionality

The issues of proportionality and recoverability of additional liabilities were brought to the forefront on 3 June 2016 in the judgment handed down by Master Gordon-Saker in the case of BNM v MGN Limited [2016] EWHC B13 (Costs).

At the part heard Detailed Assessment hearing in November 2015  following the line by line assessment, the Master assessed costs at £167,389.45, including an ATE premium of £61,480.00.

The Defendant argued that these sums were disproportionate and should be reduced further. Master Gordon-Saker sided with the Defendant concluding that the sums which had been allowed as reasonable in the first instance were disproportionate and were approximately twice the sum which would be proportionate.

At the adjourned hearing in April 2016, the Master applied the new test of proportionality and considered the factors under CPR 44.3, reducing total costs to the sum of £83,964.80 and the ATE premium to £30,000.00. Apart from the court fee, each of the individual items of costs was reduced by about one half.

In paragraph 21 of his judgment, Master Gordon-Saker observed that on an assessment of costs on the standard basis, proportionality should prevail over reasonableness. He commented that the court should first make an assessment of reasonable costs, having regard to the individual items in the bill, the time reasonably spent on those items and the other factors listed in CPR rule 44.5(3). The court should then stand back and consider whether the total figure is proportionate. If the total figure is not proportionate, the court should make an appropriate reduction. He concluded by stating that when applying the new test of proportionality the court need not consider the amount of any additional liability separately from the base costs.

As a result of this judgement it now appears that the test of proportionality applies to those cases where additional liabilities remain recoverable on an inter partes basis. Further this case provides some interesting guidance in relation to the application of the new test of proportionality, which thus far has been an area where there has been a lack of clarity.

To read the full judgment: