Costs: Court of Appeal guidance on "new" proportionality test & recovery of ATE premiums
West & Demouilpied v Stockport NHS Foundation Trust
Court of Appeal
17 July 2019
Practitioners have been waiting for Court of Appeal guidance on the "new" test of proportionality in the assessment of costs since it was introduced in April 2013 under LASPO. There was much anticipation then in advance of yesterday's judgment in West & Demouilpied v Stockport NHS Foundation Trust that the long awaited guidance would finally arrive. William MacKenzie reviews the judgment to see whether we are now any clearer on how the test should operate.
Two cases were heard by the Court of Appeal at the same time. Both related to clinical negligence claims which had settled without the need for court proceedings. The dispute centred on the level of the recoverable ATE premium in each case. It will be recalled that ATE premiums in clinical negligence claims remained recoverable from defendants post LASPO.
The first case (West) concluded with a damages payment of £10,000. The ATE premium claimed was £5,088 in a total bill of costs of £31,714.44. The second case (Demouilpied) concluded with a damages payment of £4,500. A bill of costs was presented totalling £18,376.36 and the recoverable element of the premium was again £5,088.
The ATE policies taken out were block-rated policies. This means they were not bespoke, but had a fixed premium set by reference to a wide "basket" of cases, rather than on their own merits.
Proportionality under LASPO
The Court of Appeal then went on to consider the issue of proportionality more broadly, and that when undertaking this exercise there are elements which should be removed from that part of the assessment.
They said there were certain costs which were unavoidable or which have "an irreducible minimum, without which the litigation could not have been progressed". An example was given of court fees.
The Court of Appeal said that when considering proportionality:
First, the judge should go through the bill line-by-line, assessing the reasonableness of each item of cost. If the judge considers it possible, appropriate and convenient when undertaking that exercise, he or she may also address the proportionality of any particular item at the same time.
At the conclusion of the line-by-line exercise, there will be a total figure which the judge considers to be reasonable (and which may, as indicated, also take into account at least some aspects of proportionality). That total figure will have involved an assessment of every item of cost, including court fees and the ATE premium.
The proportionality of that total figure must be assessed by reference to both r.44.3(5) and r.44.4(1). If that total figure is found to be proportionate, then no further assessment is required. If the judge regards the overall figure as disproportionate, then a further assessment is required. That should not be line-by-line, but should instead consider various categories of cost, such as disclosure or expert's reports, or specific periods where particular costs were incurred, or particular parts of the profit costs.
At that stage, however, any reductions for proportionality should exclude those elements of costs which are properly regarded as unavoidable, such as court fees, the reasonable element of the ATE premium in clinical negligence cases, and the like.
The judge will undertake the proportionality assessment by looking at the different categories of costs (excluding the unavoidable items noted above) and considering, in respect of each such category, whether the costs incurred were disproportionate. If yes, then the judge will make such reduction as is appropriate. In that way, reductions for proportionality will be clear and transparent for both sides.
Once any further reductions have been made, the resulting figure will be the final amount of the costs assessment. There would be no further stage of standing back and, if necessary, undertaking a yet further review by reference to proportionality. That would introduce the risk of double-counting.
This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.