Application of the principles of proportionality (Malmsten v Bohinc)

In Malmsten v Bohinc [2019] EWHC 1386 (Ch), the High Court allowed an appeal in part against an order for costs made following detailed assessment. The judgment helpfully sets out the approach on summary and detailed assessment and on an appeal and serves as a useful reminder to practitioners of the principles which apply. The court found that the costs judge had failed to give effect to the costs orders by including costs which were outside its scope and had focused too much on the conduct of the paying party (CPR 44.3(5)(d)) when assessing the proportionality of the costs claimed. The appellate court conducted its own assessment and reduced the costs awarded by nearly seventy per cent. In all other respects the appeal was unsuccessful.

At a costs seminar last night, hosted by Hailsham Chambers, Imran Benson, the barrister who represented the successful applicants, provided a practical insight into an approach that may assist the courts in understanding the arguments being made on proportionality.  Suggesting to the court a proportionate figure might be persuasive.  In doing so, the work a reasonable solicitor would need to undertake was laid out together with the hours required and a reasonable hourly rate was then applied. In this case, such workings resulted in a proportionate figure being £12,000, as compared to the costs being at that stage, of £47,500. The approach appears to have paid off as the judge awarded just £15,000 plus VAT.

 An analysis of the judgment by Imran Benson is available below and was previously published by Lexis®PSL Dispute Resolution on 12 June 2019.

What are the practical implications of this case?

Although this decision is not revolutionary, it does confirm a few things:

  • it reasserts that proportionality can be used to apply a large reduction and should be a separate test at the end (compared to May v Wavell [2017] Lexis Citation 462)
  • it applies to non-money cases as well as money cases
  • VAT and costs of drawing the bill are not relevant
  • incidental cannot be used to massively widen the scope of recoverable costs

What was the background?

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 three 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.

 What did the court decide?

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 

 

Case details

  • Court: High Court, Business and Property Courts, (Ch)
  • Judge: Marcus Smith J (sitting with an assessor, Master Rowley)
  • Date of judgment

 

Imran Benson is a barrister at Hailsham Chambers. He represented the successful appellants. 

 

 

 

Filed Under: Costs & Funding

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