Court rulings provide further guidance on proportionality and fundamental dishonesty

We look at two recent costs decisions in two areas that have been subject to much controversy since the recent rule changes.

Proportionality

First, there was a ruling on proportionality in the Central London County Court, on appeal from the Senior Courts Costs Office. This came only weeks after the Court of Appeal's Judgment in BNM -v- Ltd [2017] Civ 1767 (we reported on this here), which disappointed many by not giving firm guidance on how to apply the new proportionality rule in CPR 44.3(5). Now, we have at least a potential way forward.

Celebrity couple Brian and Anita May brought a private nuisance action against a neighbour, arising out of noisy and intrusive construction works going on next door. The Mays initially claimed for between £50,000 and £100,000, but then accepted a Part 36 offer of £25,000 prior to the filing of the defence. Costs were just over £208,000.

At first instance detailed assessment, Master Rowley reduced their costs to £35,000 plus VAT. He did this by following the example in previous assessments by first of all assessing the bill's reasonableness on an item-by-item basis, before further reducing the overall figure to one he considered proportionate.

Now, HHJ Dight CBE and Master Whalan have ruled on appeal that the original Master misapplied and misinterpreted the proportionality test. CPR 44.3(5) had intended a fresh start and the whole of the wording needed to be considered. In coming to a judgment on proportionality, a costs judge should have consideration to r.44.4 as well, which includes the factors to be taken into account when considering whether the sums are proportionate. The plain intention when the new rule was introduced was for there to be a holistic approach. Therefore, costs might be proportionate even if they exceeded the sums in issue if they were reasonable in relation to the specified factors. In this case, the costs judge had considerably undervalued the sums in issue and gave too little weight to the complexity of the litigation, which required detailed expert evidence. The Master also reduced the costs disproportionately in light of the early settlement, in what could have been a hard-fought litigation.

The Judges undertook a new assessment, giving due weight to the factors in CPR 44. They did not reduce the costs of preparing the bill nor the court fees and gave a smaller reduction to expert fees and profit costs, resulting in a figure of £75,000 plus VAT, which they considered proportionate.

(1) Brian May (2) Anita May -v- (1) Wavell Group Ltd (2) Farid Bizzari (2017) CC (Central London) Before His Hon Judge Dight CBE and Master Whalan.

Fundamental Dishonesty

In another area of costs law causing some confusion presently, there has been a recent decision on fundamental dishonesty and how it should be applied. The original ruling in this claim found that the Claimant had not undermined his whole claim because he was found to be fundamentally dishonest in one area of his special damages - specifically gardening costs. Judgment in his favour was £27,000 and the Defendant was ordered to pay his costs up to 31 December 2016 and 50% thereafter.

The first instance recorder stated that he needed "evidence of weight" before he could make a finding of dishonesty. Although he found the Defendant to be "muddled, confused and careless" about this aspect of the claim, the rest of the claim (which was agreed to be genuine) was not contaminated by it.

Overturning this decision, Mr Justice Knowles in the High Court has ruled that the fact that the main claim was genuine was "neither here nor there." Further, he ruled that "the judge made no findings capable of supporting a conclusion that if the whole claim was dismissed it would result in substantial injustice." The dishonest aspect of the claim had been substantial (thousands of pounds) and supported in a schedule with a statement of truth signed by the Claimant.

The decision was overturned and the claim dismissed under s.57 of the Criminal Justice and Courts Act 2015.

London Organising Committee for the Olympic and Paralympic Games (in liquidation) -v- Sinfield [2018] EWHC 51 (QB)

Although these are not decisions from the highest courts, they do at least provide an indication about how courts are now beginning to interpret the new rules day to day. Nevertheless, many are still waiting for firmer guidance from higher up.