Should additional liabilities be considered when considering proportionality?
17th January, 2017
Prior to the Jackson reforms, Costs Practice Directions defined the relationship between additional liabilities and proportionality. Additional liabilities were very rarely reduced on grounds of proportionality however the new proportionality test is subjective and there is little continuity.
The new rules are silent in respect to the application of the proportionality test to additional liabilities. There are significant classes of cases where additional liabilities are recoverable between the parties to which the new proportionality test ostensibly applies. Primarily they are run off cases where the CFA was pre 1st April 2013 (on work undertaken after 1st April 2013 where proceedings were not entered into before 1st April 2013) and Mesothelioma cases.
Although the law has developed, the Masters at the SCCO appear to be in disagreement as to the relationship between the new proportionality test and additional liabilities.
Master Gordon Saker in BNM v MGN Limited  EWHC B13 (Costs) stated that “When applying the new test of proportionality, the court need not consider the amount of any additional liability separately from the base costs”. His view was endorsed by Master Simons who in Rezek-Clarke v Moorfields Eye Hospital NHS Foundation Trust  EWHC B5 (Costs) stated that “The Claimants submit that when looking at the question of proportionality I should look separately at profit costs and additional liabilities. That may well have been the case prior to 1st April 2013 but in my judgment the position is now different. Costs must include those costs that are claimed in the bill of costs that are presented to the court”.
Conversely, in King v Basildon & Thurrock University Hospitals NHS Foundation Trust  EWHC B32 (Costs) Master Rowley came to the conclusion that “When considering whether the costs in this case were proportionate, the relevant costs to consider … were in my judgment the base costs, exclusive of success fee and ATE premium”. This decision was followed by Master Brown in Murrells v Cambridge University NHS Foundation Trust  EWHC B2 (Costs) in which he said “In the circumstances I respectfully disagree with the decision of Master Gordon-Saker in BNM as to the application of the new proportionality test to additional liabilities and therefore also as to the need to aggregate base costs with additional liabilities”.
The current uncertainty over the position we are left in should go some way to being resolved when BNM is heard in the Court of Appeal in October 2017.