Concept of ‘proportionality’ hits costs recovery in ‘low value’ claims

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Master Rowley of the Senior Courts Costs Office has warned that claimants will receive no more than a contribution to the costs they have incurred in lower value claims.

The guidance in Kazakhstan Kagazy plc v Zhunus [2015] EWHC 404 (Comm) suggests the correct standard is the lowest amount of costs that a party could reasonably have been expected to spend to ensure its case was conducted and presented proficiently. However, Master Rowley held that in lower value claims this was too generous to the claimant. Instead, he said that a proportionate sum (which is what is now allowed by court rules in place since April 2013) would be a mere contribution to the claimant’s costs in such claims.

In the case concerned – a private nuisance claim that settled for £25,000 – the claimants’ costs, on assessment, were initially reduced from £208,000 to £99,655.74. However, applying the proportionality test in CPR 44.3(5), Master Rowley found that there was no noteworthy factual or legal complexity involved, no additional costs related to the defendant’s conduct and no wider factors to consider. Consequently, he held that the £99,655.74 figure was disproportionate and, taking into account the expert evidence required and the fact the claim settled early, he further reduced the costs award to £35,000 plus VAT. The precise figures are not available, but this will leave the successful party funding at least £166,000 of its own costs – significantly more than it recovered in compensation.

There is no definition of a ‘low value’ claim but our view is that anything less than £100,000 is likely to be at risk of being characterised as such. This is one of the first cases giving some clear guidance and highlighting the risks associated with pursuing such claims.

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