Lord Neuberger has at last unveiled the new test regarding proportionality.

On the 1^st May the LAPSO bill received Royal Assent, with the provisions expected to come into effect in April 2013.

Lord Neuberger said in his recent speech that costs management will form a central component of litigation after April 2013, and it is proportionality that underpins both costs management and the court’s approach to litigation cost generally.

The new rule regarding proportionality that is to be added to the CPR is rule 44.4(5). This new rule will state as follows:

’44.4(5) Costs incurred are proportionate if they bear a reasonable relationship to:

(a) the sums in issue in the proceedings;

(b) the value of any non-monetary relief in issue in the proceedings;

(c)  the complexity of the litigation;

(d) any additional work generated by the conduct of the paying party;

and

(e)  any wider factors involved in the proceedings, such as reputation or public importance.’

Disproportionate costs that are necessarily or reasonably incurred should no longer be recoverable. This is effectively reversing the approach taken in ‘Lownds’.

Lord Neuburger stated “The law on proportionate costs will have to be developed on a case by case basis. This may mean a degree of satellite litigation while the courts work out the law….and I hope that it will involve relatively few cases.”

The likelihood on the ‘relatively few cases’ is somewhat slim. With rule changes like this satellite litigation is always rife, and it will be come April next year.

June 2012