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Proportionality. Back on the agenda.

West v Stockport NHS Foundation Trust [2019] EWCA Civ 1220 principally concerned After-The-Event (ATE) insurance premiums which, since the Jackson reforms implemented in 2013, have been largely irrecoverable.

West v Stockport NHS Foundation Trust [2019] EWCA Civ 1220

The Court allowed two appeals by Claimants whose claims to recover such premiums had been unsuccessful. The judgment dealt with the unique position of ATE premiums in clinical negligence cases, as applied to the specific facts of the combined appeals. The court also made wider observations about proportionality which are applicable to costs in all forms of civil litigation.

CPR44.3(5) was introduced as part of the Jackson costs reforms in April 2013, with the intention of defining proportionality and reversing Lownds v The Home Office [2002] EWCA Civ 365 which had effectively excluded the test of proportionality where costs had been awarded on the indemnity basis and had explained:

“There has to be a global approach and an item by item approach. The global approach will indicate whether the total sum claimed is or appears to be disproportionate having particular regard to the considerations which Pt 44.5(3) states are relevant. If the costs as a whole are not disproportionate according to that test then all that is normally required is that each item should have been reasonably incurred and the costs for that item should be reasonable. If on the other hand the costs as a whole appear disproportionate then the court will want to be satisfied that the work in relation to each item was necessary, and, if necessary, the cost of the item was reasonable”

Post-Jackson the Court, when conducting a summary assessment, will have regard to the test in CPR44.3(2)(a), and costs may be disallowed as disproportionate in amount, even if reasonably or necessarily incurred.

The White Book comments that “as yet no guidance has been provided by the Court of Appeal as to how the test of proportionality introduced on 1 April 2013 by r.44.3(2) and (5) should be applied”1 . The wait appears to be over.

In West, the Court noted that Rogers v Merthyr Tydfil County Borough Council [2006] EWCA Civ 1134 remained good law. There, Brooke LJ had said that “necessity here is, we think, not some absolute litmus test” and that “There can be no touchstone of a proportionate use of resources so understood, without an eye to the context in which any such resources are expended”.

In relation to the specific question of the recoverability of ATE premiums, the Court in West synthesised the following conclusions from the authorities (at para.56):

  1. Disputes about the reasonableness and recoverability of the ATE insurance premium are not to be decided on the usual case-by-case basis. Questions of reasonableness are settled at a macro level by reference to the general run of cases and the macro-economics of the ATE insurance market, and not by reference to the facts in any specific case.
  2. Issues of reasonableness go beyond the dictates of a particular case and include the unavoidable characteristics of the ATE insurance market.
  3. District judges and cost judges do not have the expertise to judge the reasonableness of a premium except in very broad-brush terms, and the viability of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces.
  4. It is for the paying party to raise a substantive issue as to the reasonableness of the premium which will generally only be capable of being resolved by way of expert evidence.

In case where an ATE policy has been assessed as reasonable, that cost cannot then be considered disproportionate (paras.79-80). It followed that costs which were an inevitable part of the litigation would be less amenable to challenge.

The Court observed: “when working through the various categories of cost to assess proportionality, the judge may have some overall figure in mind that would be proportionate. That figure will remain unchanged: the reductions to achieve it will simply be by reference to other elements of cost, not the ATE insurance premium” and “when undertaking the proportionality exercise, it is those elements of cost which are not inevitable or which are not subject to an irreducible minimum which will be vulnerable to reduction on proportionality grounds in order that the final figure is proportionate. Such costs are, however, likely to be costs which have been incurred as a result of the exercise of judgement by the solicitor or counsel. Those are precisely the sorts of costs which the new rules as to proportionality were designed to control.”
It follows that some items may be left out of an analysis of whether costs are proportionate (within the meaning of CPR44.3(2)(a)) because they are unavoidable and inherently reasonable.

The Court’s conclusion included the following general guidance:

88. the judge should go through the bill line-by-line, assessing the reasonableness of each item of cost. If the judge considers it possible, appropriate and convenient when undertaking that exercise, he or she may also address the proportionality of any particular item at the same time. That is because, although reasonableness and proportionality are conceptually distinct, there can be an overlap between them, not least because reasonableness may be a necessary condition of proportionality. This will be a matter for the judge. It will apply, for example, when the judge considers an item to be clearly disproportionate, irrespective of the final figures.

89. At the conclusion of the line-by-line exercise, there will be a total figure which the judge considers to be reasonable (and which may, as indicated, also take into account at least some aspects of proportionality). That total figure will have involved an assessment of every item of cost, including court fees, the ATE premium and the like.

90. The proportionality of that total figure must be assessed by reference to both r.44.3(5) and r.44.4(1). If that total figure is found to be proportionate, then no further assessment is required. If the judge regards the overall figure as disproportionate, then a further assessment is required. That should not be line-by-line, but should instead consider various categories of cost, such as disclosure or expert's reports, or specific periods where particular costs were incurred, or particular parts of the profit costs.

91. At that stage, however, any reductions for proportionality should exclude those elements of costs which are properly regarded as unavoidable, such as court fees, the reasonable element of the ATE premium in clinical negligence cases, and the like. Specifically, therefore, if the ATE premium is assessed as reasonable, it will not fall to be reduced by any further assessment of proportionality.

92. The judge will undertake the proportionality assessment by looking at the different categories of costs (excluding the unavoidable items noted above) and considering, in respect of each such category, whether the costs incurred were disproportionate. If yes, then the judge will make such reduction as is appropriate. In that way, reductions for proportionality will be clear and transparent for both sides.

93. Once any further reductions have been made, the resulting figure will be the final amount of the costs assessment. There would be no further stage of standing back and, if necessary, undertaking a yet further review by reference to proportionality. That would introduce the risk of double-counting.


1 White Book 2019 vol.1, 44.3.3. p.1391

Graeme Kirk / 18th Jul 2019


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