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Reasonable and proportionate costs – what does this actually mean?

Well, simply put, there is no definitive answer. What is reasonable and proportionate will differ on a case-by-case basis. There is, as is the case in most areas of litigation, various judgments that have offered some form of definition, but, by its very nature, are not conclusive.

Nonetheless, in the recent case of Discovery Land Company LLC & Ors v Axis Specialty Europe SE [2021] EWHC 2146 (Comm), Peter MacDonald Eggers QC (sitting as deputy High Court Judge) did confirm what is not meant by proportionate and reasonable costs. He determined that reasonable and proportionate costs do not mean the lowest amount possible and that it should not automatically entail that a Judge, approving a budget, must allow the lowest amount which a party could reasonably be expected to spend.

Controversially, Mr MacDonald Eggers did depart from the often-cited decision of Mr Justice Leggatt in Kazakhstan Kagazy Plc v Zhunus [2015] EWHC 404 (Comm).

“What is reasonable and proportionate [to recover from the other party] must be judged objectively. The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party.”

Mr Macdonald Eggers explained that the rationale behind his departure from the approach laid down in Kazakhstan Kagazy Plc was that, in the context of costs management, “the court should allow some flexibility to the parties to ensure that their conduct of the action is not unnecessarily and potentially unfairly hampered by an unrealistically low assessment or by only the lowest assessment of what would constitute reasonable and proportionate expenditure”. Therefore, determining that “expenditure which is within a reasonable and proportionate range is still reasonable and proportionate even if it is not at the lower end”.

Practically then, what can we take away from this?

Well, if you are a receiving party then this is music to your ears. Even though Mr MacDonald Eggers’ determination was made within the context of costs management, there is scope for a wider application within costs proceedings generally. Often what is considered “reasonable and proportionate” is almost, inevitably, argued within Points of Dispute and / or Replies. So, if you do receive Points of Dispute that have proposed a reduction (in the context of reasonableness and proportionality) to the lowest amount possible (in line with Kazakhstan Kagazy) then this determination, whilst not binding, would dispel that position.

As you can see, proportionality and reasonableness are extremely ambiguous areas within costs and more often than not is the cornerstone of most costs disputes. A&M Bacon Ltd have a wealth of experience, both in adverse and recovery matters, which enable us to provide detailed and tailored advice in the context of proportionality and reasonableness.

For further information, please do get in touch with the team regarding any queries you may have in relation to any of your legal costs requirements on 01733 350 880, or by email mail@aandmbacon.co.uk. For more information please do visit our website www.aandmbacon.co.uk.

Published 16 September 2021

Author – Amy Avory

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