Master Rowley has held that, when applying the proportionality test under CPR 44.3 (in force for cases and work done after 1 April 2013), additional liabilities (such as ATE insurance premiums and success fees) should be excluded. Additional liabilities fell to be assessed separately. This decision goes against the decision of the Senior Costs Judge in BNM v MGN Ltd  EWHC B13 (Costs) that additional liabilities had to be considered when assessing proportionality.
The case related to a clinical negligence claim that went to a three-day trial and resulted in a damages award of £35,000 plus costs to the claimant. On assessment of the claimant’s bill of costs, the master allowed costs amounting to £249,889.83 as being reasonable. Of that sum, base costs amounted to £88,337.58. Having decided that he would only consider base costs (and not the total sum of £234,251.08) when considering proportionality, he expressed the view that base costs of £88,337.55 were almost always going to be proportionate for a clinical negligence case which reached a three-day trial. However, had additional liabilities been included and proportionality been assessed against the total sum of £234,251.08, he was not convinced he would have considered that sum to be proportionate.
The master based his decision on several factors, including the wording of CPR 44.3(5) (that “costs incurred are proportionate if they bear a reasonable relationship to …”) and the definition of costs in CPR 44.1, which only refers to profit costs and disbursements but not to additional liabilities. In the circumstances, as the proportionality test and the definition of costs had been recast with the expectation that additional liabilities would no longer be recoverable and would be excluded, such liabilities were not caught by the proportionality test. He said that this interpretation was consistent with the costs management arrangements in CPR 3, which only apply to base costs. Moreover, additional liabilities were still allowed in some cases and, if such sums were to be assessed in the aggregate with base costs using the proportionality test in CPR 44.3, they would be effectively irrecoverable in practice.
The Court of Appeal will hear the appeal in BNM later this year and should, hopefully, resolve the uncertainty left by two conflicting decisions on whether additional liabilities should be included when applying the proportionality test. This issue remains of importance in cases where additional liabilities remain recoverable.