Proportionality is one of the most important, and often misunderstood, principles in modern costs law. Even where costs have been reasonably incurred, they may still be reduced if they are not proportionate to the case as a whole.

Understanding how the proportionality test operates is essential for anyone involved in litigation, particularly in high value or complex matters where costs can quickly escalate.

What do the Civil Procedure Rules say about proportionality?

The starting point is the Civil Procedure Rules, specifically CPR 44.3.

Under CPR 44.3(5), costs are considered proportionate if they bear a reasonable relationship to:

• The sums in issue
• The complexity of the litigation
• Any additional work generated by the conduct of the paying party
• Wider factors such as reputation or public importance
• Any non-monetary relief sought

This means that proportionality is not simply about whether work was necessary. It is about whether the overall level of costs is justified in the context of the case.

How is the proportionality test applied in practice?

In a cost assessment, the court follows a two-stage approach:

1. Reasonableness: Were the costs reasonably incurred and reasonable in amount?
2. Proportionality: Is the total figure proportionate when viewed globally?

This distinction is critical.

A cost may be reasonable when considered in isolation, but still be reduced when the court steps back and looks at the overall figure.

This is often described as a “stand back” exercise. After considering the Bill line by line, the court assesses whether the total costs figure is proportionate.

Does proportionality involve a line by line assessment?

There is often confusion about how proportionality interacts with detailed assessment.

The court will typically carry out a line by line assessment of the Bill of Costs, considering each item individually. This involves looking at:

• The work done
• The time spent
• The hourly rate applied

However, proportionality is not applied to each particular item in isolation.

Instead, the court considers the proportionality of any particular item at the same time as the overall figure, but retains the ability to reduce costs globally after reviewing the Bill line by line.

This means that even if each individual item appears reasonable, the court may still reduce the total if it considers the costs excessive overall.

What guidance has the Court of Appeal provided?

The modern approach to proportionality has been shaped by decisions of the Court of Appeal, particularly in cases such as:

• West v Stockport NHS Foundation Trust
• Demouilpied v Stockport NHS Foundation Trust 2019 EWCA Civ 1220

In West v Stockport NHS, the court emphasised that proportionality requires a global assessment rather than a purely mechanical approach.

This position was reinforced in Demouilpied v Stockport NHS Foundation Trust 2019 EWCA Civ 1220, where the Court of Appeal clarified that proportionality is not achieved simply by adding up reasonable items.

Instead, the court must stand back and consider whether, undertaking that exercise, the overall figure is justified.

The decision confirms that proportionality is a distinct and separate stage of the assessment process.

Why does proportionality matter so much?

Proportionality has become increasingly important because it allows the court to control costs even where work has been reasonably undertaken.

In practice, this means:

• Costs may be reduced even if they were necessary
• The court focuses on the overall figure, not just individual items
• Parties cannot assume full recovery simply because work was justified

This is particularly relevant in cases where:

• The sums in issue are modest
• The litigation has been conducted inefficiently
• Costs have escalated beyond what the court considers reasonable

What factors influence proportionality?

When applying the proportionality test, the court considers a range of factors.

1. The sums in issue

Higher value claims may justify higher costs, but this is not automatic.

2. Complexity of the litigation

Cases involving technical, financial or evidential complexity are more likely to justify significant costs.

3. Conduct of the paying party

Where the conduct of the paying party has caused delays or complications, this may justify higher costs, particularly where additional work generated can be demonstrated.

4. Wider factors

Issues such as reputation or public importance may justify costs that would otherwise appear high in purely financial terms.

5. Court fees and procedural steps

Even elements such as court fees and procedural requirements can form part of the overall proportionality analysis.

Can proportionality reduce otherwise reasonable costs?

Yes, and this is one of the most important practical points.

Even where:

• Time was properly spent
• Work was necessary
• Rates were reasonable

the court may still reduce costs if the overall figure is disproportionate.

This is why proportionality is often the most powerful tool available to a paying party at detailed assessment.

What does this mean for parties in litigation?

For receiving parties, the key is to ensure that costs are:

• Structured and justified from the outset
• Consistent with the scale and complexity of the case
• Supported by clear evidence of necessity

For paying parties, proportionality provides an opportunity to:

• Challenge excessive costs globally
• Focus on the overall figure rather than individual items
• Seek meaningful reductions even where item-by-item challenges are limited

How ARC Costs can assist

At ARC Costs, we regularly advise on proportionality issues across a wide range of litigation, including complex and high value disputes.

We assist with:

• Assessing whether costs are proportionate under CPR 44.3
• Preparing and defending Bills of Costs
• Identifying risks of reduction at detailed assessment
• Advancing or resisting proportionality arguments in points of dispute and replies
• Advising both receiving and paying parties

Our experience allows us to approach proportionality strategically, ensuring that costs are aligned with the demands of the case and presented in a way that maximises recovery.

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