How to apply the test of proportionality, an SCCO decision

In XX & Anor v Young & Anor [2025] EWHC 2073 (SCCO) (04 August 2025), Costs Judge Nagalingam considered the approach to the proportionality test and how the same should be applied at Detailed Assessment.  

The Claimant's were seeking a costs claim as pleaded in the sum of £517,985, following a line by line assessment the bill total was reduced to £339,565.16.  

Costs Judge Nagalingam observed that "reductions of costs of around one third are not untypical following a full line by line detailed assessment of costs in the SCCO". 

In the claim at hand the Defendant had contended that the costs claim was disproportionate and the court was "invited to assess the costs on a line-by-line basis before 'standing back' and consider the proportionality of that assessment, making further reductions on the grounds of proportionality".  

The SCCO made clear that proportionality was not a prospective exercise but at the initial assessment hearing a preliminary indication on proportionality was given to aid the parties in settlement discussions. Costs Judge Nagalingam's preliminary view "was that the costs as claimed appeared to be disproportionate based on the bill as drawn". Specifically he indicated that "the internal time claim [...] represents a section of the bill vulnerable to proportionality reductions if this assessment is not compromised, or the line by line assessment results in a disproportionate figure". 

The court stated that it was only areas where it was concluded that the assessed sum is disproportionate where further reductions may apply.  

Speed-Read 

For those wanting a quick summary, the relevant issues can be summarised as follows: 

1. Proportionality is no longer a prospective test. The court may undertake a line by line assessment then 'stand-back' and consider whether any elements of the assessed costs appear disproportionate. The court retains the ability to account for proportionality during the course of an assessment but must be careful not to lead to a result which would amount to double-counting of deductions. 

2. Proportionality should be considered against the CPR 44.3(5) factors namely; sums in issue (not the damages recovered), value of any non-monetary relief, complexity, conduct, wider factors (such as reputation or public importance) and vulnerability.  

3. Where the paying party maintains proportionality arguments the CPR 44.3(5) factors should be analysed.  

4. Consideration should be given to the true value of a claim. Here there was a range of possible outcomes with the court concluding that the claim value was closer to the £149,000 settlement than the £2.5m fully pleaded claim. 

5. Conduct means any conduct which generate costs, good or bad. For example, here the Defendant had elected to keep liability a live issue and had not made early protective settlement offers. In the face of this it was reasonable for the Claimant to continue with litigation.  

6. Vulnerability includes age, language barriers and injury recovery. Here the court also considered the isolating effect of the Covid-19 pandemic as a factor supporting vulnerability.  

7. The paying party is entitled to raise the conduct of their opponent within the costs proceedings, however, it cannot seek relitigate issues from the substantive litigation such as seeking rulings on misconduct or exaggeration in the main action. The receiving party could have elected to press their case but did not.  

8. The SCCO revisited the internal communications which had been identified as vulnerable to proportionality reductions. It was claimed at £27,724.50 plus VAT, on the line by line assessment reduced to £22,946.15 plus VAT but following the application of proportionality was reduced to £10,000 plus VAT, a near reduction of 2/3s.  

9. A reduction of receiving party costs by one third on a line by line assessment was 'not untypical' in the SCCO.  

Approach to Proportionality 

Costs Judge Nagalingam set out the approach to be adopted for the test of proportionality: 

14. The Court of Appeal has given clear guidance as to the approach to be adopted, as per West v Stockport NHS Foundation Trust [2019] EWCA Civ 1220 in that the line by line assessment must be completed first. 

15. The Court of Appeal did not categorically rule out accounting for proportionality during the course of an assessment, but one must be careful not to facilitate a result which would amount to double-counting of deductions. 

16. In this matter, I have consistently applied reductions only where I consider the costs were unreasonably incurred or unreasonable in amount, knowing at all times I would likely be addressed on proportionality following the conclusion of the line by line assessment. 

17. In that regard, I am satisfied that I have already accounted for factors that might otherwise sit outside of those set out in CPR 44.3(5). For the sake of completeness, the notion of factors sitting outside of CPR 44.3(5) was considered in West in so far that the wording of the rule refers to "if", as opposed to "if, and only if..". 

18. Thus one is reminded that "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; 

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

(f) any additional work undertaken or expense incurred due to the vulnerability of a party or any witness." 

19. These factors therefore require analysis in circumstances where the Defendant maintains their proportionality arguments. 

The SCCO proceeded to consider the CPR 44.3(5) factors.  

In relation to the sums in issue, the claim had been pleaded at £2.5million. The court considered that there was a notional bracket of possible outcomes between £149,000 to £2.5m and determined that the sums in issue were "realistically [...] closer to £149,000 than the £2.5m fully pleaded claim".  

The court next noted that there was no non-monetary relief in issue in the proceedings.  

The Costs Judge then turned to complexity: 

"30. It cannot be said that the litigation was complex but clearly it was not straightforward either. Liability was in dispute and even absent any arguments as to the speed and extent of the Claimant's recovery, the injuries sustained were significant. Medical complexity in this regard creates legal complexity in quantifying general damages and past losses, as well as the work required to establish what future heads of loss might be. 

31. Further, absent a definitive position on liability or judgment being entered for the Claimant, liability remained a factor under consideration." 

Subsequently the court considered additional work generated by the conduct of the party. It was noted that it was a choice by the Defendant to keep the issue of liability live until compromised at the JSM and that it was also the Defendant's choice not to make earlier settlement proposals. Costs Judge Nagalingam was unequivocal "until a Claimant is in receipt of a proposal to settle then there is little by way of reasonable criticism that may be raised where they continue with the litigation until a suitable offer is made or the matter finally decided by a decision of the court." 

Thereafter, the court considered that there were no relevant wider factors such as reputation or public importance at play.  

The court then addressed vulnerability. It was accepted that the Claimant was vulnerable through a combination of isolation (during the Covid-19 pandemic), injury recovery (the injuries sustained were significant), the Claimant's age (he was elderly) and language barriers (he was a non-English speaker). All of this meant that "at times the receiving party solicitors were dealing with a vulnerable client." 

Surveillance and Exaggeration - Can you raise misconduct and exaggeration after settlement? 

In the case the Defendant served surveillance evidence and attempted to seek findings of misconduct and exaggeration in the substantive litigation. The order for costs included a term that "neither party be precluded from raising issues of conduct in the assessment of costs". Costs Judge Nagalingam stated that he "was bound to re-address conduct" because of this. 

He considered thus: 

"41. This is in fact a term I addressed when conducting the early stages of this assessment in that I pointed out that the parties did not need to agree to the inclusion of such a term in the order because any party preparing points of dispute or points of reply is entitled to raise the conduct of their opponent in any event. 

42. During the course of the assessment it became clear the paying party was under the misapprehension that the inclusion of that term was a gateway to seek rulings on assessment as to misconduct and exaggeration in the main action. 

43. I rejected the assertion that on an assessment of costs I could retroactively conduct a trial of an issue that the Defendant had alleged but neglected to run to trial as an argument. 

44. To be clear, there was no dispute as to how the collision occurred or the injuries sustained. Those facts were contemporaneously and independently recorded as accepted facts. 

45. The alleged exaggeration flowed from surveillance evidence which appeared to suggest the Claimant had made a physical recovery which was better than that reported to examining experts, and the drawing of inference by the Defendant that subsequent settlement at a sum much less than that pleaded was wholly attributable to the surveillance evidence obtained. 

46. The fact that the agreed terms of settlement express damages as net of contributory negligence clearly demonstrate agreement that the gross value was in excess of £149,000 such that even if an exaggeration argument was made out, it would not extinguish the fact that the gross settlement sum must be in excess of £149,000. 

47. Thereafter, having declined to engage in a de facto retroactive trial of exaggeration as an issue, I must be careful not to descend into speculation as to explanations that might be proffered for apparent inconsistencies with covertly observed symptoms and reported symptoms. 

48. I need only recognise that in certain cases covertly observed behaviour may be capable of explanation which is not inconsistent with reported medical evidence, but most importantly had the Defendant wished to press their case they did not need to settle or otherwise could have explored settlement terms which included a percentage based costs order, for example. 

Decision 

Following consideration of the relevant issues it was concluded as follows: 

"49. Having taken into account all of the pleaded points of dispute and replies, the skeleton arguments, the oral submissions of Ms McDonald, Mr Mason and Mr Scott, and the factors in CPR 44.3(5) I have arrived at the conclusion that the assessed sum is disproportionate in all the circumstances. 

50. Following West, the approach of the assessing court should not be to simply declare what the proportionate figure is, but rather consider where the bill might be reduced further and if such further reductions yield a proportionate figure. 

51. I am grateful to the parties for providing me with an agreed version of the re-cast bill (following the line by line assessment) which has enabled me to consider whether there are phases or areas of the bill which ought to be reduced further. 

52. I have settled upon one area of costs that invites further scrutiny, being internal communications. Importantly, this is a tranche of costs identified in the pleaded points of dispute. 

53. Following the line by line assessment, this element of the bill has been reduced from £27,724.50 plus VAT down to £22,946.15 plus VAT (see column AU total at Tab 14 of the original bill and the assessed bill). 

54. With reference to the concerns regarding internal communications previously expressed in this matter, highlighted both in my earlier written judgment and comments made during the course of this assessment, I conclude that a further reduction ought to apply to this portion of costs such that the allowed £22,946.16 plus VAT is reduced to £10,000 plus VAT on a broad brush basis which allows for a reasonable amount of internal communication taking into account the facts and circumstances this case. 

55. The net effect of this reduction is that the base profit costs (excluding costs of drawing and checking the bill) are reduced to £169,534.99 (excluding VAT) and the assessed bill total is reduced to £324,029.77. 

56. I consider these sums to represent the reasonable and proportionate amount." 

The claim highlights how proportionality may be applied and how it can be considered in relation to specific elements of the costs claim, such as here where proportionality reductions were made solely to the internal communications time (and a sizeable reduction at that!).  

It's important to understand at assessment if the Judge is approaching the same with proportionality in mind or with an intention of revisiting the same following a line by line assessment. Where the court addresses proportionality in the line by line assessment they need to ensure there is no double counting of any deductions made. If the Defendant maintains proportionality then the court will likely have to look at such matters again with reference to the CPR 44.3(5) factors. This does not mean, however, that the costs allowed after a line by line assessment are automatically disproportionate.  

Further, if the Defendant wishes to challenge the receiving party's conduct or make allegations of exaggeration then the appropriate vehicle is within the main litigation and not the costs litigation. The court will not relitigate issues from the substantive proceedings. A paying party may, however, raise issues of conduct on assessment in relation to the costs claimed.  

The decision is a useful example of the court's approach to proportionality and how the CPR 44.3(5) factors will be analysed. This is useful guidance for practitioners.