Proportionality, Ainsworth and Indemnity Costs
The SCCO have considered in detail the approach to proportionality at Detailed Assessment where there was a partial indemnity costs order and much of the Points of Dispute had been struck owing to a failure to particularise the same (as per Ainsworth v Stewarts LLP [2020] EWCA Civ 178) which had resulted in large parts of the Bill of Costs been allowed as drawn.
In Stockler & Anor v The Corporation of the Hall of the Arts and Sciences [2025] EWHC 2262 (SCCO) (05 September 2025) pertained to a dispute about terms of payment for permanent seat holders at the Royal Albert Hall. The claim concluded with the Claimant ordered to pay the costs of the claim and counterclaim to be assessed on a standard basis until 8 June 2023 and an indemnity basis from 9 June 2023. Indemnity costs were awarded on the basis of the Claimant’s unreasonable behaviour.
At the initial Detailed Assessment the court had concluded that:
a. It was reasonable for the Defendant to have instructed solicitors in London 2.
b. It was unreasonable for a Grade A to have conduct in Part 1 of the Bill (standard basis) and Grade B was allowed but for Part 2 of the Bill (indemnity basis) Grade A conduct was reasonable.
c. The Claimant had inexplicably failed to distinguish properly what was offered for Part 1 and what was offered for Part 2, which was important given the basis of assessment differed.
d. A significant number of Points of Dispute raised by the Claimant were “insufficiently particularised such that the defendant was unable properly to understand and/or to respond to them. See Ainsworth v Stewarts Law LLP [2020] EWCA Civ 178. That meant a significant number of items in both Parts 1 and 2 of the bill were allowed as claimed.”
The court, however, ran out of time to provide judgment on the issue of proportionality following the line by line assessment.
Here the Claimant had submitted a proportionate sum of £8,100 against the assessed amount of £55,581.38. The SCCO ultimately held that the line by line assessment had given sums which were proportionate and no further reductions were therefore made.
Speed Read
The key issues in the case can be summarised as follows:
1. The approach to proportionality is for the court to stand back following a line by line assessment and determine whether the total figure (excluding unavoidable costs) was proportionate. If it is then no further action is needed. If it is not then the court should consider different categories of costs and make reductions as appropriate. This is the approach conferred in West and Demouilpied -v- Stockport NHS Foundation Trust [2019] Costs LR 1265.
2. The relevant factors as to proportionality are those in 44.3(1) namely; i) the sums in issue, ii) value of any non-monetary relief, iii) the complexity of the litigation, iv) conduct of the paying party, v) any wider factors and vi) vulnerability. The factors in 44.4(1) should also be considered namely; i) conduct, ii) amount or value of any money or property involved, iii) importance of matter to all parties, iv) complexity, difficulty or novelty of questions raised, v) skill, effort, specialised knowledged and responsibility involved, vi) time spent on the case, vii) place and circumstances in which work or part of it was done and viii) receiving party's last approved or agreed budget. The rules do not confer any greater status on any particular factor.
3. The test of proportionality need not to be applied to costs awarded on an indemnity basis. Where costs are claimed on both a standard and indemnity basis it is appropriate to distinguish between the two and only consider proportionality as to the costs claimed on a standard basis.
4. Here the SCCO stated that “it is difficult to see how the costs which have been assessed as being reasonable should afterwards by considered to be disproportionate.” Whilst reasonableness and proportionality are conceptually distinct there is often overlap between them.
5. Where Points of Dispute have been struck out for lack of particularisation (as per Ainsworth) and by virtue of this elements of the costs claim had been resultantly allowed unchallenged it would be unfair to the receiving party to allow a paying party to “reverse their failures by obtaining a reduction to the reasonable costs, in essence, through ‘the back door’”. This did not mean, however, that “whenever any Point of Dispute is dismissed on Ainsworth principles that automatically means that the costs concerned cannot be reduced on the ground of proportionality. Whether or not there should be any reduction, and the extent of it, will depend on the facts and circumstances of each case […]”. Here this was not a decisive factor.
6. Conduct does not need to be bad conduct to be relevant to proportionality. Here the Claimants had strongly fought the claim throughout and this had contributed to the work required and costs incurred.
7. The court should do its best to work out an approximate value with reference to any monetary and non-monetary relief. It was accepted that value of any non-monetary relief would be difficult to assess.
8. Complexity does not require a matter to be difficult. Here the issues relating to the contractual dispute required specific expertise to present. It had been reasonable to engage a London 2 firm.
9. There were wider reputational points for the Royal Albert Hall and also a prospect of claims from other seat-holders. This was relevant but did not mean the Defendant could spend unlimited funds in its defence or counterclaim.
10. The court should have some regard to the level of reduction following the line by line assessment. Here such an assessment result in a 27% reduction to the costs claim which it was noted to be “significant, but not uncommon in a standard basis assessment”.
What is clear is that parties need to be prepared to address the CPR 44.3(5) factors on a standard basis assessment. It remains open to the court to address proportionality within the line by line assessment (as explained in XX & Anor v Young & Anor [2025] EWHC 2073 (SCCO) (04 August 2025)).
A robust Bill of Costs backed by strong Points of Reply and effective advocacy are all required to best defend any prospective proportionality challenges. Practitioners also need to be aware of the approach to proportionality and bear in this mind during the course of the period of conduct of the case. It can be helpful, for example, to highlight to the opponent where additional costs are been generated by virtue of their conduct. Do not be afraid to give notice.
Approach to Proportionality
Deputy Costs Judge Joseph considered proportionality and the legal framework for the same. It was noted that on a standard or indemnity basis the court would not allow costs which had been unreasonably incurred or were unreasonable in amount (CPR 44.3(1)). In addition, on a standard basis the court would only allow costs which were proportionate, resolving doubt in favour of the paying party (CPR 44.3(2)).
The SCCO set out the relevant proportionality factors at CPR 44.3(5):
“(5) 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.”
And CPR 44.4(1):
"44.4 – (1) The court will have regard to all the circumstances in deciding whether costs were –
(a) if it is assessing costs on the standard basis –
(i) proportionately and reasonably incurred; or
(ii) proportionate and reasonable in amount….
(2) In particular, the court will give effect to any orders which have already been made.
(3) The court will also have regard to –
(a) the conduct of all the parties, including in particular –
(i) conduct before, as well as during, the proceedings; and
(ii) the efforts made, if any before and during the proceedings in order to try to resolve the dispute;
(b) the amount or value of any money or property involved;
(c) the importance of the matter to all the parties;
(d) the particular complexity of the matter or the difficulty or novelty of the questions raised;
(e) the skill, effort, specialised knowledge and responsibility involved;
(f) the time spent on the case;
(g) the place where and the circumstances in which work or any part of it was done; and
(h) the receiving party's last approved or agreed budget."
The SCCO reflected the Judgment in West and Demouilpied v Stockport NHS Foundation Trust:
"10) The right approach to costs assessment
87. We are anxious not to restrict judges or force them, when assessing a bill of costs, to follow inflexible or overly-complex rules…..Taking the various points made above and drawing them together, we give the following guidance on an appropriate approach.
88. First, 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: see Rogers[1] at para 104. 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 rule 44.3(5) and rule 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 a risk of double-counting."
Here the Bill of Costs a whole following the line by line assessment totalled £120,513.88. Part 1 which was to be dealt with on a standard basis totalled £55,581.38.
The Arguments
The Claimant conceded that the issue of proportionality should only relate to costs to be assessed on a standard basis, that was Part 1 of the Bill of Costs.
The Claimant contended that:
1. The monetary value of the claim was less than £10,000.
2. That the court had dismissed the Claimants’ claim for an account on the grounds it would have been disproportionate to pursue it.
The Claimant submitted that the figure of £55,581.38 was disproportionate and proposed £8,100 as a proportionate figure. This was on the basis a proportionate figure should be calculated by reference to between one and half and two times the amount of the value of the claim (£4,800 to £6,400), an additional figure of £1,000-£1,500 for the non-monetary element and a similar amount for the Claimant’s conduct. This gave a figure of between £6,800 and £9,400 with £8,100 as the midway point.
The Defendant’s submissions were thus:
"28. Mr Hughes accepted that in relation to the monetary element of the claim, the sum in dispute was small and, in particular, was a figure which would ordinarily mean that the case would have fallen within the financial limit (£10,000) of the small claims track. He also reminded me that the DDJ had recognised this but, at the same time, had allocated the matter to the fast track. By doing so, there can be no doubt at all that the DDJ considered that the matter was unsuitable for the small claims track.
29. As to the non-monetary element of the claim, and the value to be attributed to it, Mr Hughes accepted that it was always difficult to place a financial value on such a claim but that some assistance could be gleaned from the decision of the DDJ to allocate the matter to the fast track. The notional financial limit placed on the fast track was £25,000 with the result that it could be inferred from the DDJ's decision that he considered that the total value of the claim, including the non-monetary component of it (i.e. the claim for an account) was within the fast track limit.
30. As to complexity, Mr Hughes pointed out that the summary judgment applications had generated detailed skeleton arguments from both Counsel then instructed. It inevitably had some complexity given that it required the court to construe the contractual arrangements between the parties. Mr Hughes submitted that I had considered during the line-by-line assessment the amounts claimed by the defendant in respect of the fees of Counsel incurred throughout the claim and whether they, or any of them individually, were unreasonably incurred and/or unreasonable in amount. Having undertaken that exercise, he submitted that it was difficult to see how those fees, in particular, could or should now be further reduced on the ground of proportionality.
31. Mr Hughes also reminded me of my decision that it had been reasonable for the defendant to have instructed a firm of solicitors based in London 2. He submitted that following that decision, it inevitably brought with it a higher cost, which for the purposes of proportionality, could not be ignored. If it was reasonable to instruct a London 2 firm, it cannot then be said to have been disproportionate. He also emphasised my decision concerning which grade of fee earner should be allowed for the day to day conduct of the matter in Part 1 of the bill.
32. As to the conduct of the claimants, Mr Hughes pointed out that the effect of the DJ's decision as to costs was that their unreasonable behaviour had not started until 9 June 2023. That meant that he could not and did not submit that any part of their conduct prior to that date should be regarded as unreasonable. Notwithstanding that, the evidence showed that they had fought the case hard (as they had been entitled so to do) but that had resulted in considerable cost. Put another way, Mr Hughes submitted that neither of the claimants had given up lightly.
33. As to any wider factors involved in the proceedings, such as reputation or public importance, Mr Hughes pointed out that the claimants themselves had accepted that there might be some damage to the Hall's reputation had the claim succeeded. He reminded me that during my decision as to hourly rates, I had accepted and concluded that it would have been naïve to consider, if the claimants' contentions were correct, and the Hall had wrongly operated the Ticket Return System and not fully compensated permanent seat holders for a number of years, that there was no one else waiting in the wings to bring similar claims against the Hall. Mr Hughes submitted that it was a viable and reasonable response by the Hall to defend a claim which could, if it had succeeded, have given rise to reputational damage and to other claims by other seat holders who then jumped on the same band wagon.
34. Taking all the relevant factors into consideration, Mr Hughes submitted that the value of the claim (and particularly the monetary part of it) ought not take on any special significance over and above any of the other factors. The amount arrived at for Part 1 of the bill following the line-by-line assessment was both reasonable and proportionate and should not be reduced further on the ground of proportionality."
Decision on Proportionality
The SCCO gave consideration to the approach to proportionality following the line by line assessment. It was concluded that:
- Proportionality had been taken into account to a certain extent by the hourly rates to be allowed. It was noted that although reasonableness and proportionality were conceptually distinct, there could be an overlap and this ought to be taken into account when re-examining proportionality after a line by line assessment.
- The court rejected the notion that proportionality should be based on arbitrary multiples of the overall value of the claim but did accept sums in issue and the value of any non-monetary relief were relevant factors (amongst others). The right approach was that set out in West chiefly that the court should look at categories of costs (excluding unavoidable items) and considering each category whether the costs were disproportionate.
- The starting point was to identify the work which was reasonably carried out, disregarding all work under the indemnity costs order. The court noted the procedural work undertaken during the period of the standard basis costs order.
Deputy Costs Judge Joseph stated that:
“The result of the line-by-line assessment is that the reasonable costs for the work which I have set out in paragraph 41 above is £55,581.38. I must now, pursuant to paragraphs [90] and [91] of West, assess the proportionality of that figure by reference to the applicable rules. If, and only if, I conclude that the reasonable sum is also a proportionate sum, no further adjustment can be made. It is only if I conclude that the reasonable sum is disproportionate that I must then carry out a further assessment, which is not to 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. In this case, the matter was not cost budgeted and it seems to me that the phase, "specific periods where particular costs were incurred, or particular parts of the profit costs" in paragraph [90] of West is the most apt for this case.”
Attention turned to whether the reasonable costs were also proportionate costs. The court stated that:
- The rules do not give monetary value any special status greater than any other factors.
- The value of non-monetary relief is hard to assess. The claim was allocated to the Fast Track so the reasonable value taking into account the monetary and non-monetary relief was in the region of £25,000.
- The claim had some complexity in relation to the correct construction of the contract and contractual arrangements. Whilst the claim was not especially difficult it did require specialist expertise.
- It would be “difficult to see how costs which have been assessed as being reasonable should afterwards be considered to be disproportionate”.
- The Claimants “were not people who gave up lightly”. They were fully aware that substantial work in the claim was likely. Whilst this conduct at the outset was not unreasonable, conduct did not need to be unreasonable to be a factor to be taken into account. The Claimants had fought hard and this had costs consequences.
- It was accepted that the Defendant could view the action as having a significant, genuine and concerning impact upon its wider reputation and would have an eye on both this and prospective further actions brought by other seat holders.
- The line by line assessment had already resulted in a 27% reduction, this was a significant but not uncommon reduction.
- The fact that a significant number of Points of Dispute had been struck out, owing to a lack of particularisation as per Ainsworth was relevant. The Judge determined that:
"57. I consider that there is one further factor which I must take into account as part of all the circumstances of the case. As I have recorded, a significant number of the Points of Dispute were dismissed pursuant to Ainsworth because they were insufficiently particularised. Put another way, I found that the defendant was unfairly disadvantaged by the very limited details which the claimants had elected to provide in support of those Points of Dispute. The purpose of Points of Dispute is to raise credible and justifiable challenges to items in the bill, in this case, on the grounds of both reasonableness and proportionality (because Part 1 was to be assessed on the standard basis). The Points of Dispute failed, in material respects, and on several occasions, to set out a proper basis on which many items in the bill were challenged.
58. It is difficult to see how the issue of overall proportionality could then be used by the claimants to reduce the reasonable costs after the court has ruled that Points of Dispute relating to so many items in the bill did not contain viable challenges. Such an outcome would be inherently unfair to the defendant as the claimants would obviate and potentially reverse their failures by obtaining a reduction to the reasonable costs, in essence, through "the back door". It is important to stress that this is not a decision which should be construed as meaning that whenever any Point of Dispute is dismissed on Ainsworth principles that automatically means that the costs concerned cannot then be further reduced on the ground of proportionality. Whether or not there should be any reduction, and the extent of it, will depend on the facts and circumstances of each case, and each case will be a matter for the evaluation of the judge. In this case, Mr Hughes is correct to submit that this factor has not taken on any decisive significance."
The court found that the costs of £55,581.38 were not disproportionate and as a consequence there was no need to undertake a further assessment.
