Summary
Recent developments in the law of legal costs in England and Wales have reaffirmed the centrality of proportionality under the Civil Procedure Rules. Courts are increasingly applying a robust “stand-back” test during detailed assessments, scrutinising costs budgets, hourly rates, and litigation conduct. Key judgments in 2025— such as XX v Young, GS Woodland Court v RGCM, and Stockler v Hall of Arts and Sciences — demonstrate a clear judicial trend towards reducing excessive costs and enforcing discipline in budgeting. Legislative reforms, including the October 2024 CPR amendments, have further embedded ADR into the proportionality framework. Legal practitioners must now ensure that their cost strategies are evidence-based, realistic, and aligned with the complexity and value of the dispute, or risk adverse cost consequences.
Introduction
The principle of proportionality in legal costs continues to evolve in the jurisdiction of England and Wales, shaped by judicial interpretation, legislative reform, and practical application in litigation. As the legal landscape adapts to economic pressures, technological advancements, and procedural reforms, proportionality remains a cornerstone of cost assessment under the Civil Procedure Rules (CPR). This article explores recent developments in proportionality, including key case law, amendments to the CPR, and emerging trends in cost budgeting and detailed assessment.
The Legal Framework: CPR 44.3 and the Proportionality Test
The principle of proportionality is enshrined in CPR 44.3(2)(a), which provides that costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred. The test is further refined by CPR 44.3(5), which sets out five factors for consideration:
1. The sums in issue in the proceedings;
2. The value of any non-monetary relief;
3. The complexity of the litigation;
4. Any additional work generated by the conduct of the paying party;
5. Any wider factors, such as reputation or public importance.
These factors guide the court in determining whether the costs incurred bear a reasonable relationship to the matters at stake.
Recent Judicial Guidance: Case Law Developments
XX & Anor v Young & Anor [2025] EWHC 2073 (SCCO)
This decision by Costs Judge Nagalingam is a leading authority on the application of proportionality during detailed assessment. The claimant’s costs were reduced from £517,985 to £339,565.16 after a line-by-line assessment, and then further reduced to £324,029.77 on proportionality grounds. The judge clarified that proportionality is not a prospective exercise, but a “stand-back” review after detailed assessment. Importantly, the “sums in issue” were interpreted as a range of possible outcomes, not merely the final settlement figure. Internal communications were significantly reduced due to being disproportionate, highlighting the vulnerability of such claims.
GS Woodland Court GP 1 Ltd & Anor v RGCM Ltd & Ors [2025] EWHC 285 (TCC)
In this multi-party construction dispute, the claimant’s costs budget of £8.74 million was reduced to £4.2 million. Mr Justice Constable criticised the use of London 1 Grade A hourly rates of £1,089, which far exceeded the guideline rate of £566. The court rejected the argument that parity with opposing parties justified the inflated rates. Costs for items not supported by directions were disallowed, and the claimant was ordered to pay some of the defendants’ costs for the budgeting hearing. This case reinforces the judiciary’s intolerance for excessive and unjustified budgeting.
Stockler & Anor v The Corporation of the Hall of Arts and Sciences [2025] EWHC 2262 (SCCO)
Deputy Costs Judge Joseph rejected a mathematical approach to proportionality based on a multiple of the claim’s value (£3,200). Despite the modest claim, the assessed costs of £55,581.38 were upheld as proportionate. The court emphasised the importance of considering complexity, reputation, and wider factors, and justified the use of London solicitors. The judgment cautioned against double-counting deductions already made during line-by-line assessment.
Worcester v Hopley [2024] EWHC 2181 (KB)
Master Thornett reduced the claimant’s budget from £342,263 to £159,675, citing lack of proportionality and poor budgeting discipline. The overuse of senior fee earners and lack of delegation were criticised, and no costs were allowed for the budgeting hearing. This case serves as a warning against inflated or poorly reasoned budgets and highlights the importance of strategic cost planning.
Barry v Barry [2025] EWHC 819 (KB)
In a family contract dispute, the parents beat their own Part 36 offers and were awarded indemnity costs. The court allowed an upward variation of the costs budget due to a late amendment to the defence. The judgment distinguished between trial preparation and earlier phases when considering budget variations, reinforcing the importance of prompt applications for amendments.
Legislative Developments: CPR Amendments and ADR
The CPR underwent significant reform in October 2024, with amendments aimed at promoting Alternative Dispute Resolution (ADR). Notably, CPR 1.1(2)(f) now includes “promoting or using ADR” as part of dealing with cases justly and at proportionate cost. Further amendments to CPR 3, 28, and 29 empower courts to order or encourage ADR in fast track, intermediate track, and multi-track cases. Importantly, CPR 44.2(5)(e) now considers a party’s failure to engage in ADR as relevant conduct when assessing costs, potentially leading to adverse cost consequences. These changes reflect a broader policy shift towards efficiency and cost-effectiveness, reinforcing the role of proportionality in procedural management.
Case Law Trends: Exceptional Circumstances and Fixed Recoverable Costs
The extension of Fixed Recoverable Costs (FRC) in October 2023 has led to increased litigation over “exceptional circumstances” that justify departures from fixed limits. Courts have clarified that such claims require robust, evidence-backed arguments, not merely assertions of complexity or high expenditure. This development places greater responsibility on practitioners to ensure that cost budgets and recovery applications are strategically justified and proportionate to the case’s unique features.
Practical Implications for Legal Practitioners
1. Cost Budgeting Discipline
Practitioners must ensure that costs budgets are realistic, evidence-based, and proportionate to the issues in dispute. Courts are increasingly scrutinising budgets and penalising excessive or unjustified claims.
2. Hourly Rates Justification
Claims for rates above guideline levels must be supported by compelling justification. Courts are unlikely to accept parity with opposing parties as a valid rationale.
3. ADR Engagement
With ADR now embedded in the CPR’s overriding objective, parties must engage meaningfully in dispute resolution or risk cost penalties. Proportionality now extends beyond litigation conduct to pre-trial behaviour.
4. Detailed Assessment Strategy
During detailed assessment, practitioners should anticipate the “stand-back” proportionality review and prepare to defend the overall reasonableness of the assessed costs.
5. Client Communication
Clients must be advised of the risks associated with disproportionate costs, including potential reductions and adverse orders. Transparent budgeting and strategic planning are essential to managing expectations.
Conclusion
The principle of proportionality in legal costs is undergoing a period of refinement and reinforcement in England and Wales. Recent case law and CPR amendments reflect a judiciary and legislature committed to ensuring that litigation costs remain fair, reasonable, and aligned with the value and complexity of disputes. For legal professionals, this evolving landscape demands vigilance, strategic foresight, and a commitment to cost-effective practice. As the courts continue to develop the proportionality doctrine, practitioners must adapt their approach to cost budgeting, hourly rate justification, and ADR engagement. The message from the judiciary is clear: proportionality is not merely a procedural formality—it is a substantive principle that underpins the integrity and accessibility of the civil justice system.
