Has there been any guidance or examples on a suitable approach to proportionality?
Dealing with cases at proportionate cost is at the heart of the reforms proposed by Lord Justice Jackson. The court has been given significant additional powers to help ensure cases are dealt with in this way and are set to be more active in enforcing compliance with rules, practice directions and orders and managing cases. The new rules do provide some guidance as to the approach that will be taken to proportionately. The Civil Procedure Rules 1998, SI 1998/3132, r 1.1(2) (CPR) provides that dealing with a case justly and at proportionate cost (in accordance with the re-stated overriding objective) includes, so far as practicable, dealing with cases in ways which are proportionate to the amount of money involved, the importance of the case, the complexity of the issues and the financial position of the parties. The new rules also explain that when the court is making any case management decision, it is to have regard to any costs budgets prepared by the parties (as part of the new costs management rules) and will take the costs involved in each procedural step into account when making that decision (CPR r 3.17).

In relation to a detailed assessment of costs at the end of a case, CPR r 44.5(2) has been amended to make it clear that costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred. Any doubt as to whether costs were proportionately incurred will be resolved in favour of the paying party. A new rule has been inserted which provides that costs incurred are proportionate if they bear a reasonable relationship to the sums in issue in the proceedings, the value of any non-monetary relief in issue in the proceedings, the complexity of the litigation, any additional work generated by the conduct of the paying party, and any wider factors involved in the proceedings, such as reputation or public importance (CPR r 44.5(5)).

In a lecture to the Law Society on 29 May 2012, the then Master of the Rolls, Lord Neuberger, emphasised that "the decision as to whether an item was proportionately incurred is case-sensitive, and there may be a period of slight uncertainty as the case law is developed". He said it would be "positively dangerous to give any sort of specific or detailed guidance before the new rule has been applied" and that "the law on proportionate costs will have to be developed on a case-by-case basis".

What will this mean in practice?
If the judiciary enthusiastically enforces the new rules in relation to costs management and case manage-ment, it ought to mean there is limited scope for costs to be reduced on a detailed assessment on the basis they are disproportionate. The overriding objective is for cases to be dealt with justly and at proportionate cost from the start of the proceedings. To the extent that this does not happen in quite the same manner envisaged by the reforms, Lord Neuberger recognised that this 'may mean a degree of satellite litigation while the courts work out the law' although he hoped that it will involve relatively few cases.

In practice, if the court has not taken steps throughout the case to ensure the case is dealt with at propor-tionate cost, and if the paying party does not raise any such issues with the other side or the court, the court may not have much of an appetite for reducing costs at the end of the case on the basis that the costs incurred are disproportionate.

The recent decision in Henry v News Group Newspapers Ltd [2013] EWCA Civ 19, [2013] All ER (D) 192 (Jan) is a good example of this approach. In that case, the Court of Appeal overturned the decision of a senior costs judge, who had disallowed about £300,000 budget overspend by the claimant. The court said "the management of costs is the responsibility of all parties to the litigation and ultimately of the court itself. In this case all three were at fault to a greater or lesser degree" (at para [21]).

Is it possible to be proportionate in every case?
The new rules recognise it is not possible to be proportionate in every case. The court is expressly required to consider the complexity of the litigation and any wider factors involved in the proceedings, such as reputation or public importance, when considering whether the costs incurred are proportionate. It should also be emphasised that the new rules only apply to recoverable costs. If a party decides that it is necessary, for example, to take statements from numerous potential witnesses, they remain free to do so. That party may not, however, recover the full cost of this work if they have been given permission to adduce evidence from one or two witnesses only.

Will the court carve out any exceptions?
The new rules provide some guidance on the approach the court will take to proportionality and the nature of the exceptions that will be taken into account. As to how these rules will be applied in practice, Lord Neuber-ger has made it clear that the court will deal with each case on its own facts and merits. It seems unlikely the court will carve out any hard exceptions that would apply in all cases.

How can proportionality be monitored?
Proportionality can be monitored by the parties, but only if they are required to exchange costs budgets and to revise their budgets up or down if significant developments in the litigation warrant such revisions. It is equally important for the court to monitor proportionality by taking this into account when making case management decisions and by being more active in making contact with the parties to monitor compliance with orders and directions (pursuant to the new CPR r 3.1(8)).