Proportionality in Legal Costs

By David Garnsworthy – Barrister

New Paper 2021 v2 8.12.21

The concept of Proportionality is becoming more important but is not well understood. This process is a value judgement, it is not mathematical. For example, the concept does not mean that if $10, 000 was recovered, costs can not be greater than $10,000. The concept is simply that resources must be proportionate to what the case is about. Context is everything.

Note what has happened to costs in family provision cases where estates were eaten up with costs. Stephen Warne in his excellent blog1 cites Yara Australia Pty Ltd v Oswal [2016] VSC 440 as the leading authority. The statutory framework in this State is not the same as Victoria, though the concept of an overarching obligation to the Court is recognised.

Value based judgements are notoriously difficult to make or challenge. The Family Court provides examples of this dilemma. Especially this is so in cases relating to visiting children where an economic element does not come into play. It’s not possible to attach a $ figure to visiting children. In this situation proportion refers to the issues and difficulties, e.g. psychological or drug use. How the COVID-19 plays in this situation may be a more recent factor.

The leading case on proportionality in this State is Defendi -v- Eden Hill Plasterers. 2 At [7] the Chief Justice said:

The principle of proportionality should be borne steadfastly in mind by all the civil courts of the state. The powers available to those courts, under the various Rules of Court, construed by reference to the principle that Rules of Court are to be interpreted and administered in such a way as to enable a court to administer justice, and not in such a way as might result in the court becoming an instrument of injustice (in the context of the Magistrates Court, this is specifically required by s 13(1) of the Act), are quite sufficient to enable the principle of proportionality to be observed.

The comments of the Chief Justice emphasise another aspect of the issue, namely impact on the administration of justice where cases require disproportionate resources compared to what was in issue. The instant case involved just over $50,000 in an 11 day trial in the Magistrates Court, which is extraordinary.

Proportionality in the Magistrates Court - Civil

Section 13 of the Magistrates Court (Civil Proceedings) Act 2004 (WA) refers to the rule making power of the Court but provides a guide to how the Court will approach its role. As an example spending three days over a $100 claim may not be regarded as an efficient use of the court’s resources. The factor in issue is about use of resources, not a ratio to the amount claimed. A further factor is about appropriate use of legal (ie lawyers) time in relation to what is at issue.

In Criminal cases the task is more complex but might be seen in the consequences of conviction to the Defendant. The potential for a jail sentence may require and support greater use of resources. In traffic cases loss of licence or the risk of loss of licence may also support greater use of resources. Contesting a parking fine may not support greater use of court or lawyers resources.

Proportionality in the District Court

In Allstate Plumbing Pty Ltd -v- Crouch Developments Pty Ltd [No 2]3 at [69] then Principal Registrar Gething said :

A particular dimension of the public interest that is relevant for present purposes is proportionality. As noted, in mid 2010, RSC O 1 r 4A was amended to strengthen the weight to be given to proportionality in the management of cases. The comments made by Judge Birmingham QC about the attempts made by the defendant to amend the defence, reflected in an indemnity costs order, as well as my own review of the action, lead me to the view that issue of proportionality ought to be a paramount consideration in the exercise of the discretion I am required to exercise.

Determination and Orders

[70] In balancing the risks of injustice, the issues of proportionality, finality, delay and the ‘the need to revisit interlocutory processes’ (Aon [24]), lead me to the view that I should make an order limiting the ability of the defendant to make yet another application for leave to amend its pleading. As the High Court stated in Aon: ‘Limits may be placed upon repleading, when delay and cost are taken into account’: ([98], [102]). Further, it ‘cannot be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs’: Aon [98].

I am satisfied that the defendant has had adequate, indeed ample, opportunity to amend its defence to plead the loss of reputation claim or the loss of other contracts claim.

The amount in issue (over $18,000) is not mentioned but may have been in the background. Note the reference to proportionality in the context of case management, not as a ratio to what was at stake. Time spent on issues may not be appropriate to the nature of a case. Particularly where a party appears in person wanting to get their narrative before the Court.

Rogers -v- Gulf Western Corporation Pty Ltd4 is an even better comment on the principle where the Principal Registrar said [at 32]:

Looming large in relation to the interests of justice is the question of proportionality. The principle of proportionality is conveniently summarised in the District Court Circular to Practitioners CIV 2008/2, dealing with the Commercial List, in the following terms:

That principle may generally be expressed in terms of requiring the court to deal with cases, so far as practicable, in ways which are proportionate: (a) to the importance of the issues involved;

(b) to the value of the subject matter involved;

(c) to the complexity of the issues; and (d) to the financial position of each party;

Consistently with the overriding obligation of the court to deal justly with its cases.

That statement of proportionality is largely consistent with comments of the Chief Justice in Youlden Enterprises Pty Ltd v Heath Solutions (WA) Pty Ltd5 (Youlden Enterprises)in Staley v Pivot Group Pty Ltd6 [5]; and Macmahon Contractors Pty Ltd v Woodside Energy Ltd7

The first three factors are consistent with the trend of cases but the last factor, financial position of a party raises the increasingly important issue of access to justice. Here we see an impact on lawyer/ client costs though yet to be seen in case law as a factor it may well soon surface. Value may not be limited to $ but the wider sense of significance to the party.