Articles
Proportionality in Legal Costs: A Two-Way Street
Monday 11th May 2026
Sonny Welsh
Proportionality is one of those words that appears constantly in legal costs disputes. It is relied upon in Points of Dispute, raised at assessment, and frequently used as a broad-brush argument to suggest that the receiving party’s costs have simply become “too high” when compared with the damages recovered.
That argument can have force. Proportionality is a real, and an important part of costs assessment. The Court is not required to allow costs merely because they were reasonably or necessarily incurred. On the standard basis, CPR 44.3 provides that the court will only allow costs which are proportionate to the matters in issue, and that disproportionate costs may be disallowed or reduced even if they were reasonably or necessarily incurred. But proportionality is not, and should never be treated as, a one-way weapon.
Too often, proportionality is reduced to its weakest and most simplistic form: damages versus costs. The argument usually runs something like this: the claim settled for £X, the bill is £Y, therefore the costs must be disproportionate. That may be a convenient argument, but it is not the full test. It is not even close to the full test.
CPR 44.3(5) says that costs are proportionate if they bear a reasonable relationship to several matters, including the sums in issue, the value of any non-monetary relief, 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. That fourth factor matters. A lot!
If a Defendant has conducted the main action in a way which has generated additional work, then it is difficult to see why that same Defendant should later be allowed to rely on a narrow damages-to-costs comparison as though the litigation unfolded in a vacuum. Costs do not arise by magic. They are generated by the work required to progress, respond to, and resolve the claim. If unnecessary applications, late disclosure, avoidable denials, poor engagement, unreasonable settlement conduct, or tactical delay have increased the burden on the Claimant, then proportionality has to be viewed through that lens.
In other words, proportionality is a two-way street. A Defendant cannot burn a house down, and then complain that buckets and hoses are too expensive.
That does not mean that every criticism of a Defendant’s conduct will defeat a proportionality argument. It plainly will not. The court retains a wide discretion, and proportionality will always be an evaluative judgment for the Judge or Costs Judge on the day. There is no automatic rule that poor conduct by a paying party immunises the receiving party’s bill from reduction. Nor is there any guarantee that a particular Judge will give conduct the same weight that the receiving party says it deserves.
However, it does mean that the ‘damages versus costs’ argument should not be allowed to dominate the analysis where the Defendant’s own conduct has materially affected the shape, duration, or cost of the litigation.
That is consistent with the wider approach endorsed in various cases throughout the years. The Court of Appeal made clear that proportionality is not limited to a narrow reading of CPR 44.3(5), and that the court may also look to wider circumstances under CPR 44.4. The proportionality assessment is, therefore, broader than a simple mathematical comparison between the amount recovered and the amount claimed in costs.
This is particularly important in cases where the damages are modest, but the issues were not straightforward. A low-value case can still involve difficult liability arguments, causation disputes, vulnerability issues, expert evidence, credibility challenges, limitation points, procedural skirmishes, or a Defendant who refuses to engage sensibly until late in the day. In those circumstances, the damages figure may be only one part of the picture.
The danger with the narrow approach is that it can reward unreasonable litigation behaviour. If a Defendant knows that the lower value of a claim will later be used as a shield against costs, there is an obvious imbalance. The receiving party is expected to fight the case properly, answer every issue, comply with every direction, and protect the client’s position, but then faces the argument that the cost of doing so was excessive because the damages were not high enough. That cannot be right as a matter of fairness.
Access to justice is not only affected by court fees, fixed costs, or funding restrictions. It is also affected by whether successful parties can recover a fair and realistic contribution towards the costs they were forced to incur. If proportionality is applied too bluntly, particularly in lower value claims, it risks sending a message that some claims are simply not worth pursuing properly, no matter how valid they may be.
That is why receiving parties should not be afraid to meet proportionality arguments head-on. The answer should not simply be, “the work was reasonable.” Since reasonableness and proportionality are distinct concepts, that will often not be enough. The stronger answer is to explain why the total costs bear a reasonable relationship to the real matters in issue, including the way the case was actually defended.
Where the Defendant’s conduct generated additional work, that should be identified clearly. Not vaguely. Not emotionally. Clearly. What happened? When did it happen? What work did it cause? Why was that work necessary? How did it affect the overall cost of the litigation?
A well prepared bill, replies, and assessment strategy should be able to tell that story. Ultimately, proportionality should not be used as a blunt instrument detached from reality. It is not just about the final damages cheque. It is about the litigation as a whole. The sums in issue are relevant, but so are complexity, conduct, additional work, and wider circumstances.
The Court’s discretion remains central. Some Judges will take a stricter view than others. Some will be more receptive to conduct arguments than others. That uncertainty is part of the assessment process. But the principle remains important.
If a Defendant has acted disproportionately in the main action, then it should be much harder for that Defendant to rely on the weakest version of proportionality at the end of the case. Proportionality cuts both ways. And where the paying party’s conduct has increased the work required, that conduct should not be airbrushed out of the costs assessment.
At Smart Legal Costs, we regularly assist with proportionality arguments, Points of Dispute, Replies, costs negotiations and detailed assessment strategy. If you need help presenting the full picture on costs, rather than allowing the argument to be reduced to a simple damages-versus-costs comparison, we are here to help.