Kerry Underwood

PROPORTIONALITY: COURT HALVES COSTS

with 6 comments


This write up is now included in my detailed blog on this subject: Proportionality: The Emperor’s New Clothes.

 

The decision set out below has been leapfrogged to the Court of Appeal and an expedited hearing has been ordered.

 

In BNM v MGN Ltd [2016] EWHC B13 (Costs) 3 June 2016

 

Master Gordon-Saker dealt with the issue of proportionality in a breach of privacy case where damages of £20,000.00 had been awarded and an undertaking given not to use or disclose confidential information illegally obtained by Mirror Group Newspapers from her mobile phone, which had been lost or stolen.

 

The claimant was a primary school teacher with no public or media profile who had a relationship with a successful premiership footballer.

 

The facts could hardly have been more damning for Mirror Group Newspapers and clearly the case was about  more than the relatively low sum of damages awarded.

 

The costs claimed, including a recoverable success fee for both solicitor and counsel and a recoverable After-the-Event insurance premium, were £241,817.00.

 

Half a day was taken up with the Mirror’s argument, which it lost, that the recoverability of additional liabilities was incompatible with its right to freedom of expression under Article 10 of the European Convention on Human Rights.

 

The Master conducted a line by line Detailed Assessment and produced the following figures:-

 

Base profit costs £46,321
Base Counsel’s fees £14,687.50
Court fees £1,310
Base costs of drawing the bill £4,530
Atkins Thomson’s success fee £16,780.83
Counsel’s success fee £4,846.88
ATE premium £61,480
VAT £17,433.24
Total base costs £62,318.50
Total costs £167,389.45

 

The defendant, the paying party, argued that these costs, held by the court to be reasonable, were disproportionate and should be reduced further.

 

The court did just that and  halved the costs and arrived at proportionate figures as follows:-

 

Base profit costs £24,000
Base Counsel’s fees £7,300
Court fees £1,310
Base costs of drawing the bill £2,250
Atkins Thomson’s success fee £7,920
Counsel’s success fee £2,409
ATE premium £30,000
VAT £8,775.80
Total costs £83,964.80

 

The Master then set out the current law and the pre-April 2013 law and the key cases.
The Master said:-

 

“It is clear that the new test of proportionality was intended to bring about a real change in the assessment of costs.” (Paragraph 20)

 

Here the court said that there were three issues in this case:-

 

  • Does the new test of proportionality apply to additional liabilities?

 

  • If it does should it be applied to additional liabilities separately, rather than by the global basis, that is looking at the whole bill?

 

  • Were the costs in this case allowed on a line by line Detailed Assessment disproportionate?

 

The court set out at length the changes to the Civil Procedure Rules which occurred in April 2013 both in relation to additional liabilities and proportionality.

 

This was a post March 2013 Conditional Fee Agreement but in breach of privacy claims recoverability remained, and indeed still remains and so the point is an important one.

 

Here the court held that the new test of proportionality does indeed apply to additional liabilities and said:-

 

“32. Ringfencing and excluding additional liabilities from the new test of proportionality would be a significant hindrance on the court’s ability to comply with its obligation under CPR 44.3(2)(a) to allow only those costs which are proportionate.”

 

The court also held that when applying the new test of proportionality, the court need not consider the amount of any additional liability separately from the base costs, although the court did consider the After-the-Event insurance premium separately in this case.

 

The Master then considered the issue of proportionality and accepted that “there is little guidance on how the new test of proportionality should be applied.”

 

He accepted that had it been intended that costs should never exceed the sums in issue the rule could easily have stated that. “There will be cases in which the costs bear a reasonable relationship to the sums in issue even though they exceed those sums.”

 

The court also found that the value of the non-monetary relief in this case was not substantial and the judge based the view on the fact that the claimants knew in March 2011 that the defendant had access to the information on her phone and the phone was returned to her in May 2011 but she did not approach solicitors until March 2013 following press reports of similar cases.

 

No information taken from the phone had been published in the intervening two years and no application was made for an interim injunction and the court took the view that but for the claim for damages it is unlikely that a claim would have been brought.

 

The Master described the defendant’s conduct as “reprehensible” but said that much of the civil litigation is based on the bad behaviour of others.

 

The court also halved the amount of the ATE premium to be recovered holding that it was necessary for the claimant to purchase After-the-Event insurance but the cost was disproportionate.

 

Comment

 

This decision shows how random and arbitrary the whole new concept of proportionality is.

 

What the Master has done here is merely to chop the costs in half but with no real explanation as to why he has done that, rather than, say, reducing the costs by a quarter or three quarters or whatever.

 

As Simon Gibbs says in his always excellent blog:-

 

“It is not obvious to me that there was any need to provide a breakdown of the further “Jackson adjustment”. It seems artificial to rule that it was reasonable to spend, say, £10,000 on experts’ fees but that this will then be adjusted down to £5,000.  The “Jackson adjustment”, as the second part of the proportionality test, is to ensure that the total the paying party is asked to pay is proportionate to the claim.  This is concerned with the total, not the constituent parts of that total.  The constituent parts are dealt with in the line by line element of the assessment.”

 

Simon goes on to point out that the one thing that the Senior Costs Judge did not touch was the court fee and asks why a court fee should be ring-fenced from the proportionality test.

 

That is a very good point indeed and obviously it would have nothing to do with the possibility of a Senior Costs Judge not wishing to implicitly criticise the Ministry of Justice for the level of its fees, would it?

 

The problem for lawyers and their clients is that as they go through the case they will have no idea what the court will allow as proportionate whereas any experienced lawyer has a fairly clear idea as to what will be allowed as reasonable and necessary.

 

It can also act as a deterrent to settle, as settling for a lower sum, even if the claimant could have carried on and got more, will almost inevitably reduce the amount of costs recovered for that work, purely because the receiving party is being reasonable and settling for less than the full value.

 

I agree with Lord Justice Jackson that the only way to achieve proportionality is to have fixed recoverable costs for everything.

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Written by kerryunderwood

June 6, 2016 at 9:05 am

Posted in Uncategorized

6 Responses

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  1. Hi Kerry,

    I agree that fixed costs across the board is most sensible.

    However, there will still be situations where costs are disproportionate. Say for example a liability admitted RTA claim settled for £125,000 post issue but pre allocation. Using the current table, the Claimant would recover £31,392 of profit costs for (presumably) not a lot of work. Of course, £31,392 is proportionate to the level of damages awarded, but not to the actual amount of work required to progress the claim to conclusion.

    How would you suggest a way around this?

    On the other hand, every case requires a certain and often unknown amount of work, so swings and roundabouts…

    J

    Josh Coleman

    June 7, 2016 at 10:53 am

    • Josh

      Swings and roundabouts indeed- costs are proportionate to value- if the large amount of work reasonably and necessarily carried out is trumped by proportionality why should it matter if the same proportionate sum is received for little work? Either we pay by the hour or we don’t.

      Kerry

      kerryunderwood

      June 10, 2016 at 7:45 pm

  2. What would be the position on costs if the claimant appeals?If the claimant wins what would be the basis for determing the proportionate recoverable costs.Would it be the original amount of claimed costs,the initially reduced figure or the final figure?Presumably the success fee and the ATE Premium would not be recoverable.If the defendant wins what is the position?Presumably there is no costs budgeting for Appeals so no-one will have a clue.

    John Hall

    June 10, 2016 at 12:53 pm

    • All good questions! Reasonable and necessary work on an appeal is likely to be much less than at first instance, so problem less likely to arise. But what if a party appeals against quantum and achieves an increase or reduction of, say, £9,000? As that sum alone would at first instance be a small claim, are no costs to be awarded? Or proportionate to £10k? Or whole sum? Or total left after appeal? Etc etc…….

      kerryunderwood

      June 10, 2016 at 7:50 pm

  3. […] Kerry Underwood on the BNM case in Proportionality: Court halves costs […]

  4. […] Proportionality: Court Halves Costs […]


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