PROPORTIONALITY AGAIN : COURT CHOPS REASONABLE COSTS BY 60%
Please see my blog: Proportionality: Court Halves Costs and please note that the decision in BNM v MGN Ltd  EWHC B13 (Costs) 3 June 2016, 3 June 2016 has been leapfrogged to the Court of Appeal and an expedited hearing has been ordered.
the Senior Courts Costs Office conducted a detailed assessment of costs in an action where the claimants accepted the defendant’s first Part 36 offer of £25,000.00 and that meant that the defendants were automatically liable to the claimants for their costs under the usual provisions of Part 36.
The matter was settled before a defence was entered.
The Bill of Costs submitted came to £208,236.54 and the court conducted an item by item assessment and held that the reasonable costs came to £99,655.74.
Thus, without considering the issue of proportionality, the court reduced the bill by more than half and presumably was not impressed by the original bill being twice what it should have been.
On proportionality grounds the Master then reduced the bill on a global basis from just short of £100,000.00 to £35,000.00 plus VAT, a further reduction of around 60% from the sum that it had held to be reasonable in relation to costs reasonably incurred.
The Master took into account the fact that the case was settled at an early stage and said that the proportionate amount of costs will inevitably be smaller for a case that settles early than for one that reaches a final hearing.
The judge also took into account the following matters:-
- the sum accepted – £25,000.00 – reflected the sums in issue;
- there was a possibility of an injunction and that had to be weighed in the balance when considering proportionality;
- the case was neither legally nor factually complicated;
- there was nothing in the defendant’s conduct which caused additional work to be done;
- there were no wider factors relevant to the issue of proportionality.
Here the Master said that the amount that can be recovered from the paying party “is not the minimum sum necessary to bring or defend the case successfully. It is a sum which it is appropriate for the paying party to pay by reference to the five factors in CPR 44.3(5). It is not the amount required to achieve justice in the eyes of the receiving party but only a contribution to that receiving party’s costs in many modest cases.” (Paragraph 35).
The Master went on to say, at paragraph 42:-
“In cases such as this, it seems to me that the new test of proportionality… will require legal representatives to inform their clients that, even if successful, they will receive no more than a contribution to the costs that will be incurred.”
Here the judge took the view that he did not need to adopt the approach taken in BNM v MGN Ltd  EWHC B13 (Costs) by making a proportionate reduction on each and every item, but rather he should take a global approach and noted that the effect of that “is that the resulting figure becomes entirely a matter of judgment.”
The Master, in a colourful but illustrative phrase said:-
“There is only so much finesse that can be employed when using a broadsword rather than a rapier. A concluding global assessment of proportionality as envisaged by the new approach involves the court wielding a blunt instrument rather than a precision tool.”
It cannot be right that the stage that the case has reached has any effect on proportionality.
That appears to have no basis in law and certainly does not appear in the Civil Procedure Rule dealing with proportionality. Indeed it seems to be plainly wrong – the amount of work done and the stage that the case has reached is reflected in the figure reached after an ordinary assessment. In other words very obviously if a case settles very early on then the work reasonably and necessarily done will be far less than a case that goes to a trial.
Another interesting factor of this case is that solicitors were not involved as Mr and Mrs May had instructed a QC direct under the Direct Access Scheme.
One wonders if a more worldly person, such as a trainee solicitor which is probably the appropriate level of fee earner for a minor civil claim, would have given some practical and sensible advice which might have saved the Mays around £160,000.00.
Here, at paragraph 41, the Master said:-
“In the present case therefore there was no estimate given to the client in the manner expected (but by no means always achieved) by the SRA Code of Conduct.”
The Master appeared to recognize this and I set out in full paragraph 4 of his judgment:-
“The extent of the reduction in the bill as originally claimed was undoubtedly due in part to the method of representation adopted by the claimants. They instructed Simon Farrell QC on their behalf. Mr Farrell is authorised by the Bar Standards Board to conduct litigation. Consequently no firm of solicitors were instructed and Mr Farrell utilised the services of other barristers and a solicitor as required. The Bar Standards Board had only begun to authorise barristers to conduct litigation shortly before Mr Farrell was instructed by the claimants. Inevitably therefore, there was some novelty in conducting litigation for Mr Farrell and his team. Nevertheless, I am satisfied that the sum that I have ultimately allowed as being a reasonable sum is so whether or not it had been incurred by a firm of solicitors or by direct access counsel. As Mr Carpenter, counsel for the defendants said, and I accept, the reasonableness and proportionality of the recoverable costs cannot depend upon the method of representation. I have raised the point merely to provide some reasoning for the significant level of reduction on assessment from the original sum claimed.”
As noted above the Master here pointedly chose not to revisit each item and reduce it on proportionality grounds but rather simply, in his words, to take a broadsword rather than a rapier and to use “a blunt instrument rather than a precision tool.”
This is precisely the opposite to what the Master did in BNM v MGN Ltd and shows the hopeless confusion and uncertainty that is the nonsensical law in relation to proportionality.
Roll on Fixed Recoverable Costs for everything.
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