Proportionality: a new approach by costs judges?

Two recent judgments in the cases of BNM -v- MGN Ltd [2016] EWHC B13 (Costs) and May and others -v- Wavell Group plc [2016] EWHC B16 (Costs) appear to suggest a marked change in philosophy by the Courts when dealing with the question of proportionality of costs, which are likely to be of significant importance to paying parties going forward.

The case of BNM -v- MGN Ltd involved a primary school teacher, with no public or media profile, who was involved in a relationship with a premiership footballer between 2008-2011.

Information regarding the relationship was obtained by the Sunday People newspaper. The Claimant successfully obtained an anonymity order and subsequently agreed a consent order with the defendant newspaper in which she would be paid damages of £20,000, and the newspaper would undertake not to use or publish the confidential information. The Defendant also agreed to pay the Claimant’s costs.

The Claimant had instructed solicitors and counsel under CFAs (providing for a success fee uplift of 60% in respect of solicitors’ fees and 75% in respect of counsel’s fees); she also obtained an ATE insurance premium (£58,000 plus insurance premium tax). Total costs claimed were in the sum of £241,817.

At the detailed assessment hearing, conducted by Master Gordon-Saker (senior costs judge), the Court found that the total costs reasonably and necessarily incurred came to £167,389.45 following a ‘line by line’ assessment

The costs judge then considered the issue of proportionality. He concluded that the total of £167,389.45 was disproportionate, and reduced the amount of costs allowed to £83,964.80 (ie around 35% of the total costs claimed).

The judge referred to the provisions of CPR 44.3, which contain the relevant paragraphs relating to proportionality:

CPR 44.3(5) Costs incurred are proportionate if they bear a reasonable relationship to –

(a) the sums in issue in the proceedings;

(b) the value of any non-monetary relief in issue in the proceedings;

(c) the complexity of the litigation;

(d) any additional work generated by the conduct of the paying party; and

(e) any wider factors involved in the proceedings, such as reputation or public importance.

Master Gordon-Saker went on to confirm that, not only does the proportionality requirement apply to base costs, but it also applies to additional liabilities (ie CFA success fees and ATE premium costs).

In view of the value of the settlement (including the importance of the non-monetary remedy), the lack of complexity or wider importance, and the early stage at which the claim concluded, the Court felt that a significant reduction in recoverable costs was appropriate.

Master Gordon-Saker acknowledged that there is little guidance on how the new proportionality test would be applied. He accepted that there was no fixed rule that costs could not exceed the sums in issue in the case, and that there would be cases in which costs could be proportional even if they outweighed the damages.

This decision was shortly followed by the judgment in the case of May and others -v- Wavell Group plc and others.

This case involved a claim by Brian May (guitarist with the rock group Queen) for nuisance against the developer and owner of a neighbouring property who was seeking to install a ‘mega-basement’.

The case quickly settled for the sum of £25,000. The Claimants subsequently presented a Bill of Costs in the total sum of £208,236.54.

Master Rowley initially carried out an assessment of the reasonableness of the costs on a line by line basis, resulting in a total figure of £99,655.74. Again, however, he subsequently considered the test required by CPR 4.3(2)(a), which was to consider whether the reasonable sum calculated was also a proportionate sum. The Master also referred to the relevant issues set out in CRP 44.3(5) (see above).

Following a consideration of all the issues, the Master ordered that the proportionate costs order would be limited to £35,000 plus VA (circa 20% of the total Bill of Costs).

Clearly, the courts’ new approach to the issue of proportionality (which has now been endorsed by the senior costs judge) demonstrates that judges are willing to make very significand reductions in cases in which costs claimed are disproportionate. The clarification that the test of proportionality also applies to additional liability should also be welcomed.

It remains to be seen how the courts will apply the proportionality test in personal injury litigation, but it will prove to be a useful tool for paying parties, and will create a significant element of risk for receiving parties should they pursue mattes to detailed assessment.

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