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Senior Costs Judge halves “reasonable” bill under proportionality rule

Gordon-Saker: new test was meant to change costs assessments

Gordon-Saker: new test was meant to change costs assessments

The Senior Costs Judge has demonstrated the harsh impact of the post-Jackson proportionality rule – along with providing some guidance on how to apply it – after halving the costs of a privacy action that he had deemed reasonable after a line-by-line assessment.

“It is clear that the new test of proportionality was intended to bring about a real change in the assessment of costs,” said Master Gordon-Saker last Friday in BNM v MGN Limited [2016] EWHC B13 (Costs) [1].

The claimant was a primary school teacher who had a relationship with a Premier League footballer. In March 2011 she lost her mobile phone, which ended up in the hands of the Sunday People via an intermediary. A journalist approached her about the relationship, but after the claimant’s father complained to the newspaper, it returned the phone to her.

Two years later, she instructed well-known media law firm Atkins Thomson under a conditional fee agreement (CFA) which provided for a 100% success fee, albeit discounted if the claim concluded before trial. Two counsel were instructed on a CFA basis, with a 100% success fee, this time discounted if the claim concluded before exchange of witness statements.

The claimant also bought after-the-event insurance (ATE) from Temple Legal Protection to cover up to £165,000 of MGN’s costs and her own disbursements, including the premium.

The claimant commenced proceedings on 31 July 2013, having obtained an anonymity order the day before. She claimed an injunction to restrain the newspaper from using or publishing confidential information taken from her phone, damages and an order for delivery up of any confidential information.

MGN made substantial admissions in the defence and the claim was concluded by a consent order nearly a year later, under the terms of which it undertook not to use or disclose the confidential information, and agreed to pay damages of £20,000 plus costs.

She claimed costs of £241,817, including a 60% success fee for Atkins Thomson, 75% for both counsel, and an ATE premium of £58,000 plus insurance premium tax of £3,480.

MGN argued that the additional liabilities were a breach of article 10 of the European Convention on Human Rights, but this was rejected by Master Gordon-Saker [2].

At the detailed assessment, he ruled that subject to proportionality, all the success fees would be allowed at 33% and the ATE premium allowed as claimed. On the line-by-line assessment, the costs were reduced to £167,389, including base solicitor costs of £46,000 and base counsel fees of £14,000.

Moving on to proportionality. Master Gordon-Saker first ruled that the new test applied to additional liabilities and that they should be considered together with the base costs, although in the event he looked at the ATE premium separately.

Master Gordon-Saker concluded that proportionality demanded that he halve the costs allowed on the line-by-line assessment.

The sum in issue “was always going to be modest” – the claimant’s first offer was £40,000 – and he said the value of the non-monetary relief claimed was not substantial, given that the claimant did not seek legal advice for nearly two years after the phone was returned, and only after having seen press reports of a similar case in which Atkins Thomson had acted. In the meantime no information taken from the phone had been published.

Also, it was not a particularly complex case, while little additional work was generated by the defendant’s conduct, and there were no “wider factors” involved, such as public importance. Finally, the claim settled at a “relatively early stage”, before the first case management hearing.

“In these circumstances base profit costs of £46,000 and base counsel’s fees of £14,000 must be disproportionate under the new test, being over three times the amount of agreed damages, and covering work which fell far short of trial. In my judgment costs of about one half of those figures would be proportionate.”

The ATE premium of £58,000 was also disproportionate, Master Gordon-Saker concluded, noting that this was the premium payable at the fourth of seven stages. Had the claim proceeded to judgment, the premium would have risen to £112,500 plus tax.

“However the court approaches the new test of proportionality, if the premium is reduced on the basis that it is disproportionate, it is important that the court should identify the figure allowed, he said.

“The premium has added significantly to the costs that were reasonably incurred, broadly matching the aggregate of base profit costs and counsel’s fees. I concluded in the course of the detailed assessment that, at the outset, the claimant’s prospects of success were ‘significantly in excess of 50/50’. Those prospects did not reduce. The defendant made substantial admissions in its defence.”

Given the factors already identified, a premium of £58,000 at the stage that the claim settled, potentially doubling to £112,500, “cannot be said to bear a reasonable relationship to a claim which settles for £20,000… In my judgment no more than one half of that amount could be considered proportionate.”