Lawyers should tell clients in cases where costs significantly exceed damages that the new test of proportionality means they will receive “no more than a contribution” to those costs if they are successful, a costs judge has said.
“It may be that such advice proves to be a driver for the costs to be reduced or for alternative dispute resolution mechanisms to be explored,” said Master Rowley in the Senior Courts Costs Office.
He was ruling in a private nuisance case brought by Queen guitarist Brian May and his wife Anita Dobson, which settled after they accepted a £25,000 part 36 offer prior to the defendants entering their defences.
Master Rowley initially reduced their £208,000 costs bill to a shade under £100,000 on an item-by-item assessment, and then cut it to £35,000 on the basis of proportionality.
He ruled that in cases where the sums in issue were modest, “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”.
Going through the five factors, he found that the case was worth in the region of £25,000 and for which there was a “modest prospect” of an injunction at least early in the case. There was no “noteworthy complexity” of either a legal or factual nature, no additional costs caused by the defendant’s conduct, nor any wider factors to be considered, as the claimants’ “celebrity status” was not material, he said.
“In these circumstances, the reasonable costs allowed of £99,655.74 are undoubtedly disproportionate.”
He rejected the argument that costs should never exceed the damages, but also bore in mind the stage at which the case settled. “The proportionate amount of costs must inevitably be smaller for a case which concludes early than one which reaches a final hearing.”
Earlier this month the Senior Costs Judge, Master Gordon-Saker, also showed the harsh application of the proportionality rule by halving a bill he had deemed reasonable.
Master Rowley had earlier explained that the extent of the reduction in the original bill was “undoubtedly due in part” to the fact that the claimant had instructed Simon Farrell QC on a direct access basis.
“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.”
Master Rowley expressed hope that “cases such as this one, which are in the transitional phase of understanding the new proportionality test, will be relatively rare”.