Phone-hacking claimants fail in bid for relief from sanctions after late notifications of funding

Gordon-Saker: sanction proportionate to breach

Gordon-Saker: sanction proportionate to breach

The Senior Costs Judge has refused to grant relief from sanctions to two claimants in the MGN phone hacking case who delayed in providing notice of funding.

Master Gordon-Saker’s decision in Various Claimants v MGN Ltd [2016] EWHC B29 (Costs) is the latest in a series of notable rulings to have come out of the case, which saw an initial group of claimants awarded substantial damages for breach of privacy.

The first cases against MGN started before 1 April 2013, so the pre-Jackson rules applied. This meant that a party who entered into a funding arrangement before proceedings had to give notice of funding when the claim form was issued. Failure to do meant they could not recover additional liabilities for the period until they did, unless the court ordered otherwise.

The two claimants who gave notice of funding late were Nicola Horlick and Alan Yentob.

Mrs Horlick’s solicitors gave notice in relation to the after-the-event (ATE) insurance policy on 10 September 2014, the day after the policy was purchased, but failed to give notice in relation to the conditional fee agreement (CFA) with her solicitors until 20 November 2014. The agreement had been entered into on 24 June 2014 and proceedings were issued on 13 August 2014.

Mr Yentob entered into a CFA on 30 September 2013. The letter of claim was sent on 18 March 2014 but notice of funding was not given until 17 April 2014.

In support of their applications, they said the defendant was aware at the material time that all of the claimants were pursuing the claims under CFAs.

They also submitted that neither default was serious nor significant, and even though there was no good reason for them, they submitted that it would be just to grant relief.

Master Gordon-Saker said: “These were specific rules which required a party who had entered into funding arrangements to give notice of those arrangements to the other party. The reason for that is obvious: the funding arrangements may well have a significant impact on the amount of that other party’s liability for costs.

“These rules were well understood. Notice had to be given at the earliest opportunity if the arrangements were entered into before the start of proceedings and, otherwise, when proceedings were issued. It seems to me that a failure to give the required notice must always be serious and significant unless it is given within a very short time after the time at which it should be given.

“Having regard to the requirements of the rules generally a failure to serve a document until one month or three months after it should have been served is not likely to be treated as insignificant, particularly where the rules provide for an automatic sanction for default.

“The failures to give notice in time would appear to have been the result of oversight and no good reason for the failures was advanced.”

He continued that the failures did not prevent the parties from conducting the litigation efficiently or at proportionate cost “but nor would the interests of justice be imperilled if relief were not granted”.

The master considered the sanction proportionate to the breach. “If relief is not granted, the solicitors would be denied success fees on the value of their work done over the one and three-month periods respectively.

“The claimants would still be entitled to their reasonable and proportionate base costs for work reasonably done over those periods. The sums lost are likely to be relatively insignificant. Because of the failure to comply with the practice directions, court time and the parties’ resources have been spent on an application to disapply the sanction. Accordingly the applications for relief from sanctions are refused.”

Master Gordon-Saker was also asked to deal with other issues around success fees, ATE premiums and hourly rates. On the latter, he had “no hesitation in concluding that, in the present case, rates higher than the guideline rates were reasonable”.

This was on several grounds: the damages were substantial – “and, in many cases, significantly more than the previous highest award in a privacy case”; the claims involved some complexity and required specialist skill, not only because of the nature of the case but also because of the nature of the opponent; and, more than anything, because of the importance to the claimants.

“It seems to me that some of the rates claimed are nevertheless too high. Taking into account all of the circumstances and based on my experience of comparable (though not similar) cases, in my judgment a reasonable rate for a grade A fee-earner undertaking this work would be £400. For a grade B fee-earner, £280 would be reasonable; £230 would be reasonable for a grade C fee-earner and £140 would be reasonable for the grade D fee-earners.”

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