Wherever Law Ends, Tyranny Begins (BNM v MGN)

The recent decision of the Senior Costs Judge in BNM v MGN [2016] EWHC B13 (Costs) emphasises the uncertainty which exists in relation to the manner in which costs are supposed to be assessed post-Jackson. It also demonstrates the difficulties which would be inherent in a scheme that relies on a costs judge’s subjective opinion on global figures which lawyers should be paid for work they have done.

The Judgment:

The Claimant was a primary school teacher who had been in a relationship with a Premier League footballer. The Defendant was a newspaper publisher. The Claimant had lost her mobile phone. Her phone had ended up in the Defendant’s possession. The substantive litigation related to applications for injunctions and a claim for damages. The Defendant made a series of early admissions and gave undertakings which were acceptable to the Claimant. The Claimant recovered ￡20,000 in damages and the Defendant agreed to pay her costs.

The Claimant’s bill of costs was drawn at ￡241,817.

The bill was assessed by the Senior Costs Judge, Master Gordon-Saker. The ‘traditional’ line-by-line method of assessing a bill, whereby each item is considered to determine it was reasonable, was applied. This produced a total figure for costs in the region of ￡167,390.

However, the Court was invited by the Defendant to ‘stand back’ and to consider whether the amount allowed was proportionate and, if it was not, to make a further reduction to a proportionate sum.

Having stood back, the Master delivered a judgment (six months after the line-by-line assessment) in which it agreed with the Defendant that the total amount allowed was disproportionate. The Master re-assessed the total costs at around ￡83,965.

Two key decisions in this judgment are worthy of further consideration.

Key decision 1: the new test of proportionality is to be applied globally

Although the CFA and ATE premium post-dated the Jackson reforms, these additional liabilities were recoverable on an inter partes basis as the claim related to publication and privacy proceedings.

The costs practice direction as it stood pre-Jackson made it clear that the test of proportionality should apply to base costs only. However, the transitional and saving provisions under CPR 48 do not appear to have preserved this test where funding arrangements in matters where additional liabilities remained recoverable were entered into after 1 April 2013.

The Court accepted the Defendant’s argument that it was required to consider the proportionality of the total costs (i.e. including additional liabilities).

It may be suggested that litigants had a legitimate expectation that the ‘old’ test of proportionality would apply to additional liabilities which survived the Jackson reforms. This argument would be similar to one of those aired in Coventry v Lawrence [2015] UKSC 50 in which Lord Neuberger concluded that “it would not be right” to disallow additional liabilities in circumstances where litigants had a legitimate expectation that they would be recoverable.

However, such an argument is unlikely to be attractive. If the test of proportionality is a new test which is not bound by the old practice direction - as the Master found it to be - receiving parties are unlikely to be able to show that they legitimately expected an alternative interpretation to be applied.

Key decision 2: the ‘stand back’ test

Lord Justice Jackson was clear in his final report that he wished for the Court to consider at the conclusion of an assessment hearing whether a line-by-line assessment had generated proportionate costs. If it had not, he wished the Court to further-reduce the costs accordingly.

However, it is by no means certain that the Rules which were introduced in response to this report allow for this approach. There is no explicit requirement for the Court to reassess the assessed costs. The new test of proportionality which is found at CPR 44.3(5) could be just as easily applied on a line-by-line basis.

The approach adopted by the Master is problematic given the seemingly arbitrary nature of the reductions applied. This introduces a serious risk of costs being allowed not on the basis of what work was reasonably done in each case, but on the basis of judicially-decided tariffs which would vary from Court--to-Court and judge-to-judge.

It also gives rise to a fairly obvious question: if the Court is going to ultimately impose a cap on costs after a line-by-line assessment, what is the point in going through that process (which can often take days) in the first place?

Judges throughout the country are applying the new proportionality test in different ways. This is not the first case in which the ‘stand back’ test has been applied, but it is the most high-profile. It looks likely that the Court of Appeal will finally get the chance to give guidance as to how Courts should determine whether costs are proportionate.

Conclusion:

The assessment of costs has always been an imperfect system which has relied heavily on the subjective assessments of judges. However, MGN appears to exacerbate these imperfections.

The decision insofar as it relates to the global application of proportionality will be keenly felt by lawyers who deal with asbestos-related claims and clinical negligence matters, where additional liabilities remain recoverable.

The silver lining to all of this is that BNM is widely expected to be appealed to the Court of Appeal. Guidance form the Court of Appeal on these issues will give some certainty to practitioners.

By Alex Bagnall - Associate & Costs Lawyer