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PROPORTIONALITY BITES AGAIN
Lest anyone thought that the decision of the Senior Costs Judge, Master Gordon-Saker, in BNM v MGN (see our blog here) was just an isolated decision, they had better think again. In another case proceeding in the Senior Courts Costs Office, this time before Master Rowley, even more swingeing reductions have been made to a bill of costs on the grounds of proportionality.
In the case of May & May v Wavell Group PLC & Bizarri [2016] EWHC B16 (Costs), Master Rowley was considering a bill seeking just over £208,000. When undertaking a line by line assessment on a reasonableness basis, he reduced this to £99,655.74. However, having considered the issue of proportionality, he allowed just £35,000 plus VAT in recoverable costs. In so doing he said:
“There is only so much finesse that can be employed when using a broadsword rather than a rapier. A concluding global assessment of proportionality as envisaged by the new approach involves the court wielding a blunt instrument rather than a precision tool.”
The case has some celebrity interest because the Claimants were Queen guitarist Brian May and his actress wife Anita Dobson and involved a claim by them in relation to nuisance due to construction work nearby for the increasingly popular development of basements. Sadly (some may say), this not being a celebrity blog, our focus here is on the legal consequences.
Master Rowley reminded himself of the governing provisions of the CPR and noted that a 2 stage test was required in a case such as this one, where all of the costs had been incurred since 1 April 2013. CPR 44.3 (2) sets out the costs which are recoverable on the standard basis and the 5 factors which are at play in determining whether the costs incurred are proportionate are set out at CPR 44.3 (5). This provision states that:
(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.
By applying these factors, the Master found:
“In summary, this is a case 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 in the litigation of either a legal or factual nature. There were no additional costs caused by the defendant’s conduct nor were there any wider factors to be considered. In these circumstances the reasonable costs allowed of £99,655.74 are undoubtedly disproportionate.”
He also reviewed some recent cases and found that they were not necessarily of global application:
In Kazakhstan Kagazy PLC v Zhunus [2015] EWHC 404 (Comm) Leggatt J said:
“The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party. This approach is first of all fair. It is fair to distinguish between, on the one hand, costs which are reasonably attributable to the other party’s conduct in bringing or contesting the proceeding or otherwise causing costs to be incurred and, on the other hand, costs which are attributable to a party’s own choice about how best to advance its interests. There are also good policy reasons for drawing this distinction, which include discouraging waste and seeking to deter the escalation of costs for the overall benefit for litigants.”
To which the Master’s response was:
“It seems to me to be clear that where the sums in issue are modest, the Kazakhstan method is still too generous to the receiving party under the new approach. 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.”
He then went on:
“In cases such as this, it seems to me that the new test of proportionality as described in paragraphs 5.5 and 5.6 of the [Jackson Report] will require legal representatives to inform their clients that, even if successful, they will receive no more than a contribution to the costs that will be incurred. 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. It is to be hoped that cases such as this one, which are in a transitional phase of understanding the new proportionality test, will be relatively rare.”
He also considered Hobbs v Guy’s and St Thomas’s NHS Foundation Trust in which case Master O’Hare reduced the reasonable, albeit disproportionate, costs that he had originally assessed by revisiting certain items which he then disallowed as being disproportionate.
Master Rowley’s view was:
“It seems to me that it will be an unusual case where that will be appropriate given the requirement to consider proportionality on a global basis…. I accept that the revisiting of individual items does not appear to be what was intended when the judge “steps back” to consider whether the reasonable sum is also proportionate and so I decline to take that course in this case.”
He went on to reject the argument that costs should never exceed damages because that would elevate the 1st aspect of the CPR 44.3 (5) test to another level from the remainder. He felt that the amount to be allowed then simply does become a matter of judgment. Another factor in his mind when exercising that judgment was the stage at which the matter settled (here, prior to Defences being served). At this point in the judgement, without too much further by way of explanation, the Master plumps for a figure of £35,000 plus VAT.
Of some further interest is that the Master declined to look at the costs of drawing the bill separately when exercising this discretion. The argument had been put by the paying party on the basis that the bill fee should reflect only those costs which were ultimately allowed, but the Master felt that it was taking matters too far to split the costs up further when considering what the paying party should pay and looked at the matter globally.
What then should be made of all of this? As we set out at the beginning of this blog, this is not an isolated decision and it seems a fair assumption that this case and that of Master Gordon-Saker represent the views which will be adopted now in the SCCO. The importance of the sum in issue is being discounted in larger cases where the costs are well below that figure, but given a heightened importance in the more modest cases. We are still left in the dark as to how the figure adopted as being proportionate has been reached. However, whilst virtually every case will have to be looked at on its facts, where offers are made for costs well above the damages figure, practitioners will have to do review their position extremely seriously.