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Senior Costs Judge provides insight into decisions on hourly rates, (retrospective) success fees, ATE premiums and relief from sanctions
In a Judgment earlier this month in Various Claimants v MGN Ltd [2016] EWHC B29 (Costs), Master Gordon-Saker provided a fairly breezy review of the factors to be considered on all of these topics. This is the costs part of the now famous “phone hacking” litigation and the case may well be a useful starting reference point for practitioners faced with cases involving such disputes.
HOURLY RATES
The governing rule is 44.4 which provides that in deciding whether costs are reasonable in amount the court will have regard to all the circumstances including (a) the conduct of the parties (b) the amount of any money involved (c) the importance of the matter to the parties (d) the complexity of the matter (e) the skill, effort, specialised knowledge and responsibility involved (f) the time spent (g) the place where the work was done and (h) the last approved or agreed budget.
In this case, he found that “…the primary burden of the legal argument may lie with counsel, but the solicitors also have a role in analysing the evidence and formulating and communicating the case. I accept also that these claims required specialist skill, not only because of the nature of the case but also because of the nature of the opponent” and “…until liability was admitted, the Claimants faced the difficulty of proving the wrongs committed by the Defendant’s employees with no clear evidence of precisely what had been done and when.. The Defendant did not admit liability until late in the day and the claims were opposed, both on liability and quantum, with considerable force by a well-resourced party”.
It was not in issue that it was reasonable for the Claimants to instruct the solicitors who were instructed – broadly Central London firms who specialise in media work. Nor was it in issue that it was not a case in which City rates would be justified. In allowing figures over the Guideline rates he said:
“The guideline rates are of course just that: broad approximations of what one might expect to see for “normal” work done by firms in the relevant geographical location”
SUCCESS FEES
Some cases based on very similar circumstances were distinguished because the relevant CFA’s did not contain restrictions flowing from P36 risks and/or the success fees were not staged. In finding that some of the cases warranted a 100% success fee he found that
“these cases were so risky that no reduction should reasonably have been made from the success fees where there was no Part 36 risk nor where the success fee was not staged.”
However, where there was less risk, he did find that higher success fees should be recoverable where they had been staged and the matters did not settle at the earlier stages.
He referred to the well known passage in KU v Liverpool City Council [2005] 1 WLR 2657 (“this type of arrangement (staged success fees) would lead to a greater chance of establishing the reasonableness of a higher success fee given that the claim did not settle within the agreed period that is, an earlier stage”).
However, he went on:
“It has to be a matter of impression but ….the principal factor in assessing the reasonableness of a success fee must be the risk at the time that the agreement was entered. The kindlier eye with which the court will look at staged success fees is unlikely to lead to a substantial difference”
In the particular circumstances of these cases he added 5% to what he would otherwise have found to be a reasonable success fee.
Similarly with Part 36 risks, he found that the main risks were on liability rather than quantum, but added 3% to the otherwise reasonable success fee where such a risk had been taken.
He also took a look at the definition of “win” and said that where it was said that even an interlocutory order for costs would on the face of it satisfy that definition, it was necessary to look at the reality of the situation:
“No solicitor could reasonably ask his client to pay the full base costs and a success fee simply because along the way the client had been awarded some interlocutory costs while losing the case. As between the solicitor and the client it seems to me that the client would have compelling arguments that the agreement should be construed narrowly so that only a final costs order in the client’s favour would be sufficient to entitle the solicitor to the costs of the claim. Generally the client would be entitled to a final costs order only where he or she had been awarded substantial relief.”
RETROSPECTIVE SUCCESS FEES
In allowing success fees on work done in a period prior to the date of the CFA (where the CFA expressly provided for payment of the same) he found:
“it is almost invariably the case that work will be done in anticipation of a conditional fee agreement being entered into and without a formal conventional retainer being in place. While some of the periods over which the retrospective success fees are being claimed are surprisingly long this is not a case of a party unreasonably creating a different liability for costs after the event. There is nothing to suggest that a different kind of retainer was ever envisaged”.
His principal concern was the reasonableness of the arrangement, so far as it affected the position between the parties. These were not cases where the receiving party was simply trying to maximise the costs liability of the paying party – these were genuine retainers.
ATE PREMIUMS
There were hefty premiums at play, but the Defendant did not forward any alternative policy that was available at the relevant time.
“In short the Defendant was not denied the opportunity to settle these claims at an earlier stage of the policies, because it chose to defend the claims on liability until September 2014 and then chose to take the representative claims to trial on quantum…. there is nothing to enable me to conclude that these policies were purchased unreasonably nor that the premiums were staged unreasonably. Accordingly the premiums must be allowed as claimed”
RELIEF FROM SANCTIONS
Some of the receiving parties had been late in providing Notice of Funding. He found that failure to give the required Notice must always be serious and significant unless it is given a very short time after it should have been given. The sanction (loss of the success fee) only bit on the period during which there had been a failure to provide the Notice and thus was unlikely to be particularly significant in monetary terms and was commensurate with the breach.