Costs Claims: Beware

Upon the resolution of a legal dispute by way of trial and judgment, the Court usually has to decide whether Costs Orders should be made, in whose favour and how those costs are to be borne by the parties.

The general rule of thumb is that costs follow the event, which in layman’s terms means that the loser pays the winner’s costs or rather a contribution thereto.

Clients engaged on costs recovery (and indeed those advising them) would do well to take a more than passing glance at the recently reported case of BNM v. MGN Limited [2016] EWHC B13 (Costs).

The case was brought by a primary school teacher who had been in a relationship with a Premiership footballer against the Sunday People, who had come into possession of her lost mobile phone, but this judgment just concerned her legal costs.

The Court came to consider a Bill of Costs payable by the losing party of shortly over £240,000.  It was the task of the Court to decide what items of work falling within that figure were reasonable and supportable and accordingly should be reimbursed to the winning party.

The Court decided that the losing party should pay just over £167,000 by way of contribution.

However a separate and singular question arose:

            To what extent might any part of that £167,000 be considered disproportionate?

On further hearing the Senior Costs Judge made further reductions on the grounds that a substantial element of what had earlier been allowed was disproportionate.

Eventually the Bill was reduced by almost 50% to circa £84,800.

In arriving at its conclusion the Court placed emphasis upon Rupert Jackson’s final report into the costs regime: Sir Rupert said (and I respectfully quote therefrom):

“I propose that in an assessment of costs on the standard basis, proportionality should prevail over reasonableness and the proportionality test should be applied on a global basis… the Court should first make an assessment of reasonable costs… the Court should then stand back and consider whether the total figure is proportionate (and if not)… the Court should make an appropriate reduction”

Putting matters in context, this was a Bill of Costs which was broadly in two parts:

• the base costs, i.e. the actual costs of the work carried out allied with
• a success fee.

Of signal influence was the fact that the total costs initially allowed (£284,000) bore little relationship to the actual financial value of the claim.

On the facts the claim was one of modest financial quantum.   Other items of loss were not large either.

Although not a run of the mill case and even though the Court considered that it was reasonable for legal proceedings to have issued, the Court found that little additional work had been created by the Defendant’s conduct and that there were no wider nor more important factors at play.   The claim had also settled at a relatively early stage, the scope of the evidence had been limited and the claims were not founded on questions that were factually or legally complex.

Taking all of these items on board the Court determined that a proportionate amount would be about half of that which had been earlier allowed and moreover that the success fee did not bear a reasonable relationship to the financial value and again this was reduced by about half.

Although certain elements render this case facts-specific, there are broader principles at play.

The author respectfully submits that considerations of proportionality will now have an overarching effect upon costs recovery and that it is important to maintain a keen and ruthless eye on the relationship between:

• costs levels and
•  the overall or probable likely values of any particular claim or likely extent of financial recompense.