This case was one of the first cases to really demonstrate the power of CPR 44.3 (2) (‘Jackson test of proportionality’), which states:
Where the amount of costs is to be assessed on the standard basis, the court will –
(a) only allow costs which are proportionate to the matters in issue. Costs which are disproportionate in amount may be disallowed or reduced even if they were reasonably or necessarily incurred; and
(b) resolve any doubt which it may have as to whether costs were reasonably and proportionately incurred or were reasonable and proportionate in amount in favour of the paying party.
It will be recalled that the case settled before trial upon payment of £20,000, some low value non-financial relief and the Defendant’s agreement to pay the Claimant’s costs.
The Claimant produced a bill seeking costs in the sum of £241,817. This included a success fee on the solicitor’s CFA of 60% and 75% on counsel’s CFA and an ATE premium of £61,480, including tax.
The matter went before the Senior Costs Judge Gordon-Saker in June 2016.
On assessment the Master reduced the costs payable to £84,855 – just 35% of the total sum claimed. He adopted a two-stage process to arrive at this figure.
- He firstly assessed the costs for reasonableness on the usual ‘line by line’ basis. He reduced the success fee for both solicitors and counsel to 33% and, having reduced other base costs, brought the sum down to £167,389.
- He then applied the second ‘stand back’ approach to consider the issue of proportionality i.e. were the allowed costs proportionate taking into account the modest value of the settlement and finding they were not the Costs Judge reduced each of the sums claimed by a further half, including the ATE premium.
The matter was considered by the Court of Appeal 11 October 2017 when it emerged that the matter had come on without any reference to four pending appeals likely to be impacted by the judgment reached, thus judgment was reserved whilst the CoA considered two of the four other matters – Reynolds v Nottingham University Hospitals Foundation Trust and McMenemy v Peterborough & Stamford NHS Foundation Trust
An additional point of interest, one raised at a hearing before the Costs Judge in November 2015, was the Defendant’s challenge to the issue of proceedings on the ground that issue was an unreasonable step.
Judgment was finally handed down on 7 November 2017 when the CoA held that the Senior Costs Judge was wrong to hold that the new test of proportionality applies to still recoverable additional liabilities.
The Court of Appeal unanimously held that the saving and transitional provisions in CPR 48, combined with the more limited definition of “costs” applicable since 1 April 2013 (that now omits any reference to “additional liabilities”), together operated to preserve the former Costs Rules, with their attendant Practice Directions, to the assessment of costs that include additional liabilities.
MGN’s argument that the new proportionality test applied as success fees and ATE premiums could be regarded as “fees” and “expenses” (terms that do appear within both the former and current definition of “costs”) were rejected as was the comparison with the provisions within CPD 48 applicable to the new form of ATE premiums recoverable in clinical negligence proceedings, regarded as unhelpful.
The Court held that the Senior Costs Judge had been wrong to hold that if any exception from the new proportionality test was to be maintained for additional liabilities then that could have been provided for by further exception with CPR 44.3(7). That section uses a definition of costs that no longer makes reference to additional liabilities. He had also been wrong to hold that the former test of proportionality (old CPR 44.4(2)) was not a provision relating to funding arrangements, the term used with paragraph 1.4 of CPD 48.
It is unfortunate that the judgment does not provide guidance of wider application on how the new test of proportionality is to be applied in practice.
Not only does the Senior Costs Judge have to reconsider the original assessment on the issue of proportionality but MGN succeeded in their cross-appeal that had challenged his decision to regard as reasonable the Claimant’s decision to issue proceedings without any prior warning or contact with the Defendant; something she had done as part of her pre-issue application for anonymity.
The Court of Appeal held that the Senior Costs Judge had not sufficiently made clear what, if any, weight he had attached to certain criteria relevant to this point and thus directed him to reconsider the issue in the light of their further guidance. Accordingly, much of the base costs remain again at large and must be determined before proportionality is applied to base costs and additional liabilities separately.
Link to judgment here.