The Civil Procedure Rules, being the rules which govern the running of litigation in England and Wales, deal with, amongst other things, parties’ ability to recover costs.  CPR 44.3 provides that the court may reduce or disallow costs that are disproportionate in amount even if they were reasonably or necessarily incurred.  In determining this issue, the court will look at the following points:

·       Value of the claim and the value of any non-monetary relief sought/obtained;

·       Complexity of the litigation;

·       The conduct of the Parties; and

·       Any wider factors involved in the proceedings, such as reputation or public importance.

The reforms on costs in litigation introduced by Lord Justice Jackson in April 2013 included a new test for proportionality.  However, since this time, very few cases have considered how this test should be applied until Senior Costs Judge, Master Gordon-Saker handed down his Judgment in BNM v MGN Ltd [2016] EWHC B13 (Costs).

The Facts

The case concerned an anonymous claimant and her relationship with a premiership footballer.  The claimant lost her mobile telephone which later came into the possession of a Sunday newspaper.  The Claimant sought an injunction against the publishing company to restrain them from using or publishing confidential information taken from her phone as well as damages and an order for delivery up of confidential information.  The claim was settled and the Defendant undertook not to disclose the confidential information, agreed to pay damages of £20,000 and agreed to pay the claimant's costs.

The Judgment

At the detailed assessment, the costs claimed of £241,817 were slashed to just £84,855.  

In making its assessment the Court adopted a two-stage process.  Firstly, costs were assessed for reasonableness on the usual ‘line by line’ basis.  The Court then considered the issue of proportionality via the new test under which Sir Rupert Jackson recommended a global approach be taken under which consideration is given as to whether the total figure is proportionate before making its award.  Master Gordon-Saker held that, in the circumstances of this case, where the costs were more than three times the amount of agreed damages and where the non-monetary  relief was not substantial, costs of £84,855, being circa 35% of the costs claimed would be proportionate. 

Comments

The decision makes it clear that costs which have been allowed as reasonable on a line by line assessment can still be significantly reduced should they be found to be disproportionate.  Further, costs may be deemed disproportionate even if they were necessary.  However, the Judge did make it clear that the new rule did not means costs could never exceed the value of the claim in order to be judged proportionate.  The Judge accepted that there would be cases where "the costs could bear a reasonable relationship to the sums in issue even though they exceed those sums". For example, where a matter was particularly complex; or where there were matters of public importance. 

The decision may encourage some litigants to bring proceedings, safe in the knowledge that they will not be ordered to pay disproportionate costs if unsuccessful and if litigation is conducted in a disproportionate manner, the successful party will have meet the shortfall in its costs.  It is a stark reminder for us all to be prepared for the proportionality requirement in litigation and the risk that disproportionately incurred costs will not be recoverable from the losing side.