Costs halved in proportionality ruling

A teacher who launched a privacy action against Mirror Group Newspapers has had her costs halved, in an interesting ruling on the new test of proportionality.

The teacher settled her claim with the Sunday People for £20,000 and costs. In BNM v MGN Ltd [2016] EWHC B13 (Costs), the costs were initially assessed as £241,817—a 60% success fee for her solicitors, Atkins Thomson, a 75% success fee for her counsel and an after-the-event (ATE) insurance premium of £58,000. After further assessment, these were reduced to £167,389. MGN argued that the sums were disproportionate and should be reduced further.

Master Gordon-Saker agreed, holding that the “reasonable and proportionate costs” that should be allowed was the sum of £83,964.80—roughly half the previous amount. He stated that: “When applying the new test of proportionality, the court need not consider the amount of any additional liability separately from the base costs.” He described the ATE insurance premium of £58,000 as “also disproportionate” for a claim that settled at £20,000.

Mark Carlisle, director, Deep Blue Costs, says: “When do costs become ‘disproportionate’? Is it at 50% of value? 100%? 200%? We simply don’t know and BNM leaves us none the wiser. What it does do is herald a whole new area of uncertainty along with satellite litigation over the proportionality of additional liabilities which, until now, have largely been considered to be outside the debate.

“It is difficult to see how any privately funded litigant can make an informed decision about pursuing a case. It is now entirely possible that what appears to be a largely arbitrary reduction to a premium for ATE insurance (which the court accepts was necessary to protect the litigation from adverse costs and otherwise reasonable in amount) may result in a win turning into a significant and potentially ruinous net loss.”

NLJ columnist Professor Dominic Regan, of City Law School, says: “In the autumn 2013 supplement to the White Book Sir Rupert in the introduction said that we would need appeal court decisions to determine the test. It seems to me to be utterly arbitrary and nebulous. It injects uncertainty into costs. I assume every paying party will argue in every matter that costs are disproportionate.”