BNM v MGN Ltd [2017] EWCA Civ 1767

The facts

Although this was not a casualty claim it raises interesting points in respect of the new proportionality test to be applied to additional liabilities in cases that began before the LASPO reforms took effect on 1 April 2013.

The case was in respect of privacy issues where the defendant agreed to pay the claimant damages totalling £20,000 plus costs. The claimant had entered into a conditional fee agreement (CFA), which provided for a success fee and took out an after-the-event (ATE) insurance policy prior to the 1 April 2013.

The claimant sought costs exceeding £240,000, including a 60% success fee for their solicitors and a 75% success fee for counsel. Also, the claimant sought recovery of the ATE insurance premium totalling approximately £58,000 plus solicitor base costs of over £45,000 and counsel base fees of approximately £14,000.

The defendant argued that the claimant had issued proceedings prematurely and unnecessarily and had not given them any prior notice. As a result, the defendant argued that the case could have been settled without the need for court proceedings and for further costs to be incurred.

At first instance, the judge concluded that the new proportionality test applied under CPR, r. 44.3(2) to success fees and ATE insurance premiums. It was held that the old test of proportionality had not been preserved and the new test applied regardless of whether the ATE insurance and CFA had been entered into pre-April 2013.

The defendant appealed the decision.

Decision

The Court of Appeal held that the assessment of the claimant’s costs should have been carried out on the basis of the old proportionality test under the old CPR, r. 44.4(2). It was concluded that the relevant provisions in the old costs practice direction applied to the success fees and ATE insurance premiums that were being claimed.

It was stated that the new proportionality test was not to apply to funding arrangements to which the transitional and statutory provisions applied although it was stated that this had not been made clear in the new costs rules.

The Court of Appeal concluded that the judge had wrongly exercised his discretion when he had assessed the claimant’s success fees and ATE insurance premiums under the new proportionality rule.

As a result, the judge’s decision and resulting costs certificate was set aside.

The Court of Appeal stated that the matter would be listed for assessment under the old proportionality rules. Also, it was noted that on assessment consideration would need to be given to the issue of premature issue.

What this means for you

The new proportionality test under CPR, r. 44.3(2) does not apply to additional liabilities in cases that were commenced pre-April 2013 or which, although commenced after 1 April 2013, are governed by the transitional exceptions.

In this case, the Court of Appeal did not need to consider whether the judge had properly applied the new proportionality test when assessing the claimant’s costs. The issue for consideration was whether the judge should have applied the old or the new test in respect of proportionality and not whether any assessment under the new test had been carried out correctly.

It should be noted that no guidance was given in respect of the application of the new proportionality test so it is still unclear how this test will be applied by the courts. It is hoped that the proper application of the new proportionality test will be considered by the Court of Appeal in the near future in order for guidance to be provided in respect of this matter.