On 7 November 2017 the claimant was successful in an appeal against a decision of the Senior Costs Judge in relation to recoverable additional liabilities (success fees and after the event (ATE) premiums) and the appropriate proportionality test. The main issue in the case was whether the former (i.e. pre ‘Jackson’ and before April 2013) less effective proportionality test applied to recoverable additional liabilities or whether the more robust proportionality test applied. The Court of Appeal held the old proportionality test applies and the case has been sent back to the Senior Costs Judge to reconsider proportionality under the old test.
There was however a successful cross appeal by the defendant in respect of the Senior Costs Judge’s original determination that proceedings had not been issued prematurely, despite the fact that the claimant had issued without giving prior notice and without any attempt to settle. The Court of Appeal was concerned that this finding was flawed because several material factors had not been taken into account and the claimant had failed to adduce evidence to substantiate her position. The Senior Costs Judge will also therefore reconsider whether proceedings were issued prematurely.
This case has relevance to occupational disease mesothelioma cases and clinical negligence cases as it clarifies the appropriate proportionality test that applies to those cases for recoverable additional liabilities.
The claimant was a primary school teacher who had a relationship with a successful footballer. She lost her mobile phone in 2011, which contained information linking her with the footballer, and it found its way to the defendant. The claimant obtained an injunction against the defendant to prevent it from using or publishing the information and the next day issued proceedings for damages which were agreed at £20,000. She claimed costs of £241,817.
The claimant had entered into a conditional fee agreement (CFA) with her solicitors, retained counsel via CFAs with counsel and had taken out an ATE insurance policy. Although the insurance policy and CFAs were entered into after April 2013, the success fees and the premium (‘additional liabilities’) were recoverable from the defendant as privacy proceedings are ‘saved’ proceedings which still allow for additional liabilities to be recovered against defendants.
By issuing proceedings, the solicitor’s success fees increased automatically from nil to 40%, counsel’s success fees from 25% to 50% and the premium from £7,155 to £28,090.
The Senior Costs Judge’s decision
Originally, proceedings were not found to have been premature. Although normally absence of communication and lack of attempts to resolve disputes prior to the issue of proceedings would call for sanctions, in this instance the judge held it was justified due to the claimant’s fear of how the defendant might use the private information in its possession.
Furthermore, the new proportionality test was applied and a post assessment further adjustment of 50% was applied to all elements of the assessed sums on the basis that additional liabilities should not be ‘ring-fenced’ away from the new proportionality test.
No general guidance was provided by the Court of Appeal on the new proportionality test and how it might operate. It was hoped that some sort of guidance would be provided to clarify whether, in principle, when applying the new test a post assessment proportionality ‘adjustment’ was appropriate. It would be speculation to conclude that the lack of censure of such an approach stands as an endorsement.
Three things we have learned from BNM
1. Whether they stem from pre April 2013 funding arrangements or relate to ‘saved’ proceedings (i.e. claims for mesothelioma, in privacy/defamation and in insolvency), additional liabilities will not be subject to the new tougher proportionality test.
2. Clinical negligence ATE premiums taken out after April 2013 will be subject to the new proportionality test as they have specific provisions clarifying the position.
3. The reasonableness of issuing proceedings must be carefully scrutinised and a fairly high hurdle must be overcome whenever there is a failure to engage.
All eyes are now on the awaited judgment in McMenemy v Peterborough NHS Trust, which will consider the appropriate test when determining the reasonableness and proportionality of a recoverable ATE premium in post April 2013 clinical negligence proceedings. In light of the fact that the costs were claimed at over 11 times the damages, it is easy to understand why the costs were robustly challenged in BNM and it remains to be seen what the outcome of the Senior Costs Judge’s reconsideration will be especially in respect of the prematurity of proceedings argument.
That the old proportionality test applies to additional liabilities that stem from funding arrangements entered into before the regime change in April 2013 comes as no surprise. It is also welcome from a paying party’s perspective to have a spotlight on the importance of justifying the costs increases that arise from issuing proceedings. However, paying parties are unable to employ the weaponry provided by the new regime in the form of the new proportionality test to challenge additional liabilities in relation to ‘saved’ proceedings. This means that cases arising from such proceedings, including mesothelioma and privacy cases, under the new regime post April 2013 will be subject to the old test. In our view, this outcome can only serve to increase the pressure on removing these last bastions of recoverability as part of the next tranche of costs reform.