With Conflicting Authorities on how Proportionality is Assessed, how Should it be Dealt With?
When the judgment in BNM v MGM was released, it established that contrary to the old proportionality rules, additional liabilities were to be taken into account when considering the proportionality of costs incurred. Inevitably the case has been heavily relied on by paying parties since.
BNM v MGM is listed for an appeal in October of this year. The pending appeal, coupled with the contradictory Judgment of Master Rowley in the recent Senior Courts Cost Office case King v Basildon & Thurrock University Hospitals NHS Foundation Trust begs the question, how should proportionality be dealt with in the meantime?
Additional liabilities can often reflect a significant portion of the costs when considered on a global basis. With the judiciary divided over whether or not additional liabilities are to be accounted for when considering proportionality, both receiving and paying parties are left in a delicate position and will easily find themselves entrenched in their respective proportionality stance.
“Receiving and paying parties are left in a delicate position and will easily find themselves entrenched in their respective proportionality stance.”
For illustrative purposes let’s imagine a clinical negligence case settled for £46,000.00. The costs have proceeded to Detailed Assessment and the following elements have been assessed:
Base Profit Costs £58, 000. 00
Success Fee £46, 400. 00
ATE Premium £23, 000. 00
When a judge ‘steps back’ at the end of the Detailed Assessment to consider proportionality, whether the judge is determining proportionality taking into account additional liabilities (BNM v MGN) or only the base profit costs (King) will have a significant impact on the starting point for their consideration. In the above example does the Judge step back and see £58,000.00 against damages of £46,000.00 or £127,400.00 against damages of £46,000.00? The answer will have a considerable influence on the likelihood of a finding of disproportionality, which in turn can have a huge impact on the costs recovered. Both sides therefore have a considerable interest in the outcome.
Further cases addressing proportionality will be heard between now and the appeal on BNM v MGN and an indication of the way the appeal is likely to go can be assembled by following these results. We are currently wrapping up one such case at MRN.
This particular clinical negligence claim proceeded to a detailed assessment at which a 100% success fee has been awarded, as well as a not inconsiderable insurance premium. After careful consideration on proportionality specifically, the District Judge determined that costs were proportionate. Significantly, when assessing proportionality neither the 100% success fee nor the ATE premium were taken into account, an approach consistent with King.
“Significantly, when assessing proportionality neither the 100% success fee nor the ATE premium were taken into account”
This was of course the result which we hoped for and represented the culmination of considerable work by both ourselves and our client. Nevertheless even with the decision going our way on assessment, the other side have been permitted to appeal the decision within 21 days of the decision in BNM v MGN. So how should proportionality be dealt with going forward?
Firstly do not assume additional liabilities either will or will not be accounted for when considering the proportionality of costs, the judiciary is split.
Secondly consider how prevailing decisions deal with the issue, it is likely many cases will be heard between now and the appeal on BNM v MGN. Our case referred above indicates that there is currently some momentum behind the King approach to proportionality assessment.
Thirdly (and this goes for both paying and receiving parties) if an agreement cannot be reached, try and agree appropriate interim payments on account of costs. Doing so will reduce the paying party’s liability to on-going interest and for the receiving party an interim will no doubt cushion the blow of what could otherwise be a considerable wait for a final resolution.
It almost feels like this is something which should have been considered and made clear before the rules were introduced…