Setting and keeping costs budgets are a good discipline, even where this isn’t mandatory and however unclear the rules may be, says Matthew Gwynne.
It’s not too often you see famous rock guitarists call out costs judges, but that is exactly what Queen’s Brian May did earlier this year.
Writing in The Times in July, Dr May hit out at the application of the proportionality test in the wake of his recent case in the Senior Courts Costs Office, describing it as a ‘mockery of justice’ and arguing that ‘it’s likely to make it almost impossible for the man in the street to fight back for justice against the bullies who trample all over him’.
A few weeks earlier, in a private nuisance case, for which he and his wife accepted £25,000 in settlement, Dr May saw Master Rowley initially reduce their £208,000 costs bill to a shade under £100,000 on an item-by-item assessment, and then cut it to £35,000 on the basis of proportionality.
The musician wrote: ‘Where’s the proportionality in that? Where’s the justice? This absurd proportionality rule makes it impossible for any wronged party to protect himself.’ But as renowned US Supreme Court justice Oliver Wendell Holmes once said: ‘This is a court of law, young man, not a court of justice.’
The problem with the proportionality test is that it may be the law, but quite how it should work is still not clear. The case of Dr Brian May & Anita May v Wavell Group Plc & Dr Bizarri, and that of BNM v MGN a few months before, shows how hard the test can bite. In BNM, the senior costs judge, Master Gordon-Saker, halved the costs of a privacy action that he had deemed reasonable after a line-by-line assessment. He did the same to the ATE premium (which is still recoverable in such cases). These are brutal reductions for the lawyers to swallow.
The good news is that the BNM appeal has been leapfrogged to the Court of Appeal, so perhaps now we will get the guidance the senior judiciary said we didn’t need when the rule was introduced on 1 April 2013 (when we all knew we did). I hope the appeal judges take into account the moral implications of the rule. If a complex case will yield low damages but high costs – risking a May-style reduction on assessment – it obviously becomes more likely that a law firm will not proceed with it.
But does that mean the claimant should be denied access to justice? Along with the difficulties thrown up by budgeting, it is perhaps this that is driving the Ministry of Justice and senior judiciary towards a major expansion of fixed costs. But what to do in the meantime?
It is hard to say for sure that a budget insulates you from the application of the proportionality test. Some judges do not consider themselves bound by the budget on detailed assessment. But budgets are undoubtedly a good discipline even in cases where they are not mandatory. Where they are, do keep them updated – it is a complaint frequently heard from judges that they hardly ever see applications to revise a budget, and you are only setting yourself up for later problems if you don’t.
Similarly, it is important to record and maintain damages estimates. This is something firms are particularly bad at doing, but for the client, solicitor and funder alike, this is vital information, both as to proportionality and the context of settlement offers, and even the viability of the case.
There are broader, if more long-term, practice considerations too. If you focus on a field of law where proportionality is a regular and troubling issue it reinforces the wider benefits of diversifying into other practice areas where it is less so. It also highlights the need to review your operations – are there ways that you could streamline and reduce costs?
As a litigator, you need to keep the risks of the proportionality rule at the forefront of your mind – especially until we get a (hopefully) clear steer from the Court of Appeal. Your finances may depend on it.