Various Claimants v MGN Ltd

Costs budgeting under the Civil Procedure Rules 1998 is concerned with base costs where the prescribed Precedent H budget expressly excludes success fees and after-the-event insurance premiums. The court should not add an estimate for those additional liabilities merely because proportionality may be assessed retrospectively on the total costs. At the budgeting stage, the relevant liabilities are undisclosed and cannot sensibly be assessed for reasonableness or proportionality. A budget agreed or determined under CPR 3.18 may therefore limit recovery of additional liabilities, but the resulting difficulty does not justify altering the prescribed budgeting exercise.

This was a costs management hearing in managed privacy and publication claims. The parties agreed that common costs and individual claim costs would be budgeted separately, but disputed whether the claimants’ success-fee uplifts and after-the-event insurance premiums should be included in the budgets.

The defendant relied on proportionality and on the approach taken during a later detailed assessment in BNM v MGN Ltd. The central issue was whether that assessment approach required additional liabilities to be accommodated prospectively during costs budgeting.

1. Disposition. The court ruled that costs budgets were not to include any sum for success fees or after-the-event insurance premiums.
2. Part II of CPR 3, Practice Direction 3E and the mandated Precedent H form governed the exercise. Precedent H expressly stated that the estimate excluded success fees and after-the-event insurance premiums. Its contents therefore had the force of the Practice Direction.
3. The absence of any obligation to disclose the relevant CFA or insurance terms was material. Without knowing the amounts or assumptions underlying the additional liabilities, the court could not sensibly assess their reasonableness, justification or proportionality at the budgeting stage.
4. The defendant’s proposed approach would create an anomaly. If the budget remained limited to base costs, CPR 3.18 could prevent meaningful recovery of additional liabilities. If the court increased the budget without knowing those liabilities, it would fix a figure beyond the prescribed budget without a proper basis and without a workable allocation between budget phases.
5. The approach in BNM v MGN Ltd concerned post-action assessment, where the costs judge knew the actual additional liabilities and could assess proportionality using global figures. That was materially different from prospective budgeting and did not require the same approach.
6. The court accepted that the different functions of budgeting and assessment could produce a logical tension, but held that this was an inevitable consequence of the different information available and the different exercises being performed. The defendant’s proposed method was rejected.