BNM v MGN Ltd

Where a success fee or after-the-event insurance premium remains recoverable under the saving and transitional provisions for a pre-commencement funding arrangement, it is governed by the costs rules in force immediately before 1 April 2013. The former proportionality test therefore applies to those additional liabilities, although the current proportionality test applies to post-commencement base costs.

When deciding whether issuing proceedings without prior notice was reasonable, a costs judge must evaluate the claimant’s conduct, the evidence of any apprehended misuse, the protection actually sought and the opportunity to avoid litigation.

The claimant brought privacy proceedings against a newspaper publisher without prior notice after obtaining an ex parte anonymity order. The action settled, with the publisher agreeing to pay costs on the standard basis. The Senior Costs Judge assessed £83,964.80 plus interest and held that the current proportionality test applied both to base costs and to recoverable success fees and after-the-event insurance premiums.

The claimant appealed from [2016] EWHC B13 (Costs) on the applicable proportionality test. The publisher cross-appealed against the rejection of its contention that commencing proceedings without notice had been unreasonable and premature.

The central questions were which proportionality regime governed the additional liabilities and whether the prematurity issue had been assessed by reference to all material circumstances.

1. Appeal allowed. The recoverable success fees and after-the-event insurance premiums were pre-commencement funding arrangements. CPR 48.1 continued the former costs rules and attendant Costs Practice Direction in relation to them. The former proportionality test in CPR 44.4(2), including the approach described in Lownds v Home Office [2002] 1 WLR 2450, therefore applied to those liabilities. The current proportionality test continued to govern the claimant’s base costs: paras [66], [75]–[84].

2. The definition of costs in current CPR 44.1(1) deliberately omitted additional liabilities incurred under funding arrangements. A success fee did not become recoverable merely because it could be described as a fee. An after-the-event premium was not naturally an expense of conducting litigation. Where such liabilities remained recoverable, that result followed from the saving and transitional scheme and CPR 48.1: paras [67]–[76], [81].

3. The former CPR 44.4(2) was a provision relating to funding arrangements for the purpose of CPR 48.1, despite not being expressly listed in paragraph 1.4 of Practice Direction 48. That list was inclusive rather than exhaustive. Paragraph 11.9 of the former Costs Practice Direction was also incompatible with applying the current proportionality test to a saved success fee: paras [77]–[81].

4. Cross-appeal allowed to the extent of remittal. The Senior Costs Judge’s assessment of whether issuing without notice was reasonable was flawed because it did not show consideration of the claimant’s prolonged inactivity, the absence of publication or threatened publication, the absence of an interlocutory injunction and the lack of evidence of a reasonably based fear that notice would prompt unlawful use. Those matters did not compel a single answer: paras [89]–[98].

5. The final costs certificate was set aside. The detailed assessment was remitted for reconsideration of prematurity and proportionality, applying the current test to base costs and the former test to the pre-commencement funding arrangements.

1. Court of Appeal (Civil Division): In [2017] EWCA Civ 1767, unanimously allowed the appeal and the limited cross-appeal, set aside the final costs certificate and remitted the detailed assessment.

2. Senior Courts Costs Office: In [2016] EWHC B13 (Costs), the Senior Costs Judge applied the current proportionality test to base costs, success fees and after-the-event premiums, and rejected the publisher’s objection that proceedings had been issued prematurely.