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New proportionality ruling more than doubles appellants’ recoverable costs.

Celebrity litigants Brian May and Anita Dobson win significant recoverable costs uplift as circuit judge questions Master Rowley’s proportionality decision.

May -v- Wavell Group Ltd. In the County Court at Central London on appeal from the SCCO. Claim no. A02CL398.

Key Points:

  • Judges should look beyond the value of a dispute’s final settlement when evaluating the sums in issue in proceedings;
  • A settlement figure might provide some indication of the former battle ground but it is the battle ground itself which is to be identified when looking at the sums in issue;
  • The lack of a disagreement over legal principles does not, in itself, mean that a dispute is not complex;
  • Complexity should be measured against other claims of a similar value, not necessarily those within the same category;
  • Judges may take account of a dispute’s early settlement when evaluating “all circumstances” of the case;
  • However, it would be wrong to conclude that early settlement in itself requires a greater reduction in overall costs;
  • A proper interpretation of the rules does not require or indeed entitle a costs judge at the end of an item by item assessment to impose a very substantial reduction on the overall figure without regard to the component parts.

Link to judgment

This costs ruling arose out of an nuisance dispute between the appellants, the celebrity couple Brian May and Anita Dobson, and the owners and occupiers of a neighbouring London property. The appellants had sought legal redress from the respondents after the respondents began construction of a so-called “super basement” (paragraphs 4 – 5).

Following initial correspondence between the two parties to the dispute, a claim was issued by the court on 27 August 2014. The claim was served on the respondents – one of whom was based in the British Virgin Islands – in December that year. The damages-based claim was valued at between £50,000 and £100,000 (paragraphs 6-8).

In a letter dated 27 February 2015, the defendants made a Part 36 offer to settle the dispute for £25,000. This offer was accepted by a letter dated 9 March. The appellants’ costs were therefore subject to detailed assessment on the standard basis (paragraph 13).

The bill of costs submitted by the appellants totaled £208,236,54. This sum comprised £131,138.00 in profit costs, £42,578.28 in disbursements, plus VAT (paragraph 14).

Using the two-stage review process, Master Rowley first determined that only £99,655.74 of the appellants’ costs had been reasonably incurred, following the line by line assessment (paragraph 20).

Moving on to the second stage of the assessment process, Master Rowley then decided that it would only be proportionate for the appellants to recover £35,000 in costs plus VAT (paragraph 20).

The appellants did not seek to challenge Master Rowley’s decision regarding the reasonableness of their incurred costs (paragraph 22). Instead, their appeal focused on how Master Rowley had applied the current proportionality test for costs. Four key grounds for appeal were argued (paragraph 27):

• The sum in issue in the proceedings. In his judgment, Master Rowley had decided that this figure was £25,000 – the amount for which the dispute ultimately settled (paragraphs 28 – 31).
• The issue of whether the case was legally or factually complex. Master Rowley had considered that this dispute was neither (paragraphs 32 – 34).
• Whether Master Rowley erroneously considered the stage in proceedings the dispute had reached when it was settled (paraphs 35 -36).
• Master Rowley’s “global” approach for determining the appellants’ proportionate recoverable costs total of £35,000 + plus VAT. In his judgment, Master Rowley had referred to his “use of a broadsword and a blunt instrument” in reaching his decision (paragraphs 37 – 40).

The first two appeal grounds were based on Master Rowley’s alleged misapplication of two separate CPR 44.3 (5) factors. The third appeal ground claimed that Master Rowley took account of a factor that he should not. The fourth ground alleged that Master Rowley had erred when applying the proportionality test to the global figure (paragraph 27).

His Honour Judge Dight CBE delivered the sole judgment, supported by Master Whalen (costs judge), who was sitting as an assessor (paragraph 2).

Sums in issue

In relation to the sums in issue in the proceedings, HHJ Dight said that Master Rowley was “entitled to have regard to the figure at which the case settled but only as part of the overall weight to be attached to the first factor. A settlement figure might provide some indication of the former battle ground but it is the battle ground which is to be identified when looking at the 'sums in issue' and not the final figure which brought the battle to an end." (paragraph 66). The court’s task should be to “undertake an objective evaluation of the sums which are in issue having regard to all the material before it, including the highest figure put on his claim by the claimant and the lowest figure, if any, admitted by the defendant.” Consequently, HHJ Dight ruled that Master Rowley had misinterpreted the meaning of “sums in issue in the proceedings” and misapplied the test. The correct value range, HHJ Dight said, was between £50,000 - £100,000 (paragraphs 67 – 68).

Complexity

On the second point of appeal – whether the case was legally or factually complex – HHJ Dight asserted that “the absence of a dispute between the parties as the applicable legal principles does not mean that those which do apply are not complex.” In this particular dispute, HHJ Dight said: “although this case may not have been complex within its category [nuisance] it seems to me that it was complex when compared with other claims of a similar value within the county court” (paragraph 69). 

Early Settlement

On the third point of appeal – whether Master Rowley was wrong to take account of the dispute’s early settlement – HHJ Dight said that judges are entitled to take account of all circumstances when assessing costs proportionality, including the fact that the case settled before coming to trial. However, in relation to Master Rowley’s indication that “early settlement requires a greater reduction in overall costs”, HHJ Dight said that he must “respectfully disagree” with the Master’s judgment (paragraph 70).

Global approach

On the final point of appeal – Master Rowley’s “global” approach to determining costs proportionality - HHJ Dight doubted whether “the proper interpretation of the rules requires or indeed entitles a costs judge at the end of an item by item assessment to impose a very substantial reduction on the overall figure without regard to the component parts.” In this dispute, HHJ Dight said, the final sum reached by Master Rowley did not appear to be based on any “specific mathematical calculation”. Nor, he added, was there a “specific explanation of how the weighting of the various factors resulted in the final figure” (paragraph 71).

Conclusion 

HHJ Dight concluded that Master Rowley had:

misinterpreted and misapplied the new proportionality test. In particular, he undervalued the sums in dispute, by a considerable margin in county court litigation, and he gave too little weight to the complexity of the litigation. Further, he reduced the costs disproportionately because of early settlement." (paragraph 72).

He continued:

"When the reasonable costs are compared against a value of between £50,000 and £100,000 in a reasonably complex claim requiring specialist expert evidence, in what is to judge from the pre-action correspondence likely to be hard fought litigation, they appear less disproportionate than previously... I concluded that in all the circumstances the proportionate figure is £75,000 (plus VAT), which I believe to be a fair figure bearing a reasonable relationship to the factors as I see them."

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