BNM v MGN Ltd: the new proportionality test in practice

In the recent decision of BNM v MGN Ltd  Senior Costs Judge, Master Gordon-Saker reduced a bill, already assessed as reasonable, by half – on grounds of proportionality.

Being from the Senior Costs Judge, the decision will likely become widely relied upon in assessments and will be in the mind of District Judges applying the proportionality test.

The bill was for £241,817. On grounds of reasonableness, it was reduced to £167,389.45 before the judge adjourned proceedings returnable for a further hearing on the issue of proportionality alone. The eventually allowed costs were £84,855.80 (roughly 35% of the costs as claimed).

The judge identified the following issues to be determined:

1. Does the new test of proportionality applies to additional liabilitiesOn this point, the judge said “it seems to me that the intention was that the rules as to the recoverability of additional liabilities would be preserved in relation to those additional liabilities which remain recoverable after 1 April 2013. However the old test of proportionality was not preserved in relation to those additional liabilities”
2. If it does, should it be applied to additional liabilities separately, rather than on a global basis?
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   Turning to the second point, the judge stated the court need not apply the test separately rather than on a global basis, though in relation to the ATE premium he considered that separately.
3. Are the costs allowed on the line by line assessment disproportionate?

The judge said costs can exceed the financial value of the claim and still bear a reasonable relationship to it but given the costs, when combined with counsel’s fee, were three times the award and the matter settled shortly after the issue of proceedings, base costs “must be disproportionate”.

The test of proportionality is not prescriptive and where judges have discretion there is likely to be inconsistency. Unpredictable decisions make it difficult to gauge if your costs may or may not be recoverable and if not, why. This impossible situation cannot be what LJ Jackson envisaged. Evidence, surely, that the new costs regime was never fit for purpose and decisions like the above, no matter how absurd, will not be the last.

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