Deborah Burke examines the recent case of May & Anor v Wavell Group plc & Anor and the courts’ approach to costs in the era of proportionality.
The push for clients to receive more ‘effective’ information about the cost of legal work is completely understandable.
Part of the attraction of fixed recoverable fees – from the point of view of the client – is that the contribution they will receive from their opponent if they win their case can be set out at the beginning of their relationship with their solicitor.
Take the recent case of May v Wavell Group plc  EWHC B16 (Costs), which involved Queen guitarist Brian May. If the fixed fees proposed by Lord Justice Jackson earlier this year had already been introduced, the conversation with Brian and his partner Anita would have been quite straightforward:
Legal representative: ‘Dr and Mrs May, your claim against your annoying and noisy neighbour is not legally or factually complex and is worth no more than £25k. If you have to issue proceedings and you win, in the normal course of things, you can expect to be awarded your costs as well.
‘We now have a system of fixed recoverable costs. The amount that you will be awarded in fixed costs is no more than a contribution towards your total legal costs. There is a grid of fixed costs and that grid provides that you will receive a contribution of up to £18,750 plus VAT towards your legal costs IF your case goes all the way to trial. Most cases don’t get that far, so it’s better to assume that the contribution will be quite a bit lower than this maximum figure. If we need to spend money on other things, like experts, then we can seek reimbursement of a reasonable amount for those fees as well.’
Brian and Anita: ‘Thank you, that’s very clear. Before we decide whether to go ahead, we’ll need you tell us what your charges will be.’
The legal representative might say:
‘1. My charges will be capped at £X.
‘2. My charges will be a fixed fee of £Y.
‘3. My charges are £Z per hour.’
Whatever fee structure and figures are proposed, I think that Dr and Mrs May would agree to pay their legal team whatever the case was worth to them, knowing that if they won, they would recover damages of about £25k, plus a contribution towards their legal bill of no more than (and probably quite a bit less than) £18,750, plus VAT and expenses.
Would Dr and Mrs May willingly sign up to be on the hook for £208k (the amount of the bill eventually delivered to them by their solicitors)? It would have to be very, very important to them if they did – but that would be their choice.
Let’s look at this case from another perspective. What would happen to this case if it was going to be budgeted? Particularly since the revision of the budgeting rules this April, can anyone, hand on heart, say that they would expect a costs budget to be approved which sought base costs of more than, say, £100k for a case which was neither legally nor factually complex, and which was worth around £25k? What level of budget would be approved? Something a bit higher than the moderate level of possible damages, perhaps, with the client remaining on the hook for legal costs above the approved budget figure.
By either route, the decision of Master Rowley in May v Wavell to assess the claim for costs at £35k plus VAT seems ‘layman sensible’ – clients will wonder why lawyers have been waiting for guidance on how to apply the ‘new’ test of proportionality. Really, they will…
Rather than spending time awaiting more guidance, or trying to pick holes in the judgments on proportionality that are now beginning to appear, my (very personal) view is that lawyers should concentrate on finding concrete examples of cases where the current proportionality test, applied properly, will produce a different result.
Cases where looking at the ‘non-money’ factors in CPR 44.3(5), ie:
will persuade the judge to move away from the straight application of the ‘damages v legal costs’ element of the proportionality test.
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