Master struggles with application of proportionality test in phone hacking cases

The chief Chancery master has expressed uncertainly as to how to apply the proportionality test to the budgeted costs in the latest phone hacking cases, concluding that if the costs are reasonable, they are proportionate.

Chief Master Marsh also took a scythe to elements of the budgets, describing some of the hours put down for partners and counsel as “grossly excessive”.

The case concerned the ‘second wave’ of the Mirror Newspapers hacking litigation (MNHL), and the first claims coming through it from former TV presenter John Leslie and former Celebrity Big Brother contestant Chantelle Houghton.

The MNHL uses a novel system of template cost budgeting to avoid having to create one from scratch each time. There are three templates; these cases were ‘template C’, meaning there was at least one admission of the misuse of private information and the number of articles complained about exceeded 20.

However, it was agreed that these two cases should have bespoke individual budgets for a variety of reasons.

The MNHL is not subject to a group litigation order but has been structured similarly. Chief Master Marsh said: “There are features in the MNHL litigation that obviously do not fit with the standard costs management regime. Budgeting common costs, creating template budgets for both individual and common costs and permitting bespoke budgets are but a few examples of the bespoke nature of the regime that applies in the MNHL.

“It would be wrong, however, to see that regime as operating in a wholly parallel universe. It is better seen as an adaptation of the standard regime. The difficulty this creates, however, is that it is not clear to what extent the standard regime has been adopted and/or adapted when it comes to a detailed review of the rules and the practice direction.

“As I have already indicated, the basis of budgeting as set out in PD3E paragraphs 7.3 and 7.4 has been expressly adopted. As to the remaining provisions of the rules and the Practice Direction it is, as the parties accepted at the hearing, more a matter of the bespoke costs management regime ‘looking to’ the standard regime rather than being a new set of rules that can be derived from a re-drafting exercise.”

The master said he was finding it hard to apply “a principled approach to proportionality in relation to these budgets”. He continued: “It seems to me that the only principled way of applying the test in these cases is to have only very limited regard to the possibility that proportionality may produce a cap that will limit what would otherwise be a reasonable figure. This is what the parties have done in their submissions. To take any other approach in this bespoke litigation risks the court merely applying arbitrary limits because there is no financial reference point for proportionality.

“It seems to me that the wider factors I have summarised, in particular the public importance and test case factors, will have the effect that if the costs are reasonable they are proportionate. That conclusion chimes with the approach the parties have adopted and avoids the court wielding a concept of uncertain application.”

Mr Leslie’s proposed budget was for £1.25m, Ms Houghton’s for £723,000, both figures significantly higher than the template budgets provided.

Master Marsh then went through the budgets by phase and found much to cut. On disclosure, he noted that Mr Leslie had included the costs of preparing and pursuing an application for specific disclosure. “This is wrong in principle because the costs of such an application may be the subject of an inter partes costs order. It will be stripped out from the disclosure phase and treated as a contingency.”

On witness statements, Mr Leslie budgeted £125,000, including £26,000 of incurred costs, and Ms Houghton £85,000.

Setting the estimated costs to £60,000 and £50,000 respectively, Master Marsh said: “As a matter of impression, the hours that are included in these budgets are grossly excessive and well above what is within a range of reasonable costs and a similar observation can be made about counsel’s fees. The amount of the time that has been budgeted suggests strongly that the statements will have only a passing connection with the direct recollection of the witnesses. They will have become an artificial construct of the lawyers.”

He was similarly scathing of the trial preparation figures, with Mr Leslie’s figure seeking £150,000 and Ms Houghton £139,000. “These are very large sums indeed given that the phase excludes the PTR and the brief fees.”

The judge said: “Mr Leslie’s budget is made up of 195 hours of partner time, 160 hours of associate time and 50 hours of time spent by a trainee. In Ms Houghton’s budget, the equivalent figures are 150 hours, 180 hours and 50 hours. They total in each case 405 hours and 380 hours. I am satisfied that these amounts of time are a completely artificial budgeting construct and not a genuine estimate of time that will be spent on the limited tasks that fall within this phase. They are some distance from being within the range of reasonable costs.

“I note also that the assumptions recorded in the budgets include time spent on collating the trial bundles, despite the fact that this work is expressly excluded from the phase (assembly and collating are synonymous).”

The working assumption on the trial dealing with both claims was that it would take 15 days in court in total. “Both budgets provide for a partner and an associate/assistant to be present in court each day and allow 10 hours for each day. In addition, provision is made for 20 hours of paralegal/trainee time. The budgets total £110,400 for Mr Leslie’s solicitors and £113,450 for Ms Houghton’s.

“I accept that two fee-earners need to be involved, but I do not accept that is necessary for a partner and an associate to be involved for the whole trial period. A more reasonable and proportionate combination is a partner, or an associate, to attend with a junior fee-earner, although it is reasonable for the partner to be present at key moments. It is also unnecessary for the representatives for both claimants to be in court for the entire trial… I will allow £50,000 in each budget for solicitor’s time.”

The defendant also strongly objected to the figures budgeted for counsels’ fees for David Sherborne, a highly experienced junior, and Julian Santos as his junior. The judge said it was “telling” that the fees were described as being those “quoted by counsels’ clerk”. He explained: “No indication is given that an attempt was made to negotiate the fees.”

The total budgeted for Mr Sherborne, including the brief fee of £250,000, refreshers of £70,000 (£5,000 per day) and fees for taking the judgment and dealing with consequential issues of £10,000, was £330,000. Comparable figures for Mr Santos are £75,000, £28,000 (£2,000 per day) and £3,750 giving a total of £106,750. In aggregate, the total is £436,750 to be split equally between the two claims. These figures are far in excess of what is within a range of reasonable costs.”

Among the factors he took into account were that “Mr Sherborne has not taken silk and there is no good reason to budget his fees as if he had”.

Mr Sherborne’s brief fee, broken down using an hourly rate of £400 per hour, involved him charging for an “astonishing” 625 hours of work in preparation for a 15-day trial. “Allowing for a 10-hour day this amounts to 62 days of work (52 days if he were to charge for 12 hour days). It is difficult to conceive these are genuine periods.” Daily refreshers of £5,000 for Mr Sherborne and £2,000 for Mr Santos were “high”.

The master allowed fees of £190,000 for Mr Sherborne and £75,000 for Mr Santos, a total of £265,000 including refreshers.


Picture credit: Psyomjesus, Creative Commons Licence

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Costs News
Published date
31 May 2018

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