Cox & Anor v MGN Ltd & Ors  EWHC 1235 (QB) (26 May 2006)
The running battle over costs between London firm Schillings and Mirror Group Newspapers (MGN) moved a stage further when guidance in the assessment of costs in defamation cases was given in this costs appeal.
The facts of this case were that the Claimants had sued the Defendant for damages and other relief arising from the publication of nude photographs of them whilst on their honeymoon. On 6th June 2003, some five months before the earliest trial date, a settlement was reached. The sum of £50,000.00 was agreed in respect of damages plus the recovery of the relevant photographs in accordance with the terms of the Consent Order which provided for delivery up on oath within 14 days. The sums in Court were paid out and a payment on account of £60,000.00 was also made in respect of the Claimant’s costs.
The Claimants' Solicitors had acted under a CFA for the majority of the claim, which specified a 100% success fee of which 95% was recoverable between the parties. Hourly rate increases were specified in the CFA which provided that they should apply “from now until the review date of which we shall notify you”. A letter regarding these increases was sent to the Claimants at quite a late stage, but prior to the final settlement of the claim. The letter provided numerous increases in the hourly rates of which many were retrospective.
At the detailed assessment of the Claimants' costs, the Costs Judge, Master O’Hare, held that (i) the base costs of £143,000.00 were not disproportionate, (ii) the success fee recoverable would be 40% in light of a very supportive opinion from Leading Counsel, (iii) the hourly rate for the senior partner Keith Schilling claimed at £400-£450 for work commencing in 2001 was excessive and £300-£315 should be allowed, and (iv) that the rate review provision had to be interpreted as providing for only one review date a year and that any reviews should not be retrospective.
On 5th and 6th April 2006 these issues were heard on appeal by The Hon. Mr Justice Eady with Master Wright and Martin Cockx sitting as assessors. It was held that:
(i) The exercise of determining proportionality was inevitably rough and ready. Brooke LJ’s comment that detailed assessments in media cases run on a CFA should be conducted “toughly” (Musa King v Telegraph Group  EWHC 1312 QB) was more readily applicable at the item by item stage of a detailed assessment than at the preliminary stage of determining proportionality. However, given the circumstances of this case, the Costs Judge had been correct in determining at the preliminary stage that the costs were not disproportionate. Such a decision did not prevent a ‘tough’ approach on reasonableness for individual items.
(ii) Although a supportive opinion had been received from Counsel, it was recognised that the CFA had been made at quite an early stage in the recent development of the law of privacy, and that there were grounds for hesitation as to the application of the law in respect of taking photographs. The 40% success fee was therefore reasonable and both the Claimants’ appeal that it was too low and the Defendant’s that it was too high, was dismissed. Eady J did state in his judgment that he might well have arrived at a lower percentage, but that was neither here nor there.
(iii) Mr. Schilling adduced evidence of his high profile as a media lawyer in justification of his hourly rate. However the essential question that the Court of Appeal asked was “to what extent it was reasonable to reflect this when the other side comes to pick up the tab”. The Claimants' Solicitors argued that as a niche West End firm they could be presumed to have higher than average overheads for their area, but no evidence was adduced. An argument based on Jones v Secretary of State for Wales  1 WLR 1008 had therefore failed. It was also decided that citation of judges’ rate decisions on summary assessment were unlikely to provide a sure guide for the determination of reasonable rates on detailed assessment. In the circumstances, the Costs Judge’s allowance of £300-£315 was left unaltered.
(iv) In determining the extent to which hourly rates could be increased under the CFA, the Costs Judge had in mind his finding that this provision of the CFA was only rescued from being a breach of Regulation 2(1) (d) of the CFA Regulations 2000 by the implication of a term that any rate increase should be fair and reasonable. The letter notifying the clients of the increases included increases retrospective for more than a year and stated that the letter was “a procedural formality for your records”. This curious form of wording was inconsistent with Regulation 2(1)(d), and supported the concerns of the House of Lords in Callery v Gray  1 WLR 2000 about excessive charges being made under CFAs by lawyers who knew that their own clients would never have to pay them. The decision of the Costs Judge was therefore correct in that the rate review provision had to be interpreted as providing for only one review date a year and that any reviews should not be retrospective.
All the appeals were dismissed.
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