Burrell v Clifford [2016] EWHC 578 (Ch)
In Burrell v Clifford [2016] EWHC 578 (Ch) (03 March 2016) the matter was before Mr R Spearman QC, sitting as a Deputy Judge of the High Court. Deputy Judge Spearman had awarded the Claimant £5,000 in damages for the unauthorised disclosure of private information contained within a letter Mr Burrell had sent him. The Claimant’s costs in the costs budget were fixed at £128,695.41, excluding VAT. The Defendant’s costs were fixed at £90,295.00 excluding VAT but Deputy Judge Spearman had placed before him at the hearing, a costs schedule of the Defendant’s costs at £97,758.00 excluding VAT. Claimant’s counsel asked the court to award costs to their Client. He had succeeded on his claim and that “the usual starting point is that costs follow the event, and there are no particular circumstances which warrant any different order”.
Defendant’s counsel submitted that the court, under part 44.2 of the Civil Procedure Rules, could exercise a wider discretion to make a different order and he considered the order to be made in this matter was:
- The Claimant pay all the Defendant’s costs
- The Claimant should pay part of the Defendant’s costs
- The Defendant should not have to pay the Claimant’s costs, each side pay their own
Deputy Judge Spearman observed that Defendant Counsel’s submissions had been based upon a letter of the 30th January 2015 which contained a without prejudice offer save as to costs, whereby, payment of £5,000 damages and legal costs and disbursements, reasonably incurred up to £5,000 including VAT, was offered. The letter ended with should the offer not be accepted, the Defendant reserved its right to bring the letter to the attention of court regarding costs. Deputy Judge Spearman quoted from the letter:
“If your client fails to do better than the settlement offer at trial, we intend to seek an order requiring your client to pay our client’s costs from the expiry of the deadline together with the interest on those costs from that date until payment”.
Claimant’s counsel contended that the fee for the claim form was £1,090 and that an offer of £5,000 including VAT would give a net figure of £4,167 which figure lessened ever more to £3,077 with the costs of the claim form deducted.
Deputy Judge Spearman considered
“that submission is entirely commensurate with the costs budgeting exercise in which allowances were made for pre-action costs. The budget approved was £2,920 for that, and then a claim is made for £26,741 for pleadings and the issue of the claim, both retrospectively and prospectively, and that sum was allowed in full in the approved budget”.
He observed that when the without prejudice, save as to costs letter was sent, it was clear that the costs were much more than that offered, which he said disregarded the fact that the claim was under a CFA. This meant there was an uplift on the Claimant’s costs, subject to the uplift for success being reasonable, together with payments in respect of after the event insurance.
Further, he had before him a statement, verified by a statement of truth, that at the date of the letter of offer the figures were
“base costs of the claimant’s firm of solicitors of £9,815, and counsel’s fees of £12,340; and then there is the claim form; and then you have got various other figures which have to come in, including an ATE staged premium liability of £13,515. And the two figures I have given for lawyers’ costs exclude VAT, and obviously they also exclude the fee for the claim form”.
He considered that the offer was inadequate, it had not given the Defendant protection and Defendant’s counsel was right to refer the last paragraph of the letter to him. In his judgment, however, he considered the Claimant had done better than the settlement offer, the Defendant’s remedy to offer the £5,000 damages was right and that the costs incurred be subject to detailed assessment in the usual manner.
Defendant’s counsel referred to the White Book and the case of Walker Construction (UK) Ltd v Quayside Homes Ltd & Brett 2014. In that case the Court of Appeal had been critical of the first instant judge as he had not taken into account that the losing party could not make a part 36 offer as the consequence would have been that the successful party would get all the costs in the matter to date. Deputy Judge Spearman did not find it applied in this case as in his opinion, someone who makes an offer which includes as offer for costs to date “has all the protection they could reasonably expect by reason of the assessment regime which will have regard to reasonableness of costs and proportionality”.
He examined another point made by Defendant’s counsel who had referred to a letter of the 26th February 2014 “in which the claimant’s solicitors sought at that stage to compromise the proceedings on the basis of £25,000 damages and costs, disbursements and VAT in the total sum of £56,000-odd”. He acknowledged that offer was much higher than would be expected of the Defendant to make but he considered all that the Defendant would have had to pay was costs that had been incurred and were reasonable and proportionate. He added that the judgment in Walker Construction and, the without prejudice save as to costs offer made by the Claimant on the 13th February 2015 being £7,500 damages and payment of costs to that date, did not make him alter his mind.
He was concerned about the small value of the claim and the high level of costs incurred, which concern he shared with Mr Justice Mann who had given an interim judgment at the hearing on the 14th July 2015. He considered there were two ways of dealing with this in accordance with Mr Justice Mann’s observations:
Costs budgeting, which he observed had been invoked in this matter reducing the Claimant’s costs from around £232,000 and a well-judged part 36 offer.
He saw that there were difficulties in this matter. It was a substantiated claim, even though it was for a small amount, which the Claimant was justified in bringing. It had been considered, before Mr Justice Mann, to transfer the matter to the County Court which he
“rejected on the basis that this is still a developing area of law and therefore, for the time being at least, claims for misuse of private information properly belong in the Chancery Division or the Queen’s Bench Division regardless of the fact that they may have a modest value”.
The difficulty, as expressed by Deputy Judge Spearman, was that he had sympathy with Defendant’s counsel on the points made by him on proportionality but he did not consider that it was reasonable to say
“Well, the value is very low compared to the costs, and therefore either you shouldn’t have your costs, or you should have to pay the defendant’s costs, or you should have a radical reduction in the proportion of your costs recoverable because of the disparity between the value of the claim and the costs”.
He concluded that reasonableness and proportionality of costs were a matter for costs budgeting and costs assessment exercises. He continued that he had given his decision on the factors identified not on any injunction claim the claimant had made. As far as Deputy Judge Spearman was aware, that had not added much to the costs or made it stay in the High Court, he did not attach any weight to that contention.
He found that the Claimant was entitled to his costs in the proceedings notwithstanding the low value of his claim.
Just because a small damages award is made it is unlikely this will change the usual costs position that the loser pays the costs.
The question of reasonableness and proportionality of costs is dealt with by costs budgeting and by costs assessment. Those costs for privacy claims will be considerable.
The earlier a Part 36 offer is made the better. Better to agree to an assessment of costs early on than risk costs running to over £132,000 as in this case later and that’s without success fee and After the event insurance which could increase the costs to close to £300,000. A £5,000 offer after the letter of claim could have reduced the liability to perhaps £15,000.