Burrell v Clifford: Costs and proportionality in low value privacy law cases

Last month PR guru Max Clifford was ordered to pay the former Royal Butler Paul Burrell £5,000 compensation for the unauthorised disclosure of private information contained within a letter Mr Burrell had sent him.  The judgment on liability and quantum (Burrell v Clifford [2016] EWHC 294 (Ch)) can be found here, although Mr Justice Mann’s earlier decision dismissing Mr Clifford’s strike out application on limitation and triviality grounds (Burrell v Clifford [2015] EWHC 2001 (Ch)) is arguably of wider importance.  This was discussed on our blog last year.

In Burrell v Clifford [2016] EWHC 578 (Ch) the trial judge, Richard Spearman QC (sitting as a Deputy Judge of the High Court) considered the issue of costs and, in particular, the significance of “without prejudice, save as to costs” offers made outside of the Part 36 regime and the proportionately of costs to damages.  This judgment provides importance guidance regarding the approach to costs in low value privacy cases.

Facts

Having succeeded on liability at trial and been awarded £5,000 in damages, the Claimant applied for an order that the Defendant pay his legal costs.  This was opposed and met by a cross-application from the Defendant that the Claimant pay his costs or, in the alternative, some of his costs or that there be no order as to costs (i.e. that the parties bear their own costs).

The Claimant had originally estimated his base costs would be £260,000 plus an uplift/success fee (under a conditional fee agreement), but recoverable costs had been fixed by the Court at a case budgeting conference in the sum of £128,695 plus a CFA uplift (subject to its validity/the reasonableness of the success fee).  By the conclusion of the trial the Defendant had incurred costs of £97,758, but recoverable costs had been fixed at £90,295.

The Claimant submitted that there was no reason why the normal “costs follow the event” rule should not apply.  The Defendant invited the Court to depart from this rule.

The Defendant relied on a “without prejudice, save as to costs “ letter dated 30 January 2015 which contained a Calderbank offer of £5,000 compensation plus “reasonable costs” capped at £5,000 inclusive of VAT.

The Defendant argued that a Part 36 offer could not have realistically been made as it would have entitled the Claimant to all his costs to date if accepted.  These would have been considerable and disproportionate to the value of the claim.

Decision

The judge was not satisfied there was any basis for departing from the normal “costs follow the event” rule.

Dealing with the offer, the judge noted that after deducting the court fee, the offer allowed a net figure for costs of only £3,077.  The approved base costs for pre-action and pleadings/issue of the claim was just under £30,000.  This figure did not take into account any CFA success fee or "after the event" insurance premium.  The Claimant’s solicitor gave evidence that at the time of the offer solicitors’ base costs were £9,815, counsel’s base costs were £12,340 and a staged insurance premium of £13,515 applied.  These figures excluded vat, the CFA success fee and the court fee.

In the circumstances, the judge had no difficulty in finding that the offer was inadequate and offered the Defendant no costs protection.

The Defendant could have made a Part 36 Offer to protect his position.  The judge was not persuaded by the Defendant’s reason for not doing so, stating “[9]…To my mind, somebody making an offer of this sort who includes an offer for the 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.”

Like Mr Justice Mann, the judge was live to the marked difference between damages and costs:-

“[12]. Now, it is a concern that with a claim of this modest value, costs of this level should be incurred; and indeed that is a concern that Mr. Justice Mann had in mind in his interim judgment of 14th July 2015. He addressed, at para.31, two particular mechanisms for dealing with this. One is the costs budgeting mechanism which has been invoked in this case and has reduced the suggested costs of the claimant from £232,000-odd down to the figure I gave earlier; and the other is the possibility of making a well-judged part 36 offer. I believe that my reasoning is in line with those observations of Mr. Justice Mann. I am not in any way bound by them, but I do not think I am departing from them in the approach that I have adopted.”

As a general principle, the disparity between compensation and costs was not a reason for depriving the claimant of his costs where a claim was well-founded:-

“[13]…The difficulty that I see – while I am very sympathetic to a number of the points that Mr. Barrett has made about proportionality – is that where somebody has a proper claim with a good foundation and they bring it in the proper court, it is not in my judgment reasonable that one should end up by saying, "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". As I say, the question of reasonableness and proportionality of costs, in my judgment, is dealt with by the costs budgeting and costs assessment exercises, and in my judgment that is the answer to the thrust of Mr. Barrett's submissions”.

Comment

This is a positive decision for claimants and proponents of privacy rights.  Following Mann J’s decision in Gulatti & Ors v MGN Limited [2015] EWHC 1482, endorsed by the Court of Appeal in Representative Claimants -v- Mirror Group Newspapers Ltd [2015] EWCA Civ 1291, (see our blogs here and here), substantial damages are likely to become more common in privacy claims.  However, there will be many privacy cases where damages will be relatively modest.

Take for instance just one of the many different scenarios in which a privacy claim may arise: the leak of medical information may by a hospital or clinic.  In some cases, the damage and distress suffered by a data leak may be very serious (e.g. an unauthorised disclosure to various recipients identifying Patient A as being HIV positive).  In other cases, the damage/ distress caused by an unauthorised disclosure may be much more limited (e.g. where a clinic mistakenly sends notes regarding Patient B’s vasectomy operation to Patient C).

There will be many cases such as Patient B’s where damages may be modest; perhaps £5,000, sometimes less.  There is no “serious harm” requirement as such in privacy proceedings and individuals such as Patient B are entitled to be compensated for the infringement (their loss of control/autonomy over their information) and the distress, embarrassment and humiliation they have suffered.

Privacy actions are brought as claims for misuse of private information, breach of confidence and/or breach of the Data Protection Act 1998.  As the judge acknowledged, these are complicated and developing areas of law.  Litigants should not be expected to have to “have a go themselves” in the county court.  Indeed, experience suggests defendants rarely make an offer of compensation until claimants have retained a lawyer to properly advance their case by issuing a Pre-Action Protocol Letter of Claim or even a Claim Form.

A departure from the normal costs rules would likely mean that individuals whose ECHR Article 8 rights had been infringed would lose any redress, save in high value claims.  This is because claims will not be financially-viable if costs outweigh damages.  The same applies with conditional fee agreements; solicitors will not act if they are not able to recover costs commensurate with the level of work required to bring a claim.

The lesson for defendants is to think very carefully about the offer they are making and whether it will provide any protection down the line.  In this instance, the offer once ignored, effectively became meaningless.  It was incapable of acceptance for all practical purposes.  Had the Claimant insisted that his solicitors accept it, he would presumably have been in breach of the CFA and his solicitors would have been entitled to charge him their fees - as would the insurance company be entitled to charge him the staged premium.  On the figures set out above, the Claimant would have been substantially out of pocket.  This is not to say that there is no sense in defendants making such offers.  A Claimant (and/or his solicitors) may be getting cold feet about a claim and may be tempted to salvage anything/cut their losses (even if it means they will be out of pocket).  However, if such an offer is not accepted then the sensible course of action will normally be to make a well-pitched Part 36 Offer.

Defendant lawyers may draw little comfort from the judge’s view that if Part 36 Offers are accepted, the assessment regime will ensure costs are reasonable and proportionate; costs may well still be substantial.   Understandably this will grate where the harm suffered appears to de minimis.  So what else can a Defendant do where they think any real harm suffered is negligible? The answer must be to seek to have the proceedings struck out as the Defendant attempted in this case.  However, Mann J’s refusal to do this in Burrell means it is a brave defendant who seeks to have a privacy claim struck out as being trivial.  Given the principles set out in Gulati, particularly regarding claimants being entitled to compensation for the infringement per se, it will be interesting to see to what extent the Jameel jurisdiction can be applied to privacy claims.  At the present time, privacy and libel are arguably heading in different directions with a statutory serious harm test in libel and a tort that is arguably actionable per se in privacy.

Where common ground is shared with defamation is the potential for a huge gulf between damages and costs.  For example, last month’s decision in Stocker v Stocker (see our blog here) saw Mr Justice Mitting award the Claimant £5,000 in compensation in respect of defamatory postings by the defendant on Facebook.  Damages were graciously declined by the Claimant, but the Defendant was ordered to pay legal costs which are believed to be in the region of £200,000.  As practitioners will know, the costs of a libel trial can be significantly higher than this, particularly after taking into account a CFA success fee and insurance premium (defamation and privacy are two of a handful of areas which success fees and insurance premiums can still be recovered from opponents).

One final observation on Burrell is the judge’s comments on venue:-

“[13]…The possibility of transferring it to the county court was apparently considered in front of Mr. Justice Mann and it was rejected by him 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.”

Whilst most privacy lawyers would agree with this sentiment, they will also know that some privacy claims are now being transferred to the county court by Masters operating on their own initiative.  It is unclear whether this should be happening or not.  There appears to be no authoritative basis for issuing a claim in the High Court simply because it is legally or factually complex, although the assumption that there is one seems to be widespread.  Since April 2014 claims below £100,000 in value should generally be issued in the county court, save where a statute or a rule requires otherwise (as with defamation).  Interestingly, the recent edition of Tugendhat and Christie [para 13.66]  indicates that claims for breach of confidence fall outside the County Court’s limited equity jurisdiction, referencing sections 23-24 of the County Courts Act 1984.  As privacy claims will often include a claim for breach of confidence this suggests that the High Court may often be the correct venue.

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