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Recovery of Costs for Successful Claims Under Threat Following High Court Decision

A recent High Court decision[1] held that an especially high costs claim for a simple, low value case was disproportionate under the rules set out in the Jackson reforms, cutting the value of the award by half. This decision highlights the danger of using expensive legal advice in simple or low-value cases.

In this case a claimant launched a privacy action against Mirror Newspapers, who had obtained evidence that she had been in a relationship with a Premiership footballer. The case was settled by consent after Mirror Newspapers agreed not to disclose information about the claimant’s relationship and to pay £20,000 in damages as well as the claimant’s costs.

The claimant’s initial costs claim totalled £241,817, including a 75% success fee for counsel and a 60% success fee for her solicitors. This was contested on proportionality grounds by Mirror newspapers and the success fees were reduced to 33%, reducing the value of the costs claim to £167,389.

This amount was subsequently halved at a second hearing to £84,855, the judge finding that the costs claimed were still disproportionate under the new test introduced by the Jackson reforms. This test requires that costs bear a reasonable relationship to:

  1. The value of monetary and non-monetary relief at issue

  2. The complexity of the litigation and any additional work generated by the paying party

  3. Any wider factors involved, such as reputation or public importance

In this case the parties had not gone to trial, the case was not, in the judge’s opinion, of great complexity and yet the costs claimed were of several times the value of the damages award.

This judgment stands in stark contrast with the law prior to the Jackson reforms, whereby costs were recoverable if they were necessary and reasonably incurred. The majority of the costs in this case would likely have passed that test.

The case is also significant in that it highlights the full effects of the changes to cost awards under the Jackson reforms. These reforms were seen as a way to address issues with the previous costs regime, which many criticised for being too broad and encouraging the accumulation of fees which were disproportionate to the value of the case itself.

However some commentators believe that the new approach potentially presents risks for claimants looking to litigate less complex cases of a lower value, especially if using firms with a higher fee rate. In this case they may risk a large and uncertain recalculation of their costs award at the end of their case. As this would occur after legal costs had already been incurred, this may have serious financial implications for the claimant. DJB’s innovative business structure allows us to offer advice on these matters at prices which are not disproportionate to the value of the claim.

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