Ruled Out Of The Budget: Fees incurred in advertising to claimants are not recoverable
March 5, 2021
3 min read
What's going on here?
Mr Justice Saini, in The High Court of England and Wales, ruled out the £1m of advertising costs included in the costs budget by London firm PGMBM in the case against British Airways Plc (BA) for their latest data breach (see our article on that here).
What does this mean?
PGMBM submitted to the court that they had already incurred £443,000 and would incur £557,000 on advertising in the future to attract potential claimants to join the Group Litigation Order. Lawyers from DWF LLP who represent BA successfully argued that these costs, totalling £1m, should be removed from the costs budget. The defendant’s lawyers argued that Lord Neuberger’s ruling in the decision of Motto v Trafigura in the Court of Appeal prevented any claim for advertising costs. In that case, Lord Neuberger held that the expenses of getting business, which includes advertising to the public as potential clients, should not generally be treated as part of a solicitor’s general overheads or expenses. Saini J agreed with this, holding that it is “clear as a matter of binding authority that these are not recoverable costs” and should be treated as expenses instead.
What's the big picture effect?
This story highlights a number of issues, especially the reasoning for why these costs are not recoverable in the Group Litigation Order (GLO) and how law firms might be able to recover these costs. A GLO is a group of claimants taking action for damages. In the current case (Weaver & Ors v British Airways Plc) the claimants are taking action against BA for the data breach which occurred, claiming they suffered harm and distress and loss of control over their data. PGMBM have had to advertise to the 22,230 eligible claimants who have currently joined the action. However, it should be noted that the number of current claimants only amounts to 5% of the total eligible claimants who can join the GLO. At a first glance of the facts, PGMBM is clearly trying to take advantage of the costs budget and recover their advertising costs in the event it is successful in the litigation. It is not surprising that a law firm has attempted this because law firms are also businesses and need to make a profit to be successful, whether that is achieved by recovering their advertising costs or not.
However, it is also understandable that the defendants, in this case, should not have to pay out the advertising costs in the event they are unsuccessful in the ligation. In light of this ruling by Saini J, it is clear that the right decision has been made. This is because to an ordinary person it seems a far cry to have advertising costs included in the costs budget, especially when they amount to £1m. These are costs that are not incurred in the litigation but incurred in order to get the business into the law firm. The reasoning behind this is clearly in the right place and can be viewed as a justified ruling with good authority.
The issue now arises as to how law firms can ensure that they recover these costs given that they cannot be included in the costs budget. One straightforward method of achieving this could be through increasing the hourly rate that they are charging their clients. Alternatively, if law firms are relying on a fixed fee percentage of the damages that will be awarded, they could increase the percentage they expect to receive in the event of a successful litigation for their clients. However, these methods may not make up for all the advertising costs incurred. In conclusion, there is no doubt that law firms will find a method of recovering these costs in some capacity, but what other methods would you suggest law firms implement?
Report written by Harry Grice
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