The High Court has directed that a data protection claim worth £3,000 should be transferred to the small claims track, to be heard in the County Court.

The case Joseph Cleary v Marston Holdings Ltd, related to an incident where on 9 August 2019, an employee of the Defendant sent a letter intended to be received by the Claimant, incorrectly by email, to one of his colleagues. The Judge noted that it is common ground that was an error.

The Claimant entered into a Conditional Fee Agreement with his solicitors. The Letter of Claim included the following paragraph under the heading "Legal Costs Recovery".

"The claimant's claim is a privacy matter and is based in statutory breach and tort. Costs on a standard basis apply. In view of this, the claim is fully cost-bearing on a standard costs basis and should any argument be put forward that the matter should be in the realms of the small claims track injury or employer liability protocol, then we reserve the right to refer to this correspondence on the issue of costs and aggravated damages based upon conduct."

The case was issued in the High Court. Particulars of Claim and Defence were exchanged with the Defendant admitting the "data breach". The pleaded value of the claim was for £3,000. The matter then came to Court for a case management conference.

The Judge was not persuaded that legitimate arguments as to procedural allocation of a claim would ever amount to aggravated damages and made the following comment:

"In my judgment, the Claimant's solicitors were making a threat to attempt to dissuade the Defendant from seeking to have the claim allocated to the small claims track. It was a threat that was inappropriate and without foundation. It should not have been made."

After some further inter-parties correspondence, the Claimant's solicitors put forward an offer of £2,000. The offer letter indicated that if, not accepted, the Claimant would instruct a medical expert for a report at a cost of £1,400 and take out an ATE premium. The Claimant's solicitors had also filed a costs budget which estimated the costs likely to be incurred in bringing this case to trial was £46,908.

The Judge made a number of pertinent comments regarding costs throughout the judgment including: "It is important that claimants (and those advising them) do not pursue claims that add little but yet have the potential to make the case more complicated and lead to increased costs ultimately to resolve what in many cases will be a straightforward claim."

The Judge added: "No ordinary litigant would incur costs approaching £50,000 in order to recover £3,000. The likely irrecoverable costs would almost certainly exceed the sum that Mr Cleary was claiming in damages".

This is a familiar story to the issues that arise in social housing cases and puts into stark contrast that the interests of the client and their solicitors are not the same. The damages sought were £3,000 and so, on any reading, a legal spend of £46,908 made little sense. As the client had entered into a Conditional Fee Agreement with his solicitors, this level of legal spend was of no benefit to him particularly, given he had already offered to accept £2,000 against his £3,000 claim.

In social housing cases, where the estimated cost of the repairs or other work is not more than £1,000 and the claim for damages is not more than £1,000, the claim should be allocated to the small claims track. The vast majority of cases settle pre-action and if the case has settled before allocation, CPR 46.13(3) allows the court to restrict costs to what would have been allowed had allocation taken place i.e. smalls claims costs.

Smalls claims costs are limited to: (1) £260 for legal advice and assistance (2) £95 for loss of earnings or leave of each party or witness due to attending a hearing and (3) £750 for experts' fees per expert. Costs claimed on the standard basis run into the thousands and so the difference in the costs claim is substantial.

Many cases settle marginally over the £1,000 threshold for damages simply to allow the solicitors to recover costs payable on the fast track (i.e. on the standard basis rather than small claims costs).

In some instances, the damages and repair costs are below £1,000 and the tenant does not benefit at all. Landlords are forced, at the time of settlement, to agree to costs being payable on the standard basis as tenant's solicitors otherwise refuse to agree to settlement and threaten to incur the costs of issuing Court proceedings. The tenant stands to gain nothing, as it would make no difference to their outcome if costs recovery were limited to the small claims track. Often, the tenant is disadvantaged by their own solicitors who encourage them not to allow the landlord into the property so that they can instruct their own expert at a higher cost. In many instances, this merely causes delay for the tenant with their solicitors eventually agreeing to the landlord's schedule of works provided their costs are paid on the standard basis.

Even once a settlement is reached, Claimants' solicitors will rush to issue Part 8 proceedings within 14 days (or less) in the full knowledge that a settlement on costs is likely to be achieved but will look to increase costs at every opportunity. There is no benefit to their client who is unlikely to have any involvement in the cost claim whatsoever.

As the fixed costs regime is now delayed to October 2023, landlords will unfortunately continue to receive overinflated claims in respect of damages, repairs and costs for some time to come. It is important that such claims are scrutinised and challenged in order that a fair outcome is achieved for all parties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.