Nominal damages? Don’t expect to recover your costs — George v Cannell & LCA Jobs

Costs have now been determined in the matter of George v Cannell & LCA Jobs, in which we successfully defended claims against our clients for defamation and malicious falsehood. 

The Supreme Court’s decision in relation to the costs of the action emphasises the risks of pursuing a claim but recovering only nominal damages — with nominal damages being treated as a loss for the purpose of determining who bears the legal costs.  

As is typically the case where only nominal damages are awarded, the Supreme Court treated the award of only nominal damages as a loss by the Claimant and awarded costs (in the main) to the Defendants, Ms Cannell and LCA.

Here, Partner Helen Otty and Eleri Gibbs explore the case law behind nominal damages and asks — does such an award constitute ‘success’ in Court and what does this mean for the important issue of costs?

Quick recap

To give a brief recap of the facts of the case, Ms George claimed that Ms Cannell had falsely alleged to her new employer that she was acting in breach of non-solicitation restrictions in her contract with LCA Jobs Limited. 

Judge Saini’s first instance decision determined that Ms George’s defamation and malicious falsehood claims had failed as she hadn’t suffered any harm to her reputation or financial loss as a result of a false statement. 

Ms George then successfully appealed the malicious falsehood ruling to the Court of Appeal, persuading the Court that she may be entitled to damages for distress even where she had suffered no financial loss. 

The Supreme Court reversed the Court of Appeal’s decision, ruling that Ms George was only entitled to nominal damages of £5 due to the absence of actual financial loss. As a consequence, she wasn’t eligible for damages for distress. 

Is the award of £5 a ‘win’?

Following the Supreme Court’s judgment in June, the parties were invited to make submissions as to the recovery of costs.

Despite only recovering £5, the claimant still sought to argue that she should recover her costs —estimated to be sought at in excess of £1.5m — on the basis that she had established a wrongdoing by the defendants. 

The defendants pointed to the long line of case law to argue that nominal damages are a loss and that the defendants should be treated as the successful party.

Nominal damages — a success?

By definition, nominal damages are minimal and symbolic — intended to acknowledge that a legal wrong occurred without reflecting any substantive financial loss. 

While nominal damages serve as a legal recognition of some wrongdoing, they don’t provide significant compensation for harm because there wasn’t deemed to have been any real harm. 

In this case, the claimant succeeded in proving that a falsehood had been published but the Court was unconvinced that Ms George had suffered any measurable damage. 

Costs rulings claims are primarily based on the rule at paragraph 44.2(2)(a) of the Civil Procedure Rules, which states that: “the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party”. This principle reinforces the expectation that a party successful in litigation should be reimbursed for the expenses incurred in asserting or defending their rights. Yet what constitutes a ‘success’?

Since it’s often said in litigation that ‘costs follow the cheque’, any payment from a defendant to a claimant could be deemed  a ‘success’ — even if the claimant only recovers a small fraction of the sum claimed. This is what Ms George’s legal team sought to argue. While there are, of course, also ways for a defendant to minimise this risk by making offers, does this rule apply even when the claimant only recovers a very minimal sum? 

Courts possess discretion under CPR 44.2(4) and CPR 44.2(5) to deviate from the standard rule, considering various factors such as proportionality and the extent of success achieved. The principle of proportionality, for instance, obliges the court to evaluate whether the costs incurred are reasonable in the circumstances. Here, for instance, Ms George was awarded £5 but was expected to seek to recover costs in excess of £1.5m (including her lawyers’ success fees and insurances). 

While this case is an extreme example of disproportionality, a nominal damages award will surely always be disproportionate to the significant costs incurred in pursuing the litigation. 

So, although a claimant may technically ‘win’ the case by having established some legal wrong, the awarding of nominal damages indicates only the most limited form of ‘success’, which will rarely justify the recovery of any costs. In fact, the Court is most likely to treat an award of nominal damages as a loss and consider that the defendant is the successful party — awarding the defendant its legal costs, as in this case.

Nominal damage case law

The standard position in cases where only nominal damages are awarded was explored in Marathon Asset Management LLP v Seddon [2017] EWHC 479, which confirmed “a judgment for only nominal damages is a defeat [for the claimant].”

In this case, the High Court addressed issues surrounding breach of confidence and misuse of confidential information by former employees, particularly focusing on the appropriate award of damages when no actual financial loss is evident. Two former employees of Marathon — James Seddon and Anthony Hosking — had taken over 40,000 confidential documents when they left the company. Marathon argued that the removal of these documents constituted a breach of confidence and misuse of confidential information. Although the employees didn’t use the documents for any direct competitive advantage or personal gain, the taking itself was deemed to be a wrongful act.

When considering damages, the Court awarded nominal damages of £1 each to the defendants. The rationale was that while a breach of confidence had occurred, Marathon didn’t suffer any quantifiable financial loss — nor did the defendants derive any economic benefit from possessing the documents. 

The Court decided that nominal damages were appropriate because there was no financial impact or potential gain from the defendants’ actions that warranted compensatory damages. It was held that the award of only nominal damages meant that the defendants were the winning party.

In Bezant v Rausing [2007] EWHC 1118 (Ch), the court addressed the implications of nominal damages in a case involving claims for breach of privacy and confidentiality where the claimant (Bezant) failed to demonstrate any actual financial loss. Although Bezant successfully established that a breach had occurred, the Court awarded only nominal damages as there was no tangible harm — financial or otherwise — that warranted compensatory relief. 

This symbolic award of nominal damages recognised a technical ‘win’ but offered no substantive victory due to the lack of measurable harm. Consequently, the Court ordered Bezant to pay a portion of the defendant’s legal costs, reflecting the limited nature of the success. 

This case also underscored the risks of pursuing litigation without substantial harm having occurred, as courts will likely view such cases as minimal victories that don’t justify extensive costs recovery and are more likely to result in the claimant paying the defendant’s costs. 

Supreme Court decision 

Unsurprisingly, given the previous case law, the Supreme Court sided with the defendants in George v Cannell & LCA Jobs and gave an order that required that the claimant pay the defendants’ legal costs (save for some minor adjustments on minor points). 

This represented a significant victory for our clients, who had been facing potentially huge costs liabilities had they lost the case. 

Strategic insights on future malicious falsehood cases

For those considering pursuing claims relating to reputation or privacy, this case provides several strategic considerations. 

It remains crucial to assess whether the claimant has likely suffered a substantial loss as a result of the alleged falsehood. If the claim appears to be based on nominal or symbolic damages, then pursuing the claim will be very risky.

Talk to us

If you’re facing a malicious falsehood claim or need advice on defamation or related legal matters, our commercial disputes and litigation experts are here to help. 

We provide strategic, tailored advice to guide you through every stage of your case and achieve the best possible outcome. Our clients include prominent personalities from the worlds of sport and entertainment, as well as businesses of all sizes.

We act in a range of high-profile disputes, including cases that involve sums in excess of £40m and attract worldwide press coverage.

To find out more, talk to us by giving us a call on 0333 004 4488, sending us an email at hello@brabners.com or completing our contact form below.