Image: DFID - UK Department for International Development. This file is licensed under the Creative Commons Attribution 2.0 Generic license.
The Duke of Sussex, Sir Elton John, Baroness Doreen Lawrence and four other claimants have been told to pay Associated Newspapers Limited (ANL), publisher of the Daily Mail, an initial £9,544,355 by 28 August, after Mr Justice Nicklin ruled that costs in the case should be assessed on an indemnity basis rather than the standard basis. Converted at current exchange rates, that initial payment alone comes to somewhere around C$17.9 million, though the final figure owed will move with the pound.
The order follows Nicklin's July 7 judgment dismissing every element of the claimants' case, which alleged ANL had engaged in unlawful information gathering, including phone hacking and the use of private investigators, over a period spanning decades. The trial ran across dozens of sitting days between January and March this year, according to the judgment handed down by the High Court.
For an insurance audience, the £9.5 million figure is less important than the basis it was calculated on. Under England and Wales's standard basis, a losing party pays reasonable and proportionate costs, with any doubt resolved in their favour. Indemnity costs flip that presumption. The paying party has to show costs were unreasonable, and proportionality barely comes into it. It's a punitive mechanism, reserved for cases where a court takes a dim view of how a claim was conducted, and it tends to produce much higher bills.
Nicklin found that ANL's own claimed costs, reported in court to be in the region of £34.5 million (roughly C$65 million), appeared "exceptionally high". He nonetheless declined to cap the total amount the claimants may ultimately have to pay. A stricter costs basis combined with no ceiling on the total is about as difficult a combination as after-the-event (ATE) insurers have to price for, and about as hard to reserve against accurately at the point a case is first taken out.
The claimants' seven-strong group is understood to have held a combined £16.2 million (about C$30.5 million) in ATE cover between them, arranged when the litigation looked far less costly than it became. Against a defence bill that grew several times over across a four-year, multi-claimant action, that leaves a gap running into eight figures. ANL had sought an initial payment of just under £9.95 million, the claimants had offered £8 million, and the court landed much closer to the publisher's number.
Canadian courts already have their own version of this distinction, even if the labels differ. In Ontario, for instance, the default is "partial indemnity" costs, which typically recover somewhere between 50% and 75% of a winning party's actual legal fees. Courts can and do step up to "substantial indemnity" costs, usually running at around one-and-a-half times the partial indemnity scale, in cases involving rejected settlement offers or conduct a judge considers improper or unnecessarily prolonged. It's not identical to the UK's standard-versus-indemnity split, but the underlying idea, that a losing party's conduct can push a costs award well above the ordinary scale, will feel familiar to anyone underwriting Canadian litigation risk.
Where Canada differs sharply is on the insurance side. ATE cover, sometimes called adverse cost insurance here, is a much newer and thinner product in this market than in the UK, and Canadian courts have historically been reluctant to let claimants recover the premium itself as a disbursement, on the view that it does little to advance the litigation and isn't something a losing opponent should be made to underwrite. Third-party litigation funding has grown faster than ATE insurance uptake as a result, and as Insurance Business Canada has reported, that funding market is expanding with little regulatory oversight, a combination flagged by legal advisers as a growing pressure point for P&C pricing more broadly. For brokers fielding questions on what legal expense insurance can and can't cover, the Harry case is a useful reference point because it shows what happens once a matter has run long enough, and grown public enough, that the original insurance arrangement stops matching the risk.
Nicklin was scathing about how the case had been run, criticising the claimants for pursuing "serious allegations" that lacked adequate evidential support and for failing to drop lines of attack once the evidence no longer sustained them. He also took issue with a statement issued jointly by Prince Harry and Baroness Lawrence after the original judgment, which branded the outcome a "complete and obvious whitewash", though that comment was made by only two of the seven claimants and wasn't itself part of the costs decision.
Nicholas Bacon KC, acting for the claimant group, had warned before the ruling that moving to an indemnity basis could be "very significant" for a group whose cover was calculated on the assumption that standard costs rules would apply. That warning has now played out.
An appeal, if lodged, must be filed by 2 October, with a further deadline in early November for any notice to the Court of Appeal. The final costs bill, and how far any insurance actually responds to it, won't be settled for months yet.
Adverse cost cover still does what it's meant to do. It lets claimants who'd otherwise be priced out of court bring a case without staking everything on the outcome. But this ruling shows how a policy limit that looked sensible when a claim was filed can end up badly undersized once a court decides, years later, that the losing side didn't just lose the case but lost it badly. Canadian litigation funding is growing faster than the insurance products built to sit alongside it, and that gap is worth having on file before a comparable dispute lands closer to home.
A final ruling on the total costs payable in the UK case is expected in the coming months.
