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Defamation and privacy claimants will not have to pay other side's costs, Government confirms

Members of the public faced with the prospect of bringing a claim for defamation or breach of privacy against a large media organisation will in the future  be protected against having to pay the other side's costs if the case is lost, the Government has announced.20 Dec 2012

It has confirmed that a proposed  ban on the claiming back of legal insurance premiums and lawyers' success fees, due to come into force in the majority of civil court cases from April next year, will initially not apply to these types of cases. This will mean that conditional fee agreements (CFAs), will  continue to allow defamation and privacy cases to be brought at no financial risk to the claimant, and will remain attractive to victims of defamation or breach of privacy.

In a written ministerial statement Justice Minister Helen Grant said that the delay, which allows for the continued recovery of CFA success fees and legal expenses insurance premiums from an opponent in defamation and privacy actions, would run until the Government was able to introduce costs protection measures for claimants in this type of case, as recommended by Lord Justice Leveson following his recent Inquiry into the Culture, Practices and Ethics of the press.

"In the context of his Inquiry ... Lord Justice Leveson recommended that costs protection should be extended to defamation and privacy claims," the statement said. "This would mean that individuals of modest means should not be in the position of bringing or defending actions without some form of protection against having to pay the other side's costs if the case is lost."

"The Government has accepted this recommendation and [the ban on recoverability of success fees and insurance premiums] will not come into force for defamation and privacy claims until costs protection has been introduced for these proceedings ... this short delay in implementation will mean the protection which currently exists through recoverable insurance premiums and CFA success fees will continue until a new regime of costs protection can be implemented through changes to the Civil Procedure Rules."

Currently many civil actions, including those for defamation or breach of privacy, are brought on a 'no win no fee' basis under a CFA. These will usually be backed up with 'after the event' (ATE) costs protection insurance, which covers the claimant against the risk of having to pay the defendant's legal costs if the claimant loses the case.

If the claimant wins, the defendant or its insurers must pay the claimant's lawyer's success fee and an  ATE premium in addition to the claimant's basic legal costs. These fees can sometimes be as high as 100% of the lawyer's usual fee. If the claimant loses the case, no ATE premium or success fee is payable and the ATE insurance will cover the claimant's liability to pay the defendant's legal costs. As a result, cases can be brought at no financial risk to the claimant.

The Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) comes into force on 1 April 2013. Part 2 of LASPO introduces wide-ranging reforms to the civil litigation costs regime, as recommended by prominent Appeal Court judge Lord Justice Jackson. Among other changes, successful claimants will have to pay their own lawyers' success fees and the cost of taking out a legal expenses insurance policy out of any damages award. Among the recommendations made by Lord Justice Leveson as part of last month's report (515-page / 4.7MB PDF) into the press was the creation of a "speedy, effective and costs-free" mechanism which would enable those whose rights had been infringed to resolve disputes with media organisations without having to go to court. In keeping with the Civil Procedure Rules (CPR), parties that refused to use this procedure could face cost implications in court. This mechanism would be governed by the new independent, voluntary media regulator proposed by the report.

In the event that an acceptable alternative dispute resolution mechanism could not be established, Leveson said that the introduction of a system of qualified one-way costs shifting (QOCS), as proposed to be introduced for personal injury claimants from April 2013,.would be necessary to prevent the "seriously retrograde step" of allowing only the rich to pursue actions against the press. QOCS, as proposed by Lord Justice Jackson, would see parties who lost their action protected from having to pay the other side's legal costs.

Legal costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com, said that the introduction of a QOCS system had already been proposed for personal injury cases. He said that the Government's announcement showed that further "tweaks" to the new costs regime before it came into force in April were "likely".

"This could be the start of the abolition of between-the-parties cost recovery in litigation generally at some point in the future," he said.