Litigation costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com, said that the Government's plans could see newspapers and other media companies become embroiled in disputes about individuals' financial position when those people are suing them. The cost of this satellite litigation would be contrary to the Government's ‘Jackson’ reforms in respect of civil litigation and costs in April 2013 and the intention of reducing the cost of litigation to the parties involved, he said.
Levene was commenting after the City of London Law Society's (CLLS) litigation committee criticised proposed reforms to the costs framework for defamation and privacy cases (4-page / 101KB PDF) that were outlined by the Ministry of Justice (MoJ) in September.
Under the MoJ's proposals, the availability of cost protection from liability for opponents' costs if they lose in defamation or privacy claims would be based on a parties' ability to pay those costs - a ‘means test’. It said that the Government did not want to provide full protection to all those bringing defamation and privacy claims, as happens under the costs protection regime that applies in personal injury cases brought from 1 April 2013, so as to reflect the fact that often very wealthy people, such as celebrities, bring defamation or privacy claims.
The MoJ has therefore proposed to apply the costs protections framework differently to three different categories of people or businesses. Under the proposals only those with 'modest' means would be entitled to costs protection in full, whilst those of 'some' means would be entitled to capped or limited costs protection from the costs it has to pay its opponent in the event of losing a claim. Those of 'substantial' means would not get any costs protection under the plans if they could pay the other side's costs without facing "severe financial hardship".
Under the planned regime, it would be open to parties that are not individuals to agree the costs protection position amongst themselves. If this could not be agreed, the judge would decide based on a statement of assets provided by the party claiming financial hardship. Where liability for an opponent's costs is to be capped it is proposed this would be done by the judge at the first judicial hearing if not agreed between the parties.
Among the CLLS committee's main criticisms was its view that the MoJ's proposals lack guidance for courts to help them determine whether parties involved in defamation or privacy proceedings are experiencing 'severe financial hardship'. It said many people would seek to apply for costs protections under the plans but warned that individuals' privacy could be infringed as a result of the activities companies they are suing could undertake to challenge their applications.
"The financial standing of a claimant is nothing new in litigation and defendants have to consider issues such as potential costs capping orders, costs management orders and security for costs," Levene said. "However, introducing the proposed reforms for libel costs would amount to the equivalent of means-testing and would result in a mountain of satellite litigation around defamation and privacy cases."
"The ability for people to bring claims without facing liability for costs to an opponent in the event of losing could encourage a wave of applications from claimants to show that they are of modest means," Levene said. "Major publishers and media organisations who will likely be defending in many of the cases are likely to want to engage in tracing exercises, perhaps by engaging private investigators or forensic accountants, to ensure claimants are truly experiencing financial hardship and have not merely transferred assets to family or friends, for example. There is potential for these disputes to lead to appeals and counter-appeals and so I believe the Government's means-based proposals could be a step backwards."