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Costs protection reform - privacy and defamation cases

19 September 2013

The government has unveiled its latest attempt to resolve the tension between its plans to abolish success fees in CFAs and ATE premiums (to reduce costs in privacy and defamation cases) while still making proceedings accessible to less wealthy parties.

The government has published a consultation paper on proposals to introduce costs protection in privacy and defamation cases which aims to make it easier for people of "modest means" to bring and defend such proceedings.

The less wealthy party will be able to sue or defend without being liable for the other side's costs if they are unsuccessful. This protection takes the form of qualified one-way costs shifting ("QOCS"). 

The proposals follow Lord Justice Leveson's recommendation that costs protection should be extended to media related litigation (Recommendation 74, Executive Summary, page 44 – accessed here).

Under the proposals, a judge will be able to impose a "one-way" costs order in a case where it is clear that one side would not otherwise be able to participate in proceedings because of the potential legal costs. The poorer party would only be liable for its own legal costs, while the richer party would be liable for both sides' costs if it lost the case. 

Although likely to afford protection predominantly to claimants, such an order can be made in favour of a defendant also. This could provide comfort to smaller, less wealthy publications, at risk of claims from wealthy serial litigants, such as the late Sir James Goldsmith and Robert Maxwell. 

The proposals set out costs rules for three groups of claimants/defendants, based on their means: 

• Group 1: those of modest means – would be entitled to costs protection in full.

• Group 2: those of some means – who could pay something but not the costs in full – would be entitled to costs protection in part ('capped liability').

• Group 3: those of substantial means – would not be entitled to any costs protection because they would not face 'severe financial hardship' if they were ordered to pay the other side's costs. 

The proposed new rules would apply to proceedings for defamation, malicious falsehood, breach of confidence involving publication to the general public, misuse of private information or harassment where the defendant is a person who publishes a newspaper, magazine or website containing news or information about or comment on current affairs. 

The consultation period closes on 8 November 2013 and the proposed changes are intended to come into effect from April 2014, at which time the Defamation Act 2013 is likely to be in force. April 2014 will also see certain provisions of the LASPO Act 2012 being extended to media-related cases, which will mean that success fees and ATE premiums can no longer be recovered by claimants from defendants. 

By that time, it should be clearer to see how and when Leveson's other proposals to reduce the costs of media-related litigation – namely the low-cost arbitration scheme – will be implemented and how they will interact with the government's proposals. If these changes are implemented, we will be facing a fundamentally different costs landscape. 

Click here to access the consultation paper and here for the draft rules.