[author: Bethan Lloyd]
On 13 September, the Government opened its consultation on proposed changes to costs protection in defamation and privacy cases. These proposals reflect the suggestion by Lord Justice Leveson that the qualified one-way costs shifting (QOCS) introduced to personal injury matters earlier this year should extend to privacy and defamation.
The proposals aim to make defamation more accessible. The Government hopes that the introduction of a costs protection system will encourage meritorious claims from those who are unable to afford the legal costs and act as a disincentive to wealthy claimants with weaker claims. The proposed reforms should also encourage earlier settlement – either through Part 36 offers or an ‘Offer of Amend’ (as per s.2 – 4 of the Defamation Act 1996).
The proposed costs rules would be inserted as a new section IV at the end of Part 44 of the CPR .
The protection will, in principle, be available to both claimants and defendants, but would apply only to the types of proceedings defined in the Conditional Fee Agreement Order 2013, which includes proceedings for:
breach of confidence involving publication to the general public;
misuse of private information; and/or
harassment, where the defendant is a news publisher (i.e. a person who “publishes a newspaper, magazine or website containing news or information about or comment on current affairs“).
It was felt that it would not be right to mirror the personal injury practice of supplying ‘no win, no fee’ services to all litigants, irrespective of financial means. Accordingly, the Government proposals identify three classifications:
‘Nil net liability’ which includes those of ‘modest means’ who will be entitled to full costs protection;
‘Capped liability’ which applies to parties who can pay something, but not full costs, and are thus entitled to partial costs protection; and
‘No severe financial hardship’ which is for parties (normally publishers and wealthy individuals) who would not suffer ‘severe financial hardship’, even if a full costs order were made against them. These individuals or organisations will not be eligible for any costs protection.
For nil net liability parties, there is the presumption that an individual who is not of substantial means will be entitled to full costs protection (unless the Judge is persuaded that they will not suffer severe financial hardship if they had to pay costs). Should a party with nil net liability win damages, but still be required to pay costs (for example, if a more favourable Part 36 offer had previously been declined), their costs bill will be limited to the value of damages.
If a losing party’s liability is capped, they will have to pay a ‘reasonable’ amount, taking into consideration their assets and the costs bill (their assets will remain confidential unless the Judge directs otherwise). If, as in the previous example, there was a win with costs attached, a party with capped liability may have to pay costs in excess of any damages awarded – subject to a test of reasonableness.
The proposals expect parties to agree protection for costs between themselves but, in the absence of such agreement, the Judge can decide on the basis of a statement of costs. Any application for costs protection will be subject to s.40 of the Crime and Courts Act 2013 (when in force).
Throughout the life of the claim, either party can apply to the court to vary the costs protection order if their situation or means change. Equally, costs protection can be lost if the party attempts to abuse proceedings, or had no reasonable (or honest) grounds for bringing the claim.
The consultation process is open until 8 November 2013.