The MoJ announces deferment of civil costs reforms until appropriate ‘costs protection’ introduced
On 13 December 2012 Justice Minister Helen Grant announced that the planned abolition of the recoverability of the current form of success fees and after the event (ATE) insurance in respect of defamation and privacy cases, which was due to be implemented from 1 April 2013, will not come into force until some form of ‘costs protection’ has been introduced for such proceedings. The announcement followed the recommendation made by Lord Justice Leveson that costs protection should be extended to defamation and privacy claims. The Government has asked the Civil Justice Council for advice on a viable form of costs protection by the end of March 2013.
The Government’s planned reforms had largely been based on Lord Justice Jackson’s recommendations in his final report published in January 2010. With respect to defamation and privacy claims, the report recommended the abolition of the current Conditional Fee Agreement (CFA) regime which allowed for success fees of up to 100% of costs to be recovered from the other side, and in its place recommended that success fees be recovered as a percentage of the claimant’s award in damages. To accommodate this, the report recommended the implementation of a general increase in damages.
With respect to costs protection in the event of loss, the report recommended that ATE insurance be abolished. However, the report stated it was necessary that some form of costs protection be put in place to ensure those of modest means were able to bring a claim without risk of financial ruin. The form of protection prescribed was qualified one way costs shifting (QOWCS). QOWCS at its most basic level means that a claimant will not have to pay the successful defendant’s costs unless he is conspicuously wealthy or has behaved badly during the proceedings.
Lord Justice Jackson made clear that his recommendations were “interlocking” and it was only if the “overall package” was implemented that claimants would enjoy a “generous” regime that “promoted access to justice.”
Instead, with respect to defamation and privacy claims at least, his recommendations were only accepted in part. In line with Lord Justice Jackson’s recommendations, the Government sought to abolish the current CFA regime and replace it with damages based success fees – the latter being supplemented by a general increase in damages by 10% as announced in April 2012, in the case of Simmons v Castle; but crucially the government did not propose to introduce any form of costs protection for claimants in such proceedings.
This approach has been widely criticised on the grounds the new costs regime would lead to a serious impediment to access to justice. While a claimant would be able to bring a claim on a damages based conditional fee agreement, he would not be afforded protection in the event of a loss – where a claimant could be faced with a substantial costs bill. In effect, this would leave any potential claimant of modest means in a defamation or privacy case hopelessly exposed in the event of a loss.
Therefore, the government’s announcement is a welcome development. While it is accepted the Government has a duty to address imbalances in the civil costs regime, the Government also has a duty to ensure that everyone is afforded the opportunity to protect their reputation from unjustified attack and their privacy from unwarranted press intrusion. A vital part of ensuring this is to provide some form of costs protection for claimants of modest means.