Government launches consultation on defamation/privacy costs protection proposals

The Ministry of Justice has published details of its proposals for a cost protection regime in defamation and privacy cases.   The proposals follow Lord Justice Leveson's recommendation that an adequate costs protection system be put in place for defamation and privacy cases (and harassment cases involving the media) once the cost of 'after the event insurance' policies cease to be recoverable from the losing party (which is now the norm in most other cases).

After the event insurance insures a litigant against the risk of being ordered to pay the cost of the other party's legal fees (which they would normally happen if their case is unsuccessful).  The non-recoverability of such policies, which can approach 100% of the sum insured (perhaps several hundred thousand pounds in a libel case), will mean that in practice litigants are often going to be unable to obtain such insurance and be deterred from bringing a claim.  The consequence of this is that wealthy individuals and organisations may be placed at an unfair advantage and individuals could be prevented from seeking redress when, for instance, a newspaper breaches their privacy or libels them.

The government is proposing a form of 'Qualified One Way Costs shifting', modified from a system recently introduced for personal injury claims.  Under the proposals a litigant (normally, but not necessarily, a claimant) will be entitled to apply for a costs protection order at the outset of the litigation if they a have modest means and an adverse costs order would cause them severe financial hardship.  If granted an order may protect them against an order that they pay the other side's costs if they lose, or cap the costs they could be liable for.  It is anticipated that there would be exceptions, for instance: where the party had been dishonest, where a case had been struck out, where a party had pursued an unmeritorious issue or where a party had unreasonably rejected a settlement offer (although one of the issues under consultation is whether this should be capped at the amount of damages ordered).

The consultation runs until 8 November 2013 and it is anticipated that the government will publish a response by April 2014.  After the event insurance policies (and uplifts on conditional fee agreements) remain recoverable in the interim.  Details of the Consultation and the Consultation Paper can be found at the below link:-

https://consult.justice.gov.uk/digital-communications/costs-protection-in-defamation-and-privacy-claims