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scrapping of recoverability of success fees and insurance premiums to be delayed for defamation and privacy cases

The Government has announced that it will delay the implementation of sections 44 and 46 of the Legal Aid, sentencing and Punishment of Offenders Act 2012 in relation to defamation and privacy claims until an appropriate 'costs protection' regime has been introduced.

sections 44 and 46 of the Act will mean that success fees under conditional fee agreements and 'after the event' insurance premiums will no longer be recoverable from an unsuccessful opponent.  Both sections had been due to come into force on 1 April 2013.

The removal of the recoverability of success fees and insurance premiums had been criticised by some commentators as limiting access to justice.  The inability to recover success fees is likely to mean less lawyers are willing to act under a conditional fee basis (often the only way that libel or privacy claims can be funded).  A success fee means that a lawyer's fee is subject to a percentage uplift in the event of success.  The uplift is currently recoverable from the opponent (subject to any challenge over the level of the uplift sought) and is principally intended to compensate the lawyer for the risk of losing the case and not receiving any fee.  Additionally, without 'after the event' insurance a litigant is exposed to an adverse costs order in the event of the claim being unsuccessful and thus may be deterred from bringing a claim.  Again, at the present time such a premium is recoverable from the opponent.

The delay in implementing the reforms is a result of Lord Justice Leveson's recommendation that "costs protection" should be extended to defamation and privacy claims. It is unclear how  a "costs protection" regime would operate, but its purpose would be to allow individuals of modest means to bring or defend actions whilst having some form of protection against having to pay the other sides costs if the case was lost.  The Ministry of Justice has stated that it accepts Leveson LJ's recommendation and has asked the Civil Justice Council for advice.


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