Costs reforms for Privacy and Defamation cases come into force next week

Costs changes are afoot in relation to privacy infringement and defamation claims.

Publications disputes have enjoyed a “carve out„ from the costs rules affecting other litigation, but all of that is set to change.

As of 6 April 2019, “success fees„ in Privacy and Defamation cases will no longer be recoverable by a party (usually a claimant) from the “losing„ party (usually the defendant). This is a consequence of delayed Government reforms being brought in under the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO„).

Success fees are used in Conditional Fee Agreements, which are also known as “No Win, No Fee„ agreements. A success fee is essentially an “uplift„ on fees that law firms normally charge for their legal services. Being able to claim this “uplift„, if the case is successful, allows law firms to mitigate the risk that that they will be paid nothing if a case is lost. Well known privacy disputes such as the News of the World “phone-hacking„ claims have been run on “no win, no fee„ agreements.

This reform was announced in a statement in November 2018 by David Gauke, the Lord Chancellor and Secretary of State for Justice. In his statement, Mr Gauke said that a reason for this reform is to ‘further control costs of these cases’. The Government’s response to the 2013 consultation - ‘Costs protection in defamation and privacy claims: The Government’s proposals’ - was also published, which further details the Government’s reasons for implementing this costs reform. The change follows extensive lobbying efforts by the media which is the obvious beneficiary of such a rule change.

The consequence of this change is that it may no longer be viable for law firms to enter into the same type of Conditional Fee Agreements for a variety of privacy and defamation claims. Post 6 April agreements are now likely to seek payment of the success fee from the Client instead, on either a percentage basis or in the form of a fixed fee. Alternatively, firms may explore the use of Damages Based Agreements. The upshot of these reforms is that claimants may have to sacrifice some of their compensation in order to gain access to legal representation.

The Government has stated that ‘After the Event’ insurance premiums will still be recoverable from the “losing„ party; a move which the Government states will protect access to justice. However, critics have argued that the Government’s changes will restrict access to justice for those who have limited means.