In his report Lord Jackson reviewed legal costs in specific types of litigation, including defamation proceedings. There were numerous recommendations and a consultation process, in which Goodwin Malatesta Legal Costs Services were respondents, that have led to proposals for interim measures being laid before Parliament.
Since implementation of the Access to Justice Act 1999 parties (normally Claimants) in defamation proceedings have been able to fund cases by Conditional Fee Agreements (CFAs) allowing a success fee of up to 100% and the premium of after-the-event (ATE) insurance to be recovered by successful parties from their opponents. This has resulted in high levels of legal costs being incurred in defamation actions and has been criticised and debated in the courts and Parliament. It was felt that the high level of costs in defamation claims, caused by the recovery of success fees and ATE insurance premiums, had a chilling effect on free speech and legitimate publication. The excessive costs could force Defendants to settle unmeritorious claims, which in turn threatened a more risk averse approach to reporting and a risk to freedom of expression.
Before Lord Jackson’s review the Government had consulted on various proposals to control legal costs and on 1 October 2009 a pilot scheme was introduced in the Royal Courts of Justice and District Registry in Manchester, whereby each party will file and exchange costs budgets. The court will approve or disapprove those budgets and unless there is a significant change in circumstances an amount approved by the court will be deemed reasonable and proportionate.
It is proposed that success fees and ATE insurance premiums should not be recoverable in civil litigation, including defamation claims. To compensate Claimants for the removal of this recovery it is proposed that general damages for defamation and breach of privacy should be increased by 10%.
It is also recommended that a regime of qualified one way costs shifting should be introduced, whereby any costs orders against a Claimant shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to the financial resources and conduct of the parties.
It was felt that paragraph 3.3 of the defamation pre-action protocol should be amended so that the Claimant is required to make his case clearer from the start. It is proposed that the new paragraph will read “The Claimant should identify in the letter of claim the meaning(s) he/she attributes to the words complained of.”
Finally, it was recommended that there be a proper consultation as to whether trial by jury in defamation cases should be retained as the costs of those trials is 20% to 30% greater than the cost of a trial by Judge alone.
Interim measure – reduced success fees
On 19 January 2010, after publication of Lord Jackson’s review, the Ministry of Justice (MoJ) published a consultation paper proposing the reduction of conditional fee agreement success fees. The MoJ sought views regarding a proposal for the maximum recoverable success fee to be reduced to 10% as an interim measure whilst Lord Jackson’s recommendations are considered.
The response to the consultation was published on 3 March 2010 when it was shown that 53% of the respondents agreed to the proposal and the Conditional Fee Agreements (Amendment) Order was laid before Parliament on 3 March 2010 to urgently introduce the maximum success fee.
The disproportionate cost of defamation proceedings has caused great concern for some time and the fact that the MoJ has acted so swiftly after Lord Jackson’s review does show that Parliament has the desire to address these concerns. What impact the capped success fee (whenever it is implemented) and the costs budgeting pilot scheme has on the cost of defamation actions will be awaited with interest.