The government’s long awaited changes to the funding of defamation and privacy claims are coming into effect on 6 April 2019. Claimants will no longer be able to recover success fees under Conditional Fee Agreements (CFAs) from defendants.
CFAs – also known as “no win no fee” – allow a litigant to enter into an agreement with their solicitor and barrister in which it is agreed that they will only pay their legal fees/expenses if they win. Either party can enter into a CFA, but in defamation and privacy claims they have been more commonly used by claimants.
CFAs contain a success fee - an additional amount of the winning party’s legal fees to be paid by the losing party. Success fees are often set at 100% of the original legal fees incurred, thus doubling the legal costs that the other party is at risk of paying and considerably raising the stakes of taking a case to trial.
Changes to the funding of defamation and privacy cases have been expected since 2012, when the Leveson report into the culture, practices and ethics of the press recommended that costs protection should be extended to this type of claim. The government consulted on a proposed bespoke costs protection regime in 2013 but its proposal (which was based on an assessment of the losing party’s means) proved to be complex and unpopular, and was subsequently dropped. The government’s recent decision to stop success fees from being recoverable, which it has described as “a pragmatic way forward”, is a compromise because it is still allowing “at least for the time being” After The Event insurance premiums to be recovered from the losing party.
In introducing this change, the government has had to take into account the judgment of the European Court of Human Rights in the case of MGN v UK which held that the defendant's obligation to pay the claimant a 100% success fee under a CFA was disproportionate, and that the CFA regime was in breach of Article 10 (freedom of expression) of the European Convention on Human Rights (the underlying case involved a breach of confidence/ misuse of private information claim brought by Naomi Campbell following an article published about her in The Mirror).
Those in favour of retaining CFAs have argued that they help claimants of limited means to bring claims to protect their privacy and reputation. The media, defendants and their insurers have pointed to the fact that in claims funded by CFAs, the claimant’s legal costs can significantly exceed any damages payable, are often disproportionate and discourage freedom of expression. After 6 April there may be a short term spike in claims brought by claimants, looking to take advantage of the old regime, who signed up to CFAs prior to the change in the law, but in the longer term the ban on recovering success fees is likely to be a game changer in redressing the disparity in legal costs that arises when a claimant is on a CFA. It remains to be seen whether it will now discourage claimants from bringing defamation and privacy claims.