On 13 September 2013, the Government issued its consultation paper on cost protection in defamation and privacy claims. The recommendations put forward by  Lord Justice Jackson and Lord Justice Leveson included an extension of costs protection to encompass  media related litigation. The aim of these recommendations were to make it easier for people who cannot afford the cost of litigation usually associated with privacy and defamation cases, to bring and defend such proceedings.

The Government’s proposals are “designed to help people and organisations of more modest means to be able to protect their reputations and privacy” in such proceedings that include (a) defamation (b) malicious falsehood (c) breach of confidence involving publication to the general public; (d) misuse of private information; or (e) harassment, where the defendant is a news publisher.

Fundamentally, the proposals set out that the less wealthy party will be able to sue, or defend a case without being liable for the other side’s costs if they are unsuccessful. This protection takes the form of qualified one way costs shifting.

Where potential legal costs would prevent a party from taking part in proceedings, the judge would be able to order a one way costs order, whereby the less well-off party would only be liable for their own legal costs.

The proposals consider three, fairly self explanatory, groups;

  1. Those of Modest Means

People in this category are defined as those who would suffer “severe financial hardship” if they had to pay the other side’s costs. If granted full protection, a party of modest means would not have to pay the other side’s costs in the event that their case was lost.

If the case is won, and damages awarded, they would not have to pay anything beyond those damages (with the usual exceptions such as pursuing a hopeless point, and failing to beat a part 36 offer).

  1. The Mid Group, with some means

This category represents the party who would be able to pay some costs without affecting their overall financial position, albeit they may not be able to afford all of the other side’s costs. They would be expected to pay a reasonable amount.

The intention is that the level of costs would be capped at the first hearing, although it would be possible for parties to agree. The level would be based on an assessment of the applicant’s statement of assets and the costs budget.

The overall aim is that the claimants or defendants who will be liable to pay should know as early as possible what level of costs is likely, so that they can reached an informed decision regarding continuation of the proceedings.

  1. Those of Substantial Means

Those parties with substantial means, who can readily afford the other side’s costs, will not be entitled to any protection.

Even if a party, such as a national newspaper, claims that they are losing money, the test will be based on whether they will suffer ‘severe financial hardship’ if ordered to pay the other side’s costs.

It would also be open for the parties to agree a cost protection position. However, if this cannot be agreed between the parties, a party that wants cost protection will have to seek it from the Court who would make their decision based on a statement of assets.

What next?

The consultation period on this paper closes on 8 November 2013, with an expected report publication date of April 2014. It will be interesting to see how these proposals sit alongside the press arbitration scheme, which is still being vigorously debated.

There are, inevitably, issues which will be raised by the proposals set out in the consultation paper, but without doubt any changes implemented will change the landscape of costs consequences in cases such as these. We will have to wait until at least next year to see just how much.