Controlling costs in defamation proceedings: Consultation Paper CP4/09

This is the response by the London Solicitors Litigation Association ("LSLA") to the consultation paper published on 24 February 2009.

The LSLA

The LSLA was formed in 1952 and represents the interests of a wide range of civil litigators in London. It has some 800 members throughout London among all the major litigation practices ranging from sole practitioners to major international firms.

Members of the LSLA Committee sit on the Civil Justice Council, the Civil Rule Committee, the Law Society Civil Litigation Committee, the Commercial Court Users Committee and the Supreme Court Costs Group, to name but a few. As a consequence, the LSLA has become the first port of call for consultation on issues affecting civil and commercial litigation in London and it has, on many occasions, been at the forefront of the process of change.

The consultation paper

The position of the LSLA is that we see no reasons which are sufficiently persuasive for the costs regime in defamation proceedings to be any different from that for other types of civil proceedings. Our answers to the questionnaire reflect that. If there is an actual problem in defamation proceedings, then potentially there is the same problem in other types of proceedings. For this reason, the draft response submits that each of the proposals is unnecessary save for that regarding notification of ATE insurance premiums; which should apply to all types of litigation, not just defamation. The effect of the proposals is to make defamation cases ever more specialised and mysterious. This is not in the interests of users of the civil court system. Defamation cases are a type of civil litigation that need not be the reserve of a handful of specialist firms, which can thereby use their market position to charge premium fees.

We might add that it seems to us to be inappropriate it is odd for the government to be putting forward proposals for reform in one isolated area of costs when Lord Justice Jackson is currently reviewing the whole area of civil costs with a view to coming up with coherent and comprehensive plans for the future.

Turning to the specific questions posed in the consultation paper:

1 Do you agree that a maximum recoverable hourly rate should be introduced?

No. We see no good reason for this whether in defamation proceedings or indeed in any other type of proceedings. Hourly rates are already open to challenge under the current costs assessment procedures if they are not reasonable. This has the effect of establishing a ‘going rate’ but providing flexibility to cater for the circumstances of any particular case. Imposing a cap on the recoverable hourly rate will have the effect of restricting access to justice since it will tend to increase the size of the shortfall between the amount of costs a claimant actually incurs and the amount recoverable from the defendant – the greater the shortfall, the more likely that potential claimants will be deterred from bringing proceedings.

2 Do you agree that costs capping is likely to be appropriate in all or most defamation proceedings? If so, (a) do you think costs capping should be made mandatory or (b) should its consideration be made mandatory?

Generally no, as a costs cap is likely to unfairly impact on successful claimants and constitute a corresponding windfall for unsuccessful defendants. To the extent that the cap reduces the amount that would otherwise have been recoverable from defendants, the shortfall is likely to be borne (at least in part if not whole) by the claimant out of their damages. Once again, the effect of the cap is the restrict access to justice.

In any event, there is no need for mandatory costs capping for the simple reason that it is open to any party to apply to the court for a costs capping order in accordance with CPR 44.18-44.20 and section 23A under the Costs Practice Direction. Thus, media defendants have all the potential protection available to them, on application.

Undergoing mandatory costs capping (or costs capping consideration) procedures will simply introduce a potentially unnecessary layer of additional cost. On what basis can it make sense to put the parties to the expense of costs capping procedures in a case where none of the parties seek it? If a defendant is concerned by the modus operandi of particular claimant firms, they can apply for a costs capping order. If a particular case raises no concerns that require consideration of costs capping, then there is no need or justification for considering it.

3 Do you agree that there should be a requirement to notify the other party that ATE insurance has been entered into in the letter before claim or at the earliest opportunity thereafter?

Yes, although notification would be appropriate for any type of proceedings, not just defamation.

4 Would it also be helpful to require early notice of (a) whether the premiums are staged and, if so, the points at which increased premiums become payable (b) the amount of insurance cover and (c) any exclusion clauses?

(a) Yes, and again this should apply to all types of litigation not just defamation.

(b) Yes, and again this should apply to all types of litigation not just defamation.

5 Do you agree that the ATE insurance premium should not be recoverable where an offer of amends or admission of liability is made that leads to settlement of the substantive claim without court proceedings?

Yes, subject to the time limitations below.

If so (a) should a time period be specified during which the defendant must make the admission or offer of amends in order to avoid liability for an ATE insurance premium; (b) what should the period be?

(a) Yes.

(b) 21 days.

6 Do you agree that the courts should apply the proportionality test to total costs not just base costs?

Once again, we see no reason for defamation proceedings to be a special case. The success fee is subject to a statutory cap of 100% and is also subject to a reasonableness assessment. If the proportionality test is restricted to base fees in other types of proceedings, there is no good reason for adopting a different position in relation to defamation proceedings.

7 Should the proposals apply to (a) defamation disputes only (b) a broader definition based on context or (c) disputes defined by way of a wider list of causes of action? Please say which option you prefer and why. If option (b) please suggest how you would define the scope and give reasons. If option (c) please say whether you agree with the definition suggested at paragraph 48 or propose an alternative definition.

As explained above we do not agree that a special regime should be created for defamation or publication proceedings, however defined. If there is to be such a special regime, it should be restricted to a narrowly defined category.

8 Do you agree with the estimated costs and savings to legal businesses, media defendants, ATE insurers and the Courts? Will any additional costs or benefits arise from these proposals?

We query the source and accuracy of the estimated costs and savings quoted in the consultation paper and do not think any meaningful conclusions can be drawn from them.

9 Do you agree with our initial view that the proposed changes will have no equality impacts? If not, please explain your reasons.

No. If there was a separate costs regime for defamation to that for other types of litigation this will result in defamation becoming an even more specialist area of the law. Although there are a small number of niche firms specialising in defamation, at present defamation claims are also dealt with by a much wider range of solicitors’ firms, including practices that traditionally service a BME client base. These more general practices tend to charge lower hourly rates than specialist defamation practices, or certainly do not charge higher hourly rates for defamation work. If general practice firms are discouraged from offering defamation services due to there being a separate costs regime, there will be less choice.

10 What would be the potential costs/savings to your business of the proposals? Please explain how these costs or savings will arise, indicate the size of your business; micro (1-9), small (10-49), medium (50-250) and also which sector you operate in.

No comment.

11 Are there any competition impacts arising from these proposals? Please give details.

Yes. As with our response to Question 9, if there was a different costs regime for defamation to that for other types of litigation this would be likely to result in defamation becoming an even more specialist area of the law carried out only by niche firms. This will be anti-competitive to the detriment of solicitors who currently carry out defamation work in addition to other work and will thus limit the choice for claimants.