Government plans to curb costs in defamation proceedings

25 Sep 2009 10:33 AM

Steps to tackle excessive legal fees in defamation proceedings were announced yesterday by Justice Secretary, Jack Straw.

The government response to the consultation Controlling Costs in Defamation Proceedings, which is published today, comes following extensive consultation with the Civil Procedure Rules Committee and representatives from the media, legal profession, insurance industry and judiciary.

The response sets out the first raft of measures aimed at making libel costs more proportionate and reasonable from 1 October 2009:

• early notice if ‘After the Event’ (ATE) insurance has been taken out
• a 42 day ‘cooling off period’ where, if the defendant admits liability and it leads to a settlement, the ATE premiums won’t be payable by the defendant
• a mandatory cost budgeting pilot for defamation proceedings, aimed at ensuring that costs are proportionate and within the agreed budget, with close judicial supervision.

Justice Secretary Jack Straw said:

‘Freedom of expression and investigative journalism are fundamental protections to the democracy of this country, of which we are rightly proud and the Government is working hard to protect.

‘Spiraling costs and disproportionate legal fees are too often a feature of defamation proceedings, skewing justice as defendants choose to settle unwarranted claims rather than face huge libel costs.

‘“After the Event” insurance premiums, a common accompaniment to “no-win, no-fee” civil proceedings, coupled with generous success fees, can make libel cases difficult to fight for some defendants, particularly regional media organisations.

‘That is why the Government is taking action to ensure that, where ATE insurance is taken out, defendants are notified as early as possible, and given the opportunity to reach a settlement without being liable for the insurance premiums.  

‘As recommended by the Civil Procedure Rules Committee, publication proceedings will also be part of a mandatory costs budgeting pilot, with Judges scrutinising costs as cases progress to ensure that they are proportionate and within the agreed budget. 

‘But these are only the first steps. We will be watching the pilot carefully and actively considering whether further measures are needed to control costs in this area.’

Notes to editors

1. The consultation was published on 25 February 2009 and was aimed at, in particular, legal representatives who conduct litigation in the area of defamation, media organisations, insurers and those in England and Wales with an interest in, or views on, the proposals.
2. The original press notice and consultation paper.
3. There are around 220 defamation cases issued in the High Court at the Royal Courts of Justice each year. However, we have been unable to ascertain either the total number of proceedings issued or the number of defamation claims settled before court proceedings are issued. We estimate that there are around 300 such claims a year.
4. Measures considered as part of the consultation included:
   • early notice where After the Event (ATE) insurance is taken out
   • limiting recoverable hourly rates by setting either maximum or fixed recoverable rates
   • mandatory cost capping or mandatory consideration of cost capping in every case
   • requiring the proportionality of total costs to be considered on cost assessments conducted by the court.
5. The government response to the consultation
6. Ministry of Justice Press Office can be contacted on 020 3334 3536.