CFA success fees abolished in privacy & defamation cases

April 8th, 2019

So after many of months of GDPR-related anguish, finally some good news for data controllers: with effect from last Saturday (6th April), conditional fee agreement (CFA) success fees will no longer be recoverable from defendants in privacy or defamation proceedings, at least where the relevant CFA was entered into after 5 April.

The legislative story goes like this (deep breath!):

  • CFAs were initially widely permitted under section 58 of the Courts and Legal Services Act 1990 (CLSA).
  • In 2012, the then Coalition Government sought to crack down on this permissive CFA regime on the basis it had led to spiralling litigation costs. So it enacted s. 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), which had the effect of generally preventing the recovery of CFA success fees in civil litigation – see further s. 44(4) LASPO which purports to amend s. 58A CLSA so as to include a new subsection (6) as follows: ‘A costs order made in proceedings may not include provision requiring the payment by one party of all or part of a success fee payable by another party under a conditional fee agreement’.
  • Section 44 was generally brought into force in April 2013, pursuant to the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 5 and Saving Provision) Order 2013, SI/2013/77 – “the 2013 Commencement Order”). However, as the 2013 Commencement Order made clear, the Government deliberately opted not to bring s. 44 into force in respect of “publication and privacy proceedings”. These proceedings were defined in Article 1 of the 2013 Commencement Order as ‘proceedings for (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’ – see further the carve out provided for in Article 4(b) of the 2013 Commencement Order (“the Carve Out”). The effect of the Carve Out was that claimants could still recover CFA success fees from the defendant in “publication and privacy proceedings”. (Notably, the definition of “publication and privacy proceedings” did not expressly refer to proceedings under data protection legislation This has in turn given rise to debates as to whether success fees in data protection proceedings could be treated as being subsumed within the category of ‘misuse of private information’, or whether they should be treated as being outwith the Carve Out and, accordingly, irrecoverable. I express no views on that debate here).
  • Much to the chagrin of many claimant data subjects (and their lawyers), in November 2018, the Government announced that the days of the Carve Out were numbered, and indeed that it was enacting a statutory instrument which would have the effect of bringing s. 44 LASPO into effect in respect of “publication and privacy proceedings”. The Government sought to justify this change not least on the basis that it accorded with the judgment of the European Court of Human Rights in MGN v United Kingdom (2011) 39401/04 (in MGN, the ECtHR had found that a costs regime which permitted the recovery of a 100% success fee from a media defendant in privacy proceedings brought by Naomi Campbell infringed the defendant’s Article 10 rights) – see the Government’s announcement here. And so it was that the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 13) Order 2018 SI/2018/1287 (“the 2018 Commencement Order”) was born. Article 2 of that order has the effect of bringing s. 44 into effect in respect of “publication and privacy proceedings” (Article 1(2) of the Order defines “publication and privacy proceedings” in identical terms to Article 1 of the 2013 Commencement Order). The Carve Out has now itself been excised from the legislation.

Three important points to note about these legislative changes:

  1. They do not affect the recoverability of success fees under CFAs entered into prior to 6 April: provided that the CFA itself was entered into for the purposes of providing advocacy or litigation services ‘in connection with the matter that is the subject of the proceedings in which the costs order is made’, the success fee is recoverable even if the proceedings to which the CFA relates are not issued until after 6 April 2019 – see further s. 44(6) LASPO, and see also the explanatory notes to the 2018 Commencement Order.
  2. They do not prevent claimants taking out After The Event (ATE) costs insurance and potentially recovering the premiums from the defendant in the event that they (the claimants) succeed in their claim – see further the fact that there is still a carve out in respect of recoverability of ATE insurance premiums in publication and privacy proceedings under s. 46 LASPO. The Government made clear in its November 2018 announcement that, ‘at least for the time being’, it intends to retain this costs protection for claimants on the basis that this represents a fair balancing of the imperative to ensure access to justice as against the imperative to protect defendants from excessive costs bills. As the Government put it ‘after the event insurance discourages weaker cases as these are unlikely to be insured’.
  3. The abolition of the CFA regime in privacy/media cases raises important questions about how such cases are to be funded in future. Inevitably, for many claimants the focus will now switch to endeavouring to recruit third party litigation funders. The extent to which litigation funders will see the privacy/media litigation market as being worth the funding candle remains to be seen.

Anya Proops QC

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