There will no doubt be a predictable groan in newsrooms to the announcement by the Lord Chief Justice, that general damages for claims, including those for defamation and breach of privacy, are to be increased by 10pc from 1 April 2013, but the background to this announcement may yet prove to be ‘good news’.
Those who have been following the Leveson Inquiry in detail (and who hasn’t) may recall mention of the review of legal costs undertaken by Lord Justice Jackson, and his recommendation that the (insidious) success fees payable under Conditional Fee Agreements (CFAs), and the insurance premiums demanded under After the Event insurance schemes, should now be paid by claimants out of their damages, rather than by the losing party, all too often the publisher.
Lord Jackson’s recommendations have been accepted and incorporated into the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) which comes into force on, surprise, surprise, 1 April 2013 (is the date significant I ask?).
So, if a publisher mistakenly (and it is usually a mistake, rather than deliberate) defames someone and if, for illustration purposes only, under the old regime, damages were assessed at £5,000, from 1 April 2013, damages would be increased to £5,500.
However, if the claimant has the benefit of a CFA with his or her lawyers, whilst any damages will cause considerable angst, the heart attack inducing figures associated with lawyers’ fees might be reduced.
What the changes mean is that if a publisher takes a matter to trial before 1 April 2013 and loses, they might be ordered to pay damages of say £5,000. If the claimant has the benefit of a CFA the publisher may also face a bill for legal fees of say £125,000 plus (and I emphasis, plus) a mark-up of up to 100pc on those fees.
This increases the costs payable by the publisher to £250,000 and, having been slapped in the face with the mark-up, you then have the double whammy of paying the claimant’s premium on their After the Event Insurance policy, which could be in the region of £95,000.
Prior to 1 April 2013, in that scenario, the publisher finds itself with a total bill, excluding their own fees, of £350,000. From 1 April 2013 the bill might be reduced to £130,500, still very painful but significantly less.
No, I promise this is not an (advanced) April Fool’s joke. The theory is that the claimant will be able to pay his/her own success fee and ATE premium out of the increased damages.
However, in a scenario where damages for libel are often comparatively small (and yes I know that any payment is painful) a claimant will simply be unable to pay anything like the mark-up publishers have been faced thus far.
Whether the new regime spells the end, in practical terms, of CFAs for defamation claims, we will have to wait and see, but the reality of this increase in damages may mean a significantly reduced payment overall.
It may also allow publishers to defend claims which they have otherwise been forced to settle because of the risks associated with the pernicious CFA regime.