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Winner loses all? Section 40 of the Crime and Courts Act 2013 and its adverse costs consequences

As others have speculated, not only could the enactment of section 40 of the Crime and Courts Act 2013 run contrary to the values of ensuring a free press, it could upend what we understand about the general rule of costs: that is, the loser pays.

Introduction

If you placed a bet on Remain winning the EU referendum, or on Hillary Clinton succeeding in her bid to become US President, you would not have expected the bookie to have paid out when the results became known. Likewise, if you chose to invest in Betamax, or bought shares in HD DVDs, you would not expect compensation for your forfeited investment when the market forces displayed their preferences for VHS and BluRay.

In these scenarios, failure to recuperate any money would seem the fair result: you gambled and you lost. So are there circumstances in which an ultimately unsuccessful venture will pave the way for recovery of expenditure, regardless of the outcome? The answer, for libel proceedings against the press at least, will be yes, if a government consultation, seeking views on issues relating to the Leveson Inquiry into the culture, practices and ethics of the press, results in the enactment of section 40 of the Crime and Courts Act 2013 as drafted (the consultation closes today, 10 January 2017).

Section 40 of the Crime and Courts Act 2013

Under section 40, any relevant publisher (for example, a national or local newspaper) that declines to voluntarily join a government approved press regulator could be required to pay a claimant’s legal costs in any libel claim, even if it won the case and every word of the article in question was proved to be true.

Enough has been written about the impacts this could have on investigative and editorial journalism, and the consequent chilling effects it could have on free speech. From a narrower civil procedure perspective, the proposed inversion of the starting point that the “loser pays” costs should not go unremarked.

General rule on costs: loser pays

Generally, in most civil litigation, the courts have a wide discretion under CPR 44.2 to award costs. However, it has long been established that the general rule for costs under the court’s discretion is that the unsuccessful party will be ordered to pay the costs of the successful party. Only in exceptional circumstances should the principle be disregarded. In the words of Norris J, delivering judgment in The London Borough of Tower Hamlets v The London Borough of Bromley:

“One should depart from the general rule only where the needs of justice and the circumstances of the particular case require, and a measure of caution is needed.”

Under normal, perhaps pre-Leveson circumstances, it is difficult to see how the publication of something demonstrably true, and in the public interest, would justify a departure from the general rule on costs.

Court’s discretion as to costs

It is understood that courts are obliged by the civil procedure rules to be open to arguments for orders for costs to be split, and they may make percentage orders that require a party to pay a proportion of the total costs, such as in Earl of Malmesbury v Strutt and Parker and others and Mears Ltd v Leeds City Council.

The first point of reference is, of course, CPR 44.2. As stated above, the court may make a different order as to costs, which departs from the general rule (CPR 44.2(2)(b)). CPR 44.2(4) goes on to make clear that, in deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including:

  • The conduct of the parties.
  • Whether a party has succeeded on part of its case, even if it has not been wholly successful.
  • Whether any admissible offer to settle has been made by a party and brought to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply.

In the recent case of Arroyo and others v Equion Energia Ltd (formerly known as BP Exploration Co (Colombia) Ltd), Stuart-Smith J reiterated a number of circumstances, flowing from the court’s discretion under CPR 44.2, where the costs recoverable by a successful party can be reduced. He alluded specifically to the conduct of the parties and circumstances where one side may not win on every issue.

The court in Halsey v Milton Keynes General NHS Trust considered whether refusal to mediate should give rise to costs sanctions. It noted that any decision to deprive a successful party of any of its costs (on the grounds that it refused to mediate) is an exception to the usual rule that costs follow the event. As a result, the burden to justify a costs sanction lies with the unsuccessful party, which must show that the successful party acted unreasonably in refusing to mediate.

Circumstances such as these may provide support for the notion that a successful party’s costs can fairly be reduced. However, it seems to me to be a considerable step to move from reducing a successful party’s costs to ordering that party to pay the costs of the losing party, regardless of any imperative for change.

Unmeritorious claims

Understandably, the civil justice system seeks to guard against the abuse of the courts’ processes. Who is to say, however, that a deluge of unmeritorious claims will not result from the enactment of section 40? If a claimant has nothing to lose, or has a personal vendetta against a particular publisher who has released true, yet disagreeable, information into the world, they may decide to pursue a vexatious claim. The wording of section 40(3) is quite emphatic. It states that the court must award costs against the defendant if it was not a member of an approved regulator (when it could have been) at the time the claim was commenced. However, balance and some deterrent is introduced by the inclusion of two exceptions to this rule, namely where:

  • The issues raised by the claim could not have been resolved by using an arbitration scheme of the approved regulator (had the defendant been a member).
  • It is just and equitable in all the circumstances of the case to make a different award of costs or make no award of costs.

Conclusion

The debate about section 40 rages on in media circles. It should also raise an eyebrow with the wider legal community because its costs consequences seem to be so at odds with that to which we are accustomed. If the established general principle on costs is abandoned in these circumstances, there is no telling what precedent that might set. Although a clichéd warning, the phrase “slippery slope” seems apt.

Practical Law Dispute Resolution Jack Meek

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