Briefing Note on Exemplary Damages and Costs – Gill Phillips

A lot has been written in recent days about the proposed new clauses to go into the Crime and Courts Bill, which is due to be debated in the Lords on Monday, on exemplary damages and costs. The content and import of these clauses are very worrying and pose some serious threats to free speech.

It is worth reminding ourselves just what Lord Justice Leveson had to say on exemplary damages:

In the circumstances, in line with the conclusion in the Report of the Law Commission on Aggravated, Exemplary and Restitutionary Damages, I recommend that exemplary damages (whether so described or renamed as punitive damages) should be available in actions for breach of privacy, breach of confidence and similar media torts as well as for libel and slander. Voluntary Participation in a regulatory regime contained in or recognised by statute and good internal governance in relation to the sourcing of stories should be relevant to the decisions reached in relation to such damages (Leveson Report Vol IV page 1512 para 5.12)

As has been widely reported (see here and here and here)  the advice from three eminent QCs, Lord Pannick QC, Antony White QC and Desmond Browne QC, in a Joint Opinion commissioned by the Industry, is that Lord Justice Leveson’s proposal to extend exemplary damages to  a small group of news publishers, probably breaches Article 10 of the European Convention of Human Rights. The basis on which that advice is given is that the approach currently being proposed is (i) inconsistent with authority, (ii) incompatible with Article 10 of the Convention, and (iii) objectionable in principle. Lord Pannick QC, Antony White QC and Desmond Browne QC advised in particular that no Minister of the Crown would be able to make a statement of compatibility in relation to the draft proposals as required by section 19 of the Human Rights Act 1998. It will be interesting to see which Minister is brave enough to make this statement if these clauses are passed.

It is worth noting that Lord Justice Leveson neither invited nor received submissions on exemplary damages during his Inquiry and the recommendations in the Report on exemplary damages are based on an out of date Law Commission report which was prepared before the Human Rights Act 1998 was passed.

What is regarded as particular objectionable is the fact that these proposed new clauses [pdf] single out for punishment a particular category of defendant, rather than a particular kind of conduct, all the more so where the category of defendant singled out includes the press. The advice here is particularly strong, namely: to punish the press for what others may do without punishment is inconsistent with the special importance that both domestic and Strasbourg jurisprudence attaches to freedom of the press under Art 10 of the ECHR.

Leaving aside the very serious concerns in principle about introducing exemplary damages, anyone reading what is proposed in the latest draft clauses and comparing them with what the Leveson Report recommended can’t but say that these current clauses are a million miles away from what the Report recommended.

NC21A (clause 11 on the draft) singles out publishers of news-related material for this new punitive damages regime. The chilling effect of this on free expression is obvious and unjustifiable. While the touchstone for such an award under clause NC21A (6) (clause 11(6)) is “a deliberate or reckless disregard of an outrageous nature for the claimant’s rights”, as it is likely that almost all publication of information concerning an individual takes place in the knowledge that the individual’s Article 8 rights are engaged the requirement that the defendant has deliberately or recklessly overridden the claimant’s rights will be met in most if not all cases. This is not therefore such a high hurdle as has been suggested. This will force the focus on to whether the defendant’s conduct was “of an outrageous nature”. This may ultimately depend on the personal views of an individual judge.

The House of Lords in Rookes v Barnard and Broome v Cassell & Co when it imposed a limitation on the categories of cases in which exemplary damages were available, found that a touchstone of “outrageous” conduct was unsatisfactory and legally uncertain. In Rookes v Barnard, (at 1229), Lord Devlin rejected the use of words such as “outrageous”, stated that “ It would, on any view, be a mistake to suppose that [such a word] can be selected as definitive..”. In Broome v Cassell & Co it was specifically contended that the court should be allowed to award exemplary damages wherever the defendant’s conduct was outrageous, and that the limits imposed in Rookes v Barnard should be overruled. A seven judge court rejected this submission. Lord Reid at 1087 stated that such a test would be “far too vague”. Lord Diplock at 1129 dismissed a test of “outrageous” conduct as merely one of “a whole gamut of dyslogistic judicial epithets”, and explained that the rejection of such a test in Rookes v Barnard was a decision of legal policy.

There is therefore a strong possibility that the ECHR would consider that “outrageous” conduct lacked the legal certainty required before a measure which interferes with freedom of expression under Article 10(1) of the Convention can be said to be “prescribed by law” and capable of justification under Article 10(2).

There still appears to be a serious problem with the definition of relevant publishers, as it appears that at least some websites will be exposed to exemplary damages while others (such as the websites of broadcasters, which are not regulated by Ofcom) will fall outside these provisions. The definition will still catch websites of whatever size or influence which are published in the course of a business unless they fall into one of the exclusions. Leveson never seems to have intended that small online publishers should be  threatened with costs and damages if they didn’t participate, but the current definition sections (NC 29 and 30 and NS5, clauses 18, 19 and 131 on the attached version) would seem to include a lot of them. There is also a lot of ambiguity around many of these definitions.

The clear message coming out from some parts of the press, is that if these clauses are passed into law, they will challenge them in Strasbourg at the first opportunity. It’s worth noting that the past use of exemplary damages against newspapers in libel cases is very rare (I have been told its about three times in the last 30 years, but I don’t have exact figures or cases to hand); certainly some think that they may not need to wait years for an actual case but, because of the way the press are singled out, given their special protection under Art 10, they can argue that the chilling effect of the mere existence of such a clause already renders them victims.

Equally alarming is that whereas the previous Conservative proposal simply and straight forwardedly exempted relevant publishers who were members of an approved regulator, the latest formulation provides no such protection, and actually exposes such publishers to a form of statutory double jeopardy. NC21A(3) (clause 11 (3)) then provides that the court can disregard this prohibition, and still make an award of exemplary damages, so the protection of 21A(2) seems to be illusory. This goes way beyond what Lord Justice Leveson had in his Report. This clause seems to make it a disincentive to join any approved Regulator, because any publisher who does may end up facing a double penalty. The clause also appears to give Claimants carte blanc to re-open Decisions of the Regulator in every media case that they bring before the courts.

I am told that the aim behind this clause is to allow the courts to punish news organisations that are found to have lied to a Regulator. It seems to me that should be left as a matter for the Regulator, who after all will have powers to impose sanctions of up to a million pounds. Lets remember that all that Leveson recommended was that

“Voluntary participation in a regulatory regime contained in or recognised by statute and good internal governance internal governance in relation to the sourcing of stories should be relevant to the decisions reached   in   relation   to   such   damages”

He saw these matters at best as being available to a court when exercising its discretion.  The current proposal to restriction of the extension of exemplary damages to relevant publishers also seems to me to go beyond Leveson.

As far as costs are concerned, again NC27A (clause 17 on the attachment) seems to me to go beyond what Lord Justice Leveson recommended in his Report. He goes no further than suggesting that availability of an arbitration scheme should be one of a number of matters that a court can take into account when exercising its discretion on costs.  This is what he recommended on costs:

6.7  If an arbitral mechanism was set up through the regulator, however, I see no reason why the courts should not embrace it as an extremely sensible method of pursuing the overriding objective in civil cases. In those circumstances, costs consequences could flow both ways. Thus, if the relevant media entity was regulated and thus able to utilise the availability of the arbitration service, it would be strongly arguable that a claimant who did not avail himself of that cheap and effective method of resolving his dispute but, instead, insisted on full blown High Court litigation, should be deprived of any costs even if he is successful: that also be a powerful incentive for a publisher to join the regulator, particularly if concerned that an extremely wealthy claimant might otherwise seek to overwhelm the publisher with expensive litigation out of all proportion to what was at stake.

6.8 Equally, however, if a publisher did not join the regulator, with the result that the specialist arbitral system was not available to a claimant wishing to pursue a remedy (particularly if of limited means and, thus, unable otherwise to obtain access to justice), I see no reason why the court should not be able to deprive even the successful publisher of costs that would not have been incurred had the alternative arbitration been available. I go further and suggest that, in a case legitimately brought and potentially borderline, the court would even retain the discretion to order the successful publisher to meet the costs of an unsuccessful claimant (although I recognise that this would not be the case if the court was dealing with vexatious or utterly misconceived litigation). Ultimately, the discretion of the court would govern all these issues, …”

6.9 … In the circumstances, I recommend that the Civil Procedure Rules should be amended to require the court, when considering the appropriate order for costs at the conclusion of proceedings, to take into account the availability of an arbitral system set up by an independent regulator itself recognised by law. The purpose  of this recommendation is to provide an important incentive for every publisher to join the new system and encourage those who complain that their rights have been infringed to use it as a speedy, effective and comparatively inexpensive method of resolving disputes. (Leveson Report Vol IV page 1512-3  paras 6.7 – 6.9)

I understand that there is a “not” missing from clause (2))A) here (which doesn’t inspire confidence in the drafters) but much more alarming is clause NC27A(5) (clause 17(5)) which requires the Secretary of State to put in place (as yet entirely unspecified arrangements) to protect the position in costs of those parties who have entered into CFAs, it appears even if they bypass the opportunity to use any new arbitration service.

This clause appears to have its origins in an early Lab/LibDem clause which was designed to protect those on a CFA if they lost. That drafting seemed to disapply the ordinary rule so that a party represented under a CFA would not pay or recovers costs. It is not at all clear what is intended by this current drafting. It appears that (the only possible) intention is to give special protection to a CFA funded claimant even if they lose. This would appear to be completely inimical to the ECHR’s ruling in Campbell. This clause too is therefore likely to fall foul of Art 10.

Gill Phillips is the Director Editorial Legal Services, Guardian News and Media.