Evidence submitted by The Newspaper Society
1. The Newspaper Society represents the
regional newspaper industry. Its members publish around 1,286
regional and local newspapers in the United Kingdom, including
27 morning titles (19 paid-for and eight free), 75 evening titles,
21 Sunday titles, 526 paid-for weekly newspapers, and 637 free
weekly newspapers. The Society's submission relates to the Committee's
examination of conditional fee arrangements and its terms of reference
enquiring into "What has been the effect of the move to `no-win
no-fee' contingency fee agreements?"
2. The regional press is read by around
40 million adults each week. Local and regional newspapers enjoy
a high degree of trust amongst their readers. The local newspaper
reports, investigates, campaigns, informs, entertains and provides
a catalyst for action and forum for debate and discussion, comment
and opinion in its local community. This can lead to coverage
of contentious national, regional and local issues, provoking
complaint. Traditionally, the local and regional newspaper editors
swiftly resolve complaints of any nature, through correction,
apology, follow up story or letter if appropriate. If satisfactory
resolution is not obtained and the matter could constitute a breach
of the Editors' Code of Practice, complaint can be made to the
Press Complaints Commission where the majority of complaints are
quickly conciliated or proceed for adjudication, without the need
for legal waiver by the complainant. The regional press has always
been concerned that conditional fee arrangements should not undermine
the operation of self-regulation, mediation or other systems of
alternative dispute resolution.
3. In the event of legal claims, the regional
press will also act responsibly and seek swiftly to remedy its
mistakes. However, the law does protect freedom of expression
and local and regional newspapers, in common with other media,
will wish to use the defences provided by Parliament and the commonlaw,
where such defences are merited in respect of their lawful publication
of fact, comment and opinion, dealing with issues of legitimate
public interest.
4. Conditional fee agreements (cfas) have
created particular problems in freedom of expression cases. The
regional newspaper industry submits that legislative reform of
the system for conditional fee agreements is urgently necessary.
The system creates a chilling effect upon publication and defence
of free speech. Reform is needed in respect of litigation relating
to freedom of expression such as defamation, breach of confidence,
malicious falsehood, misuse of personal information and data protection.
5. Regional and local newspapers are particularly
susceptible to the "chilling effect" of the defamation
laws, (where the onus of proof is upon the defendant) and the
effect even of modest damages and legal costs (see also Libel
and the Media—the Chilling Effect, Barendt and Others,
OUP 1997; Reynolds v Times Newspapers [2001] 2 AC 127).
The current cfa system increases the costs of merited rigorous
defence of actions and provides incentives to settle legal claims
and threatened claims on financial grounds rather than legal merit.
It deepens the chilling effect, in a way ultimately inimical to
freedom of expression.
6. The problems which defamation litigation
under the cfas are currently causing which have given rise to
concern that "freedom of expression may be seriously inhibited"
were commented upon by Lord Hoffman in Campbell v MGN [2005]
UKHL 61 with reference to Turcu v News Group Newspapers
[2005] EWHC 799 and King v Telegraph Group Ltd [Practice
Note] [2005]1 WLR 2282. Such problems were summarised in submissions
made by the media, including the regional press, to the Department
of Constitutional Affairs and recorded in New Regulations for
Conditional Fee Agreements, Response to consultation CP(R) 22/04,
10/08/2005. Lord Carswell concluded that he was far from convinced
about the wisdom or justice of the cfa system as it is presently
constituted' and saw "considerable force in the comments
made by Lord Hoffman in the concluding paragraphs of his Opinion".
7. The opinions of Lord Hoffman and Lord
Carswell in Campbell v MGN referred to the "chilling
effect", "the ransom factor", "the blackmailing
effect", "the arms race" of costs created by and
inherent in the current system. The problem relates to the effect
which the threat of heavy financial liability may have upon the
conduct of the newspaper not only in deciding whether to publish
information which ought to be published but which carries a risk
of legal proceedings against it, but also in the event of a threat
or claim post-publication, to the effect of such potential financial
liability upon the newspaper's decision as to whether to defend
or settle, irrespective of the merits of its defence.
8. The cfa system produces the risk of liability
for very high legal costs, (solicitors' fees alone calculated
at a rate of over £800 per hour under the 100% uplift permitted),
further inflated by ATE insurance premiums, which are high, given
the comparatively small market. Lord Hoffman noted that cfas also
create an "arms race" since cfas permit claimant's solicitors
to conduct a case in ways that "not only runs up substantial
costs but requires the defendants to do so as well".
9. Thus the current cfa system now puts
a newspaper defendant under pressure to settle cases "to
pay up something to be rid of litigation for purely commercial
reasons and without regard to the true merits of any pleaded defence".
Lord Hoffman noted that the "cost capping" and judicial
control proposals can be "only a palliative". It did
not deal with the problem of a newspaper faced with the prospect
of incurring substantial and irrecoverable costs, win or lose
if faced by an impecunious claimant without ATE insurance, or
threat of having to pay "claimant's costs at a level which
is by definition up to twice the amount which would be reasonable
and proportionate". In referring to the chilling effect,
Lord Hoffman referred to the particular problems for smaller publishers,
which might not be able to take the same stand as a larger publisher.
10. Regional and local newspapers face the
same cfa problems as national media organisations and share their
desire for reform of the system. The differences of scale between
say the limited budget of a local weekly newspaper and a national
media organisation mean that the "chilling effect" and
proportionality concerns begin to operate at a much lower level
of costs and damages. Small newspapers are perhaps put even more
quickly under greater pressure to settle than larger organisations
because the costs factor is operative at a lower financial level.
Advisers to regional and local newspapers report that the operation
of the cfa system and consequent financial pressure can lead to
settlement despite the merits of defences available to them. This
will inevitably prevent repetition and could deter other publication
of reports that might raise similar issues, leading to the "chilling"
of publication on issues of legitimate local interest.
11. Yet advisers to regional publishers
suggest the costs of settling relatively minor claims brought
under a cfa system, admitted from the outset and relatively minor
damages can still be disproportionate and "back-breaking"
in respect of any small weekly newspaper's budget.
12. The differences of scale between media
defendants also mean that smaller publishers are also subject
to a particular disadvantage that might not apply to larger organisations.
Costs might be very significant in respect of a smaller publisher's
budget, but not high enough to warrant the risk of incurring further
costs by going to assessment, so that legal safeguard, in practice,
may not really be available.
13. There is also particular objection to
the effect of ATE insurance and its inflation of costs. This is
another problem attributable to the current cfa system. Claimants
have to purchase ATE insurance policies at the outset, before
any sensible assessment of risk to the claimant and in respect
of cases where the libel might be minor, where the publisher might
in any event have admitted liability irrespective of the basis
on which the action is brought, where damages might be small and
disproportionate to the cost of the ATE premium alone. Any claimant
of course might never be liable for the premium as payment might
be borne by the losing defendant or indemnification given as part
of the cfa by the claimant's solicitor
14. Regional and local titles fear that
the cfa system allows cases which might otherwise have been swiftly
and amicably resolved without legal intervention by the publication
of a correction or apology to escalate quickly into legal action
and rapidly mounting but disproportionate legal costs. If the
title decides to settle a case, damages might be considerably
less than £5,000, but costs rapidly escalate to triple that
amount, despite the low level of risk to the claimant or amount
of damages recovered—indeed the claimant might settle for
the publication of an apology, costs and no damages, but the newspaper
face very high costs; a newspaper might have admitted liability
"in print" before the involvement of a claimant's solicitor
on a cfa basis, but a success fee of 75% initially claimed (later
reduced to 40%). Conversely, a newspaper might robustly defend
its position and the complaint or threat of legal action is ultimately
not pursued, or settled by letter of clarification but no published
apology, no damages, no costs, but the title would have had to
bear the high level of costs that it had incurred. Thereafter
for financial reasons alone, a newspaper may become wary of dealing
with stories that might initiate such complaints in future or
being so robust in defence of future claims. The chilling effect
is deepened yet further where titles already wary, become extremely
cautious of dealing with stories about certain types of groups,
such as the police, because of successful past litigation brought
by individuals, perhaps backed by a union, where it becomes known
that cfa agreements may be in place.
15. The problems created by the current
conditional fee system which seriously inhibit freedom of expression
must be urgently addressed. The Newspaper Society submits that
the Department of Constitutional Affairs must now bring forward
legislation.
The Newspaper Society
November 2005
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