Evidence submitted by Newsquest Media
Group
Newsquest Media Group is a major regional newspaper
publisher, circulating more than 10 million million copies across
the UK through some 300 newspapers and magazines, including 17
regional dailies. Among them are some of the longest established
and most distinguished titles in the newspaper industry.
So-called "no win, no fee" conditional
fee agreements ("CFA") act in a different way on regional
publishers because of the differences of scale. The cost of settling
a relatively minor defamation when a CFA is used can rack up to
£20,000, even when it is admitted from the start. These are
back-breaking figures for the small budgets of weekly titles.
Damages might be much less than £5,000, but where an expensive
London solicitors' firm is involved on a CFA, the costs can quickly
(from our own experience) add up to £15,000 or more even
over the course of just a few rounds of correspondence. The attraction
of CFAs for claimants has meant that matters which in the past
might have been settled with a published apology can escalate
into full-blown legal actions with serious impact on the economics
of local titles.
Slowly but surely, CFAs are beginning to poison
the relationship local newspapers have with their readers and
the local communities they serve. For both parties, the focus
on the money distracts from the actual merits of the case. Editors
find that the financial logic of the success fee compels settlement
even when it would otherwise be reasonable to put up a defence.
Then they have to think harder about the financial risk before
covering certain controversial stories or particular categories
of persons who are known to be litigious. Wariness and suspicion
replace openness and trust. The essential idea of the local newspaper
as a political and social forum for the community is thus undermined.
The commercial principle of the success fee
is understood, but its effects are too onerous at the permitted
level of up to 100%. We take particular objection to the practice
of charging for the "after-the-event" ("ATE")
insurance policy, which is bought from the outset (even before
the first letter before action) apparently regardless of any sensible
assessment of the real risk to the claimant. The market for these
policies seems small and unsophisticated and so the price is very
high, typically £5,000 or £6,000 at this first stage
(and rising in steps thereafter), even in respect of the minor
libels faced by a weekly newspaper. Moreover, with some practitioners,
the claimant could never actually be personally liable for this
premium—they are not required by the insurer to pay out
until conclusion of the action, and then of course it would either
be paid out of their winnings from the newspaper, or else (in
a losing case) the claimant solicitor might offer indemnity as
part of the CFA deal. Regional publishers find themselves paying
out on these excessive and pointless premiums in cases where they
immediately admit liability and would have done so whether there
was a CFA or not. The effect of allowing ATE insurance from the
outset of a claim is simply inflationary and brings no benefit
except as a windfall to the insurer.
A particular disadvantage falls on regional
publishers as a result of CFAs at this lower level. While the
costs are very significant in terms of a weekly newspaper's budget,
they are still not high enough to warrant risking still further
costs by going to the court for assessment. Paradoxically, that
decision is much easier when the scale of costs is higher (as
may be the case with the national media). Therefore, regional
publishers have the worst of both worlds: the impact of CFA costs
on a small weekly is just as big as for the nationals because
of the differences of scale, but the legal safety nets are not
really available. The pressure to settle both damages and costs—and
to settle quickly—is very great. The result is a corresponding
"chilling" effect on local journalism.
Simon Westrop
Head of Legal
Newsquest Media Group
November 2005
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