Evidence submitted by Trinity Mirror Plc
INTRODUCTION
1. This submission is made on behalf of
Trinity Mirror Plc, the largest newspaper publisher in the United
Kingdom. Its subsidiaries include MGN Limited, the publisher of
the Daily Mirror, the Sunday Mirror and the People.
2. It addresses the issue of Conditional
Fee Agreements (CFAs) and fee uplifts or success fees in those
cases that involve Article 10 of the European Convention of Human
Rights (Article 10).
3. In 2002 in the House of Lords case of
Callery v Gray[66]
Lord Bingham of Cornhill, the most senior Law Lord, said that
the Access to Justice Act 1999 had three aims; to contain the
rising cost of legal aid, to improve access to the courts for
"meritorious claims" and, thirdly, to discourage weak
claims. But he also recognised that the new funding regime was
"obviously open to abuse". He said:
"One possible abuse was that lawyers would
be willing to act for claimants on a conditional fee basis but
would charge excessive fees for their basic costs, knowing that
their own client would not have to pay them and that the burden
would in all probability fall on the defendant or his liability
insurers. With this expectation the claimant's lawyers would have
no incentive to moderate their charges. Another possible abuse
was that lawyers would be willing to act for claimants on a conditional
fee basis but would contract for a success uplift grossly disproportionate
to any fair assessment of the risks of failure in the litigation,
again knowing that the burden of paying this uplifted fee would
never fall on their client but would be borne by the defendant
or his insurers.[67]
Lord Bingham also said:-
" . . . I would not wish to discount either
the risk of abuse or the need to check any practices which may
undermine the fairness of the new funding regime. This should
operate so as to promote access to justice but not so as to confer
disproportionate benefits on legal practitioners or after the
event insurers or impose unfair burdens on defendants or their
insurers."[68]
4. Trinity Mirror would argue that the abuses
identified by Lord Bingham now exist. If they are allowed to go
unchecked they will significantly detract from the three policy
objectives of the access to justice reforms.
HISTORY
5. The White Paper "Modernising Justice",
published in December 1998, made it clear that the underlying
philosophy of the CFA reforms was that "justice must not
be restricted to the very wealthy, who can well afford high legal
fees, or the very poor, who may qualify for legal aid".
6. In the debates about the Access to Justice
bill the then Lord Chancellor, Lord Irvine of Laing, said it should
be generally right that the successful party in any litigation
should be able to recover costs to which he (or she) had been
put in prosecuting or defending a claim. However, the success
fee is not a cost to which the claimant in any proceedings has
been "put". One of the features of libel and breach
of confidence actions in England and Wales is that, as far as
we are aware, the claimant has never paid a success fee. It is
always sought by the claimant's lawyers from the defendant and
can and should therefore be seen as akin to a tax on the losing
party.
7. Section 58(A) of the Courts and Legal
Services Act 1990 does not provide that the recovery of the success
fee from the defendant should be automatic. Indeed in Scotland,
as Lord Hope of Craighead recorded in his judgment in the Campbell
case,[69]
the success fee is not recoverable from the losing party.
8. The relevant section of the Access to
Justice Act 1999 which substituted new sections (58 and 58(A))
of the Courts and Legal Services Act 1990 came into force on 1
April 2000. This was only a year after the Civil Procedure Rules
(CPR)—referred to as the Woolf reforms—were introduced.
As has been recognised by the courts "one of the principal
objects of the Woolf reforms was the control of costs . . . to
enable the court to limit recoverable costs".[70]
The extension of CFAs with success fees to libel and breach of
confidence cases has had the effect of increasing, rather than
reducing, legal costs.
WHAT IS
THE SUCCESS
FEE FOR?
9. It is very important that the Committee
realises exactly what the success fee is for and equally what
it is not for.
10. The success fee is to compensate a solicitor
for the risk that a client might or might not be successful in
that litigation. At the time the CFA is entered into the solicitor
will assess what the chances are of the client being successful;
and should fix the success fee accordingly.
11. We submit that in cases involving Article
10 success fees should not be used to bolster a lawyer's earnings
in one case so as to offset the fact that they may have lost an
earlier CFA case.
12. Nor should the success fee be fixed
generally, say by reference to the arrangement a particular firm
may have with an insurance provider. Our understanding is that
one of the main libel claimant firms, Carter Ruck, has recently
introduced a system whereby it operates different (stepped) success
fees where the success fee claimed increases as the action progresses—and
that these steps are fixed by reference to their arrangement with
an insurer, Temple-Legal Protection Limited, for staged premiums
in relation to the after the event (ATE) insurance which is provided
by that insurer to Carter Ruck's clients. We think this is wrong
as the success fee is not being assessed on an individual basis
by reference to the risk in a particular case.
13. In May 2004 Lord Justice Brooke said
"the availability of CFAs in defamation cases (often including
a success fee of up to 100%) certainly created the potential for
a chilling effect on investigative journalism and for significant
injustice".[71]
And he concluded by saying "it cannot be just to submit defendants
in these cases [an impecunious claimant who enjoyed the benefit
of a CFA but no ATE insurance], where their right to freedom of
expression is at stake, to a costs regime where the costs they
will have to pay if they lose are neither reasonable nor proportionate
and they have no reasonable prospect of recovering their reasonable
and proportionate costs if they win".[72]
In the Campbell case Lord Hoffmann referred, with reference to
the case of Turcu -v- News Group Newspapers Limited, to such litigation
having "a blackmailing effect".[73]
WINS AND
LOSSES
14. Most libel and breach of confidence
cases are handled by a small number of firms of solicitors: Carter
Ruck, Schillings and David Price to name three of the main claimant
firms. Although it should therefore be relatively easy to obtain
statistics as to how many CFA cases each firm has won and lost
these firms are surprisingly reticent about providing such information.
This is, we would submit, because the vast majority of CFA funded
cases for claimants are won. Losses by CFA funded claimants in
this area of the law are very much the exception; we believe that
there have been no more than a handful. In reality, therefore,
there is little or no risk being taken by these firms given that
they can cherry pick the cases they take on and then cherry pick
those cases which they offer/agree to handle on a CFA basis.
15. Whilst the above firms are reticent
about disclosing precise statistics concerning CFAs Carter Ruck
printed on their website as long ago as February/March 2003 that
they had `successfully acted for about 200 people' on a CFA basis.
In addition a partner of the firm wrote to the Times in February
this year to say that his firm had "successfully represented
well over a hundred libel claimants on such a "no-win, no-fee"
basis"[74].
However, when I asked him he was not forthcoming about the exact
number of wins and losses, regarding such information as confidential.
16. We suspect Carter Ruck have lost under
10 and closer to 5 claimant actions funded by CFAs. On the basis
of 200 victories that is a loss rate of just 2.5%.
17. Schillings have, similarly, been unwilling
to disclose the number of wins or losses. As we will show later
in the cases of Sara Cox and Naomi Campbell (both of which were
wins for them) they have claimed the maximum success fee and sought,
in our view, extortionate costs.
18. In September 2004 David Price was asked
how many CFA cases he had won and how many he had lost. He declined
to answer but in May 2005 a spokesperson for him told Media Guardian
(after the Turcu case) "we have won a large number of conditional
fee agreement cases against the News of the World. This was the
first CFA case that we have lost against the News of the World
and only the second CFA case we have ever lost against a newspaper"[75].
19. Following the appearance of that quotation
I wrote and asked David Price to disclose how many CFA cases for
claimants he had won. He said he was not prepared to answer the
question.
20. In September 2004 a partner for Russell
Jones & Walker said they had never lost a CFA case.
21. The Committee will, we have no doubt,
be able to work out why the main claimant firms are not willing
to disclose precisely how many CFA cases they have won and lost.
The basic truth is that newspapers lose or settle the vast majority
of actions brought against them. It follows from this that the
risk claimant's lawyers are taking, in bringing such actions,
is very low if not in reality non-existent in the vast majority
of cases. Perhaps more importantly, in the context of providing
access to justice, we would submit that meritorious cases could
(and would) have been brought without any success fee.
THE FIRST
ABUSE
22. It is our submission that the use of
CFAs with success fees has meant that claimant solicitors have
charged excessive fees (the first one of Lord Bingham's possible
abuses; see paragraph 3 above).
SPECIFIC EXAMPLES
23. Although the court has not yet decided
on the appropriate sum of costs which are to be paid in the case
of Sara Cox and Jon Carter v MGN Limited the claim for
costs by Sara Cox's lawyers totals £272,961.58. In contrast
MGN Limited's costs were £46,310.28. The claimants' legal
costs were, therefore, almost six times greater than MGN Limited's
and we would suggest there are two main reasons for this. Firstly,
the fact that the claimants' solicitors were acting on a CFA basis
and, secondly, because they were seeking recovery of a success
fee of 95% (reduced by Master O'Hare to 40%; see paragraph 32
below).
24. Of the figure of £272,961.58 the
solicitors' profit costs are £93,649.50 and the success fee
they sought (95%) amounted to £88,967.03. With VAT the solicitors
alone sought costs in excess of £200,000.
25. In the Naomi Campbell case the amounts
which have been sought by the claimants' lawyers are even more
staggering. Naomi Campbell's lawyers only entered into a CFA for
the application to the House of Lords which involved a 2 day hearing
occupying less than 9 hours of the court's time. By this stage
in the case there was no requirement for those solicitors to gather
evidence or prepare witness statements; those steps having been
taken far earlier in the case.
26. The total amount sought including a
success fee of 95% for the solicitors and 100% for counsel is
£594,470 in the House of Lords, that figure is over £125,000
greater than MGN Limited's total legal spend (at that time) on
the whole case (our emphasis)—which involved a week long
trial and a two and a half day hearing in the Court of Appeal.
27. The claimants' solicitors, in the House
of Lords alone, seek profit costs of £169,733 and a success
fee of £161,246.35; £330,979.35 in total. The success
fees alone sought by solicitors and counsel amounts to £279,981.35.
A table showing a breakdown of the figure of £594,470 is
annexed to this submission. In contrast MGN Limited's solicitors'
costs were £43,084.50 so the claimant's solicitors are seeking
base costs 8 times greater than our solicitors' charges. And all
this in a case where Naomi Campbell only recovered damages of
£3,500 and where the trial judge found that "she lied
on oath".
28. Even if the legal costs are severely
reduced by the court no sanction will apply to the solicitors
personally for seeking what we would submit are simply totally
unjustifiable costs as there is no requirement, as we would submit
there should be, for lawyers to certify that the legal costs they
seek recovery of from the paying party are reasonable and proportionate.
If such sanctions were in place it would have two effects, which
are both in the public interest. Firstly, such excessive claims
for costs would be curbed and secondly valuable court time would
not be taken up by so-called satellite litigation on costs.
THE SECOND
ABUSE
29. It is our submission that as the note
to the Committee's press release suggests 100% success fees are
being claimed even when law firms are assuming little or no risk
in taking on the case (the second one of Lord Bingham's possible
abuses; see paragraph 3 above).
SPECIFIC EXAMPLES
30. One of the worst examples which is in
the public domain which involves a 100% success fee being claimed
even when the law firm was assuming no risk is the case of Gazley
v News Group Newspapers Limited. In that case the Sun newspaper
printed the wrong picture of a man in connection with a story
about a paedophile. They immediately apologised for that on the
Monday after the original story had appeared on the Saturday and,
as Mr Justice Eady put it, "by the time Carter Ruck came
to be instructed on 2 April 2003 [the Wednesday] the publisher
of The Sun had admitted liability published an apology and admitted
a willingness to pay damages"[76].
31. Members of the Committee could be forgiven
for thinking that this was an open and shut case. Though it may
have been appropriate for a "no-win no-fee" agreement
it did not require or justify any success fee. Nevertheless Carter
Ruck entered into a CFA with a 100% success fee with Mr Gazley.
What this means is that they had assessed the risk of Mr Gazley
winning that case as being no greater than 50/50. Unsurprisingly
the costs judge reduced this success fee to 20% but, of course,
it was necessary for the defendant, who would have had to pay
the costs and an uplift of 100% on those costs proceedings if
they had lost, to challenge that 100% success fee in order to
get it reduced. In our submission a success fee of 20% is still
too high as the chance of Mr Gazley losing this case was, in reality,
non-existent.
32. In the privacy case which the Radio
One DJ Sara Cox and her husband, Jon Carter, took against MGN
Limited, the claimants' solicitors, Schillings, again entered
into a CFA with a success fee of 100%. This was reduced by Master
O'Hare to 40% and he said "in doing that . . . I am taking
into account primarily what I consider to be the high prospects
of success which were appreciated or should reasonably have been
appreciated in January [when the CFA was entered into; the proceedings
having been commenced the previous October], even though the defendants
denied liability. It seems to me that at that stage there was
a reasonable cause for thinking that this case was a very strong
case because of the advice of leading counsel which had been obtained
. . . I am saying that the case is as strong as such a case could
be but, nevertheless, I bear in mind it is cutting edge, it is
new law"[77].
33. That case remains before the courts
as both sides are appealing against the decision on the success
fee with MGN Limited contending it should be nil on the basis
of leading counsel's opinion to the claimants and Schillings contending
that the uplift should be reinstated to be 95%; the sum they sought
recovery of from MGN Limited. (Unfortunately, Schillings have
not permitted us to show to you the advice from leading counsel
which we have and which will be before the judge who hears the
appeal even though we requested that they consent to disclosure
of this to the Committee.)
34. In one case—not involving one
of the firms referred to herein—MGN Limited were, effectively,
"blackmailed". (We were made an offer by the claimant
during the case and were told by his solicitors that a CFA had
not yet been entered into but that it was "their intention
to do this if we didn't accept the offer".)
35. The Committee must bear in mind that
solicitors can go on CFAs with success fees whenever they want.
Therefore they can start cases on an ordinary fee paying basis
but yet at any point of their choosing subject to the client's
agreement—and why would the client not agree—they
can then enter into a CFA with a success fee. In practice, Schillings
enter into CFAs when a particular piece of litigation has turned
against their client/s. This has two effects. Firstly, it immediately
increases the pressure upon the defendant (the "ransom factor")
as, overnight, the claimant's solicitors have effectively "doubled
the odds" and, secondly, because the success fee is based
on the risk the solicitor is taking at the time the CFA is entered
into it becomes easier for them to claim the highest success fee
possible. This, it is quite clear, is the tactical use of CFAs
with success fees to increase pressure on defendants and to make
more money for the lawyers. It has nothing whatsoever to do with
access to justice and indeed in the case of Naomi Campbell, who
entered into her first CFA with Schillings less than a month after
she had lost in the Court of Appeal in October 2002, there is
the added point that she had the means to pay for the litigation
herself, including paying the costs of MGN Limited should she
have lost the proceedings.
36. The Committee should also be aware that
in view of a recent decision of the Court of Appeal,[78]
once the court decides on the appropriate success fee then that
success fee applies throughout the case. Therefore, it is perfectly
conceivable that a solicitors firm could recover a success fee
of 95 to 100% on each and every piece of work irrespective of
whether that particular piece of work carries any risk to the
solicitors whatsoever. In financial terms we face claims of almost
£1,000 per hour.
37. The following quotation indicates why
the success fee is so iniquitous and should, in our submission,
be removed from Article 10 cases:
"The uplift [success fee] is added as a
percentage bonus to the cost of work actually done, based not
on any conduct or attribute of paying parties, but as a penalty
for having lost in litigation against opponents who have entered
into a particular type of contract with their own lawyers."[79]
ARTICLE 10 OF
THE EUROPEAN
CONVENTION OF
HUMAN RIGHTS
(ECHR)
38. The real problem comes about because
no consideration was given, at the time CFAs with success fees
of up to 100% were extended to libel and breach of confidence
cases, to whether CFAs with success fees were appropriate for
cases which concern the exercise of the right to freedom of expression
as guaranteed by Article 10 of the ECHR. (See in this connection
the comments of Lord Justice Brooke in the Musa King case[80].)
Nor was any consideration given to the rights of the paying party.
39. As the ECHR has made clear freedom of
expression, which Article 10 protects, "constitutes one of
the essential foundations of a democratic society and one of the
basic conditions for its progress and each individual's self-fulfilment"[81].
40. They have also made it clear that on
cases in which the Article 10 right to free speech is engaged
it is faced:
"not with a choice between two conflicting
principles, but with a principle of freedom of expression that
is subject to a number of exceptions which must be narrowly interpreted
. . . .It is not sufficient that the interference belongs to that
class of the exceptions listed in article 10 (2) which has been
invoked; neither is it sufficient that the interference was imposed
because its subject-matter fell within a particular category or
was caught by a legal rule formulated in general or absolute terms:
the Court has to be satisfied that the interference was necessary
having regard to the facts and circumstances prevailing in the
specific case before it".[82]
41. Parliament has also recognised the importance
of freedom of expression: Article 10 having been incorporated
into law by the Human Rights Act 1988. See also section 12 (4)
of that Act which refers to how the court "must have particular
regard to the importance of the Convention right to freedom of
expression".
42. An award of costs against a defendant
constitutes an interference with the exercise of the right to
freedom of expression as guaranteed by Article 10 (1). Such an
award will not fall foul of Article 10 provided the costs are
reasonable and proportionate; hence the suggestion in paragraph
28 above.
43. However, and in contrast, it is our
submission that an exposure to a liability to pay a success fee
of up to 100% to the winning party (which in reality their client
was never going to pay) above and beyond `reasonable and proportionate
costs' falls foul of Article 10.
CFAS FOR
RICH PEOPLE
44. The availability of CFAs with success
fees for rich people like Naomi Campbell and Sharon Stone is a
far cry from the three underlying aims of the Access to Justice
Act 1999 (for which see paragraph 3 above). As Michael Beloff
QC the President of Trinity College, Oxford has said (about the
Naomi Campbell case) "it is absurd that someone in a profession
whose incumbents tend to prefer not to get out of bed for less
than £10,000 a day was able to avail herself of a CFA".[83]
There is no public interest in allowing a system to continue which
permits, and in reality actively encourages, lawyers for rich
people—who could afford to pay for the litigation themselves—to
seek to `double their money'. In Article 10 terms permitting rich
people and their lawyers to have the benefit of CFAs with success
fees is neither `necessary' nor `proportionate' and it certainly
has nothing to do with permitting `access to justice'.
CONCLUSION
45. There is no evidence to suggest that
meritorious claims would not have been brought without the existence
of CFAs with success fees. Nor is there any evidence to suggest
that preventing successful claimants recovering success fees from
losing defendants (the system which operates in Scotland) would
prevent those claimants who have good claims being provided with
access to justice.
46. In contrast there is evidence that the
existence (and reality) of recoverable success fees of up to 100%
has led to the abuses identified by Lord Bingham (see paragraph
3 above); examples of which we have given above. Removing those
abuses would ensure that the system remained compatible with Article
10 whilst providing access to justice to those claimants with
meritorious claims. It would also be in the public interest. Moreover
it would not require primary legislation.
SOLUTIONS
47. Changes to the court rules should be
made to prevent the recovery of success fees from losing defendants
in cases which concern the exercise of the right to freedom of
expression as guaranteed by Article 10 of the ECHR. Secondly,
lawyers should only be permitted to seek recovery of costs which
they certify are "reasonable" and "proportionate".
Marcus Partington
Head of Legal
Trinity Mirror Plc
November 2005
66 Callery v Gray (Nos 1 and 2) [2002] UKHL
28. Back
67
Lord Bingham at paragraph 5 in Callery v Gray [2002] UKHL
28. Back
68
Lord Bingham at paragraph 10 in Callery v Gray [2002]
UKHL 28. Back
69
Lord Hope at paragraph 41 in Campbell v MGN Limited [2005]
UKHL 61. Back
70
Lord Justice Dyson at 848H in Leigh v Michelin Tyre Plc [2004]
1 WLR 846. Back
71
Lord Justice Brooke at paragraph 41 in King v Telegraph Group
Ltd [2004] EWCA Civ 613. Back
72
Lord Justice Brooke at paragraph 101 in King -v- Telegraph
Group Ltd [2004] EWCA Civ 613. Back
73
Lord Hoffmann at paragraph 31 in Campbell v MGN Limited [2005]
UKHL 61. Back
74
Law Letters; The Times 8 February 2005. Back
75
http://media.guardian.co.uk/presspublishing/story/0,7495,1480601,00.html Back
76
Mr Justice Eady at paragraph 28 in Gazley v News Group Newspapers
Limited [2004] EWHC 2675. Back
77
Master O'Hare at paragraph 2 in Sara Cox and Another v MGN
Limited and others SCCO 0403832. Back
78
KU v Liverpool City Council [2005] EWCA Civ 475. Back
79
Keith Ashby and Professor Cyril Glasser in an article entitled
"The Legality of Conditional Fee Uplifts" published
in the Civil Justice Quarterly, Vol 24, January 2005. Quoted by
Lord Hoffmann at paragraph 15 in Campbell v MGN Limited [2005]
UKHL 61. Back
80
Lord Justice Brooke at paragraph 90 in King v Telegraph Group
Ltd [2004] EWCA Civ 613. Back
81
Selisto v Finland [2005] EMLR 178. Back
82
Sunday Times -v- The United Kingdom (1979) 2 EHRR 245. Back
83
Law 5; The Times 22 November 2005. Back
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