Evidence submitted by Reynolds Porter
Chamberlain
PARTIES TO
THIS SUBMISSION
Associated Newspapers Limited
BBC
Express Newspapers plc
Guardian Newspapers Limited
Independent News & Media Limited
ITN Limited
News Group Newspapers Limited
News International plc
Telegraph Group Limited
Times Newspapers Limited
Trinity Mirror Plc
EXECUTIVE SUMMARY
— The operation of CFAs in publication
cases (ie cases based on complaints about published material)
has had unintended consequences, vastly increasing the cost of
litigation in this area.
— These consequences are unique to
such cases. They operate against the public interest and affect
freedom of expression.
— Reform is needed. This would not
affect the operation of CFAs in other cases and could be achieved
by subordinate legislation and/or changes to rules of court.
BACKGROUND
1. An important policy feature of CFAs in
civil litigation has been to impose the cost of such litigation
on unsuccessful defendants as a class. In relation to the most
common types of litigation, that policy raises no particular difficulty
since the additional cost falls mainly to the insurance industry
and can be absorbed by passing it on to the public in the form
of increased premiums.
2. Publication cases are different. Such
cases tend to be low in volume and high in cost compared to the
high volume, low cost model of personal injury cases. The cost
of such litigation is not capable of being shared fairly among
defendants and cannot be passed on to the general public by means
of insurance.
3. Most importantly, however, publication
cases raise issues of freedom of expression which do not arise
in other kinds of litigation. Large awards of costs will inevitably
have an impact on free speech. As Lord Hoffmann said in Campbell
v MGN: " . . . there is a human right to freedom of expression
with which the imposition of an excessive cost burden may interfere."
4. THE PROBLEMS
Since, following the Access to Justice Act 1999,
it became possible for CFA-assisted claimants to recover success
fees as well as ATE ("after the event") insurance premiums
from defendants, there has been no stopping claimant lawyers from
(quite lawfully) exploiting the system to its maximum financial
potential. Every significant media organisation has its own stories
to tell.
5. THE SCALE
OF CLAIMANTS'
LAWYERS' COSTS
Libel cases are characterised by their extravagance.
Success fees of 100% are claimed in most cases. When added to
already very high charging rates of £400-plus an hour, these
can result in claimant lawyers seeking costs at rates of £800
an hour and more.
In Naomi Campbell's case against MGN Limited,
her lawyers sought costs of £594,470 for her appeal to the
House of Lords. That bill alone not only vastly exceeded MGN's
own costs for the appeal; it exceeded MGN's own costs for the
entire case including a trial before Morland J and an appeal from
that decision to the Court of Appeal.
In a case brought last year by a police officer,
Associated Newspapers would have faced a bill of £3.3 million
for the claimants' lawyers' costs (including over £600,000
in respect of an ATE insurance premium) if it had lost at trial.
In a case against the publishers of the Sunday
Telegraph, the claimant's lawyers had incurred costs of £32,000
(equivalent to £64,000 after imposition of a 100% success
fee) even by the time the parties' statements of case had been
exchanged.
Legal fees in libel and other cases against
the media often bear little relation to the damages available.
Naomi Campbell recovered damages of only £3,500. Libel damages
are often modest five figure sums. In a recent case against Guardian
Newspapers the claimant received damages of £10,000 but his
costs payable by the Guardian (even after significant reduction
by the costs judge) were around £100,000.
Where an ATE premium has been incurred by the
claimant, this will add significantly to the overall cost since
the ATE insurance market in libel cases is extremely limited and
the cost of such premiums correspondingly high.
Libel litigation is often conducted by claimants'
lawyers, for tactical reasons, in a manner guaranteed to run up
costs. Court rules do little to prevent such conduct. In Campbell
Lord Hoffmann remarked on the difficulty:
"Faced with a free-spending claimant's solicitor
and being at risk not only as to liability but also as to twice
the claimant's costs, the defendant is faced with an arms race
which makes it particularly unfair for the claimant afterwards
to justify his conduct of the litigation on the ground that the
defendant's own costs were equally high."
6. THE EFFECT
ON FREEDOM
OF EXPRESSION
The prospect of having to pay very large legal
costs affects media companies in two ways. First, it operates
as a powerful incentive to settle cases, even where these cases
may be unmeritorious (the "ransom factor"). Second,
it operates more generally as a disincentive to publish investigative
or other stories which carry greater risk of giving offence and
attracting claims (the "chilling effect").
The ransom factor was recognised by Eady J and
later by the Court of Appeal in Musa King v Telegraph Group. It
has more recently been acknowledged by Lord Hoffmann in Campbell.
There can be no doubt that the spectre of costs looms large when
media organisations are deciding whether or not to defend an undeserving
libel claim. In cases in which the claimants have little or no
ATE insurance, the commercial pressure to settle is likely to
be considerable, even for the largest organisations. The effect
of such pressure is that claimants will receive false and undeserving
vindication and their past and future activities will very probably
become immune from future investigation and publication. That
is against the public interest.
While the chilling effect of costs is particularly
acute for smaller media companies, it should not be thought that
it leaves larger organisations unaffected. Such organisations
are answerable to shareholders and the prospect of an enormous
order for costs against them, especially given the uncertainty
of jury trials, may in some cases be enough to discourage publication
of a contentious book, programme or newspaper article.
7. THE LACK
OF EFFECTIVE
CONTROL OF
CFAS
There are presently no relevant court or other
rules which recognise the impact of CFAs on Article 10 rights
and the importance of avoiding unnecessary interference with such
rights.
In particular:
— There are no rules controlling or
limiting base fees or success fees in Article 10 cases against
the media.
— There are no rules requiring, controlling
or limiting ATE insurance in such cases. In many libel cases,
ATE insurance is not worth the paper it is written on because
the occurrence of the very event to which the insurance is meant
to respond will of itself trigger numerous exclusions and limitations.
— The protection supposedly afforded
by the costs assessment process is too little and too late. The
process is cumbersome and expensive, with the odds firmly stacked
in the receiving party's favour. Moreover, where defendants have
already incurred irrecoverable costs in consequence of the claimant's
lawyers' extravagant conduct of a claim, it is no comfort to be
told by a costs judge that such costs should not have had to be
incurred because the claimant's lawyers acted unreasonably.
— Cost-capping has so far proved to
be a limited solution at best because, among other things: (a)
it does not operate retrospectively and (b) it depends upon accurate
estimates of future costs being provided by the claimant.
8. REFORM
The changes necessary to secure protection of
Article 10 rights in the context of CFA-funded litigation could,
we believe, be secured by subordinate legislation and/or amendments
to rules of court. Primary legislation would not be required.
The parties on whose behalf this submission is made intend to
address the possible changes in individual submissions and would
also welcome the opportunity to give oral evidence. There is common
ground that reform is needed in the following areas:
9. BASE COSTS
In the absence of controls by the client, free-spending
solicitors need to be controlled by the courts. This is not simply
to limit the costs those solicitors themselves incur (and then
expect the other party, but not their own client, to pay); it
is to limit the costs they thereby force their opponents to incur.
Such control is probably best exercised by active
case management. Rules should ensure that CFA-assisted cases are
reviewed by the court at an early stage by judges or masters with
appropriate training and experience. A range of steps to control
costs should be considered, including:
— more frequent case management conferences;
— active consideration of ADR at regular
intervals; and
— cost capping in appropriate cases
and not limited to cases in which the claimant is impecunious
or has no ATE insurance.
The introduction of fixed costs should be considered
in cases where the defendant makes an offer of amends under section
2 of the Defamation Act 1996.
Although libel is not regarded as "City"
work, it has become common for solicitors acting on CFAs in libel
cases to charge City or premium rates, often much higher than
the rates charged by their opponents. Rates in libel cases need
to be brought back to reality.
Solicitors should be required to certify that
the costs they seek to recover are reasonable and proportionate,
with sanctions being imposed on the lawyers where they are not.
In judging reasonableness and proportionality,
the courts should take account of the facts of the case, including
the seriousness of the libel or misuse of private information
and the remedies sought, including the amount of compensation
recovered or likely to be recovered.
The provisions of CPR Part 36, which appear
to impose unfair and disproportionate costs penalties on defendants
while offering little or no disincentive to claimants to refuse
reasonable offers of settlement, should be reviewed.
10. SUCCESS FEES
Given that under the ECHR any restriction on
Article 10 rights must be no more than is necessary, it has not
been established that permitting the recovery of success fees
from losing defendants is necessary to achieve the object of providing
access to justice. The CFA system was designed without reference
to defamation cases; too often, success fees represent a windfall
for claimant lawyers; and the adverse consequences for media defendants
were unintended and unforeseen. As Lord Hope pointed out in Campbell
v MGN, the Scottish system does not permit success fees to be
recovered from defendants.
In any event:
— Consideration should be given to
limiting recoverable success fees in Article 10 cases to a modest
percentage uplift.
— Cost caps should include any recoverable
success fee.
— Before permitting a claimant to recover
a success fee from an opponent, the claimant should be required
to certify that a CFA with a success fee is his only means of
financing the case.
— Because of the vagaries of litigation
against the media, retrospective assessment of the risk should
be permitted and the court should have power to allow different
percentages for different stages of the case.
— Success fees should not be recoverable
in proceedings for the assessment of costs.
11. ATE INSURANCE
The market for ATE insurance is currently very
small and appears to be restricted to a handful of insurers and
law firms handling claimant defamation work. Transparency is required
to ensure that this aspect of funding CFAs is not open to abuse.
Claimants should be required to give reasonable
advance notice of their intention to purchase ATE insurance.
When ATE insurance is taken out, the claimant
should be required to disclose the policy to his opponent, making
clear the nature of his own liability to the insurers.
12. COSTS COUNCIL
The Civil Justice Council has recommended the
establishment of a body to be known as the Costs Council. The
parties to this submission agree with this recommendation, which
reflects the crucial importance of costs in modern day litigation.
They suggest that such a body would be well placed to look into
some of the issues highlighted in this paper and formulate appropriate
proposals.
Reynolds Porter Chamberlain
November 2005
| 
