Evidence submitted by Richard Shillito,
Farrer & Co Solicitors
We are a central London practice of 61 partners.
Our Media Team specialises in all aspects of media law including
defamation and privacy and we have experience of conditional fee
agreements, having been involved in some of the leading recent
cases affecting the Press including Turcu v NGN and Musa King
v Telegraph Group.
1. To state our conclusions first:
1.1 CFAs may be appropriate for personal
injury cases, but they are not working satisfactorily in media
cases (ie libel, privacy and the like) and are open to abuse;
1.2 the defects in the current regime are
unlikely to be resolved, either by mediation between interested
parties or by legislation;
1.3 because of the potential adverse consequences
for freedom of expression, they should be abandoned in media cases.
2. PROS AND
CONS
2.1 A balance sheet would in our view show
a preponderance of factors against, although there are undoubtedly
factors in favour of, CFAs.
2.2. We accept that since Legal Aid is unavailable,
CFAs make up for some of the disadvantage between impecunious
claimants and wealthy defendant publishers. In addition to the
right of freedom of expression (article 10), the rights to privacy
and to a fair trial are recognised under the ECHR (articles 6
& 8), and these rights may be harder to exercise where funding
is absent or in short supply. We accept that there have been some
deserving cases, notably Lillie & Reed v Newcastle City Council
and ors.
2.3 With the exception of the last-named
case, most of the publicity about CFAs has attached to cases which
either involve celebrities taking advantage of CFAs or national
newspapers having to deal with CFA backed claimants. It is tempting
to assume that if problems persist they affect the wealthy and
are therefore of low priority in terms of law reform.
3. OUR EXPERIENCES
3.1 Our practice as defamation experts includes
advising a large number of publishers, who publish both national
and regional newspapers and specialist magazines. They include
public companies and smaller, family-owned companies. By way of
example, a regional newspaper publisher, Johnston Press plc, for
whom we act, has recently sought our advice on two libel claims
where the Claimant was represented by solicitors acting under
a CFA:
(i) An evening newspaper in the North
East was the subject of a claim of libel by a police officer backed
by the Police Federation, whose solicitors said that he would
incur liability for an after the event (ATE) insurance premium
if proceedings were issued. We were warned that this could amount
to as much as £50,000, payable in the event that the newspaper
lost the action, or even if the claim was settled before trial,
in addition to costs which could be uplifted by up to 100%. Our
estimate of likely damages, if the matter settled before proceedings
were commenced, was in the range of £5,000—10,000.
The claim's downside risk (which we put in six figures) caused
consideration of possible settlement at Board level, before the
company decided on principle to resist the claim, which, happily,
was later effectively abandoned. The Editor concerned has commented
that the experience has led to extreme caution when dealing with
any stories about police officers.
(ii) An evening newspaper in the North West
made an error in a report and, when a claim was made, immediately
apologised and, in response to the letter before action, made
a formal Offer of Amends under the Defamation Act 1996. Damages
were quickly agreed at £12,000, by negotiation. The Claimant's
solicitor's costs amounted to approximately £25,000, or double
the damages, and were not justified by the work involved, having
regard to the newspapers' conciliatory attitude.
3.2 In a third case, involving a smaller
publisher of company reports and analyses, our clients, who were
initially confident that they had a good defence of fair comment,
decided to settle a claim for libel only after the claimants changed
to a firm of solicitors who threatened a CFA backed claim for
libel.
3.3 In addition to advising "defendant"
publishers, we also-but to a lesser extent—advise claimants
and potential claimants. We consider ourselves professionally
obliged, notwithstanding our reservations about CFAs, to advise
clients of their availability and, when asked to act on that basis,
to give the proposal serious consideration.
4. PROPOSALS FOR
REFORM
4.1 Possible reform of the CFA regime has
been considered by the DCA and in a recent Report, New Regulation
for Conditional Fee Agreements, Response to Consultation 10.8.05,
at Annex C, is a submission from media organisations (settled
by Andrew Caldecott QC & Aidan Eardley), which contains a
number of proposals. These proposals are of interest because they
indicate the general media view of CFAs. (We explain below why
we think they are impractical.) They are intended to cover all
"publication" cases, including libel, confidence and
data protection and include:
(i) a maximum 12.5% uplift where cases
settle early, before Defence
(ii) cost capping at the allocation questionnaire
stage in all cases (not just where there is no after the event
(ATE) insurance as in Musa King)
(iii) that success fees must always be proportionate
to financial compensation (disapplying CPD 11.9 of the Civil Practice
Rules)
(iv) suggestions as to factors to be taken
into account in assessing uplifts, which should be staged
(v) courts to consider whether a claimant
is wealthy enough or has methods of financing a claim other than
by a CFA
(vi) that Defendants should have notice of
intended ATE insurance, in view of the very high cost in some
cases
(vii) that the court should take certain factors
into account in deciding if an ATE premium is reasonable
(viii)uplifts in costs proceedings to be decided
on own merits and not by reference to the substantive proceedings.
4.2 We do not disagree with these proposals.
Rather, we consider that they are, for the most part, impractical
in terms of what is likely to be agreed or enacted. More particularly,
in our view:
4.2.1 Cost capping is a blunt instrument
in a field of law where the subject matter is so varied and consequently
the time to be expended and the costs incurred so variable. There
is a risk that this will lead to serial approaches to the courts
to cap costs or to vary costs caps in individual cases.
4.2.2 The decision of Gray J in Henry v
BBC [2005 WL 3016932] illustrates how imperfect the costs-capping
regime, commended by Hoffman LJ, really is. In that case and for
good reason an application to cap was made when trial was only
days away. By that time it was apparent that the Claimant's ATE
insurance cover was wholly inadequate. Doubts were also raised
as to whether a successful defence of justification might allow
insurers to avoid liability on grounds that the insured had provided
false or misleading information.
4.2.3 The Naomi Campbell case shows that
sometimes the principle or vindication may be more important than
the amount of compensation (only £3,500). Any rule that costs
should be proportionate would have to take account of such cases.
(Costs exceeded £1m in that case.)
4.2.4 Campbell is also a good example of
a case where it would be impractical to implement the Scottish
system advocated by Lord Hope, whereby the uplift is paid by the
winning client, not by the losing defendant. In many defamation
cases now, the costs (on any basis) greatly exceed the damages,
so the system would very often leave the winning claimant out
of pocket.
4.2.5 Staging of uplifts is good idea in
principle, but would require a reappraisal of the court's current
approach, which is that a solicitor is entitled to take a view
at the outset of the chances of success and that it is not for
the courts to second guess him. In turn, this could involve difficult
"inquests" by costs judges after the event.
4.2.6 The House of Lords has ruled in Campbell
that means-testing of claimants is impractical and (although it
is apparently achieved in legally aided cases) it is certainly
cumbersome. Nevertheless, it must be contrary to the intention
of the CFA regime that millionaires can use CFAs.
4.2.7 The ATE market is restricted to a
very small number of insurers. They undoubtedly have difficulty
in assessing risk and premiums, which accounts for the widely
varying figures encountered. We have mentioned the premium of
£50,000 quoted in respect of a regional newspaper. In the
Miller case, the defendants were told shortly before trial that
the Claimant had incurred costs of £3.3m including a premium
of £615,000. In brief, we do not consider that it is open
to the courts or the legislature to remedy market failings in
this context.
4.2.8 It would risk an injustice if, the
claimant having incurred an ATE premium, the courts ruled that
it was too high.
5. FREEDOM OF
SPEECH
The Miller, Musa King, and Turcu cases are well-known
and will be cited in more detail in other submissions to this
Committee. We consider that there is a serious potential risk
to free speech, which could arise where, for example, a small
publisher or indeed an individual was faced with a CFA-backed
claimant and decided that he could not afford to defend the claim
in view of the possible financial consequences.
6. GENERALLY
The issue of CFAs should not be seen in isolation.
In general terms, pressure for reform has led, since the 1980s
to a more acceptable, but still not perfect, regime for assessing
libel damages. Costs remain a problem and are disproportionate
to damages in too many libel and privacy claims. This problem
requires consideration in the context of the law and practice
generally, with a view to making the courts more accessible to
all, and not just the well-heeled. Specifically we favour a costs
assessment system based on reasonable rates, for time reasonably
spent. If there is to be an uplift on costs and the Defendant
has to pay it, then we consider that the costs judge should be
able to take the whole bill into account (ie base costs plus uplift)
when considering whether it is proportionate.
Richard Shillito
Partner
Farrer & Co
November 2005
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