Evidence submitted by Davenport Lyons
Solicitors
INTRODUCTION
1. This submission is made on behalf of
Davenport Lyons and addresses the issue of the use of Conditional
Fee Agreements (CFA's) in cases which engage Article 10 of the
European Convention on Human Rights—principally libel and
breach of confidence/privacy cases.
2. Davenport Lyons is a firm of solicitors
practising in Central London. It has a well-established reputation
for acting for media organisations in claims for libel and breach
of confidence. Amongst its clients are MGN Limited (publishers
of the Daily Mirror, Sunday Mirror and Sunday People), Express
Newspapers, Private Eye, Penguin Books, Harper Collins and Macmillan
Books. Davenport Lyons has acted in many of the high profile libel
and breach of confidence cases that have helped shape these areas
of law and recently acted for MGN Limited in the breach of confidence
action brought by Naomi Campbell, in which the House of Lords,
in its Judicial capacity, ruled in her favour on the validity
of her CFA in October 2005.
3. This submission represents the combined
input of the four partners of the firm who specialise in this
area, and who together have over 70 years experience in this area.
4. In compiling this submission we have
had to have regard to the duty of confidentiality to our clients.
BACKGROUND
5. CFA's were introduced to provide "access
to justice" for those who were not " . . . very wealthy,
who can well afford high legal fees, or the very poor, who may
qualify for legal aid" (White Paper on "Modernizing
Justice" December 1998).
6. The legislation which introduced the
CFA regime (principally the Access to Justice Act 1999 and subsequent
subordinate legislation) reversed the Common Law Rule that it
is unlawful for lawyers to charge fees which depend on the outcome
of a case.
7. A CFA allows fees to be payable only
in specified circumstances and for those fees to be increased
above the amount which would be payable if they were not only
payable in specified circumstances (the "success fee").
The success fee can be included in the costs recoverable from
the losing party. The success fee cannot exceed 100%.
8. The success fee is to compensate a solicitor
or barrister for the risk of taking on "no win, no fee"
cases and the "risk" that a proportion of those will
be lost. As Lord Hoffman explained in Campbell -v- MGN Limited,
it was a deliberate policy of the legislature to impose the total
cost of all CFA funded litigation, successful or unsuccessful,
upon unsuccessful Defendants. The effect of the 1999 Act (as amended)
and the legislation made under it is that losing Defendants are
required to pay not only the reasonable and proportionate costs
of their adversary in the litigation in which they are involved
but also to make a financial contribution to the funding of other
(unsuccessful) litigation as a supposed means of providing access
to justice to those (unsuccessful) litigants. Here it is important
to note that not all publishers are large corporate entities which
can swallow these costs. The system may work in personal injury
actions where insurance companies are in practice paying but not
in media cases. Lord Hoffman pointed out a number of problems
which CFA funded defamation/privacy claims were causing to the
media but felt the Courts were powerless to resolve these problems
and that only a legislative solution could do so.
9. The success fee is an uplift on the basic
costs that the solicitor/Counsel have charged. It is our experience
that in nearly all libel and breach of confidence cases where
a CFA is used the uplift claimed is 100%. This is because the
risk is assessed at the time the CFA is entered into (often before
proceedings are commenced) and the success fee is fixed then.
This percentage success fee then applies throughout the litigation
(no matter what defence is raised, if any at all), even including
the assessment of the successful Claimant's costs after Judgment.
THE CENTRAL
ISSUE
10. In summary the central issue is whether
CFA's (as currently operated) have a "chilling effect"
on freedom of expression. Our view is that it does have such an
effect. We have already seen that in Campbell Lord Hoffman felt
that a legislative solution may be needed, a point upon which
Baroness Hale concurred. Lord Carswell also agreed adding "That
such fees, [success fees] constitute a "chill factor"
cannot be doubted . . ."
11. This "chilling effect" is
caused by the level of costs which a losing party is obliged to
pay—theoretically to finance other cases brought by (unsuccessful)
claimants which solicitors and Counsel would not be prepared to
undertake if they were unable to recover such high success fees
in successful cases. Our submission is that the current CFA regime
in libel and privacy cases does not strike the appropriate balance
between improvement of access to Justice for meritorious claims
and the financial burden upon losing Defendants with the consequent
interference with their right to freedom of expression. In this
context it must be remembered that not all publishers/media organisations
are financially strong enough to take a stand when faced with
huge potential costs should they lose an action.
THE CAUSE
OF THE
PROBLEM
12. As noted above CFA's with a success
fee operate by increasing the basic costs claimed by a percentage
uplift (the success fee). The first issue is the level of basic
costs. It is our experience that Claimant solicitor/Counsel operating
under a CFA claim basic costs far in excess of this firm acting
for a Defendant. In Campbell the Claimant's solicitor's basic
costs were over four times our costs in acting for MGN Limited
in the House of Lords. We find that Claimant's solicitor's basic
costs are usually at least double and often more than our basic
costs. This is perhaps not surprising when a Claimant's solicitor
is not accountable to his client for the costs he is incurring.
No one will pay those costs unless it is the losing media defendant
and no one questions the time being recorded unless the matter
goes before a Costs Judge (with the media organisation facing
an uplift on the costs of doing this). The higher the basic costs
claimed, the higher the success fee.
13. The success fee is determined when the
CFA is entered into and is often done when the claimant does not
have all the information available to assess the risk, such as
what defence will be run. The level of that success fee does not
change even if the risk anticipated does not materialise. Thus
the risk assessment may advise a 100% uplift be claimed on the
basis that a jury trial is anticipated. If this risk does not
materialise and an offer of amends is made (for example) the rate
of 100% does not change. As noted above our experience is that
the vast majority of Claimant's solicitors operating under a CFA
seek a 100% uplift.
14. In non-CFA funded litigation, costs
assessed on the standard basis must be reasonable and proportionate
and in applying the test of proportionality, the Court is to have
regard to the overriding objective that cases be dealt with justly.
This includes, so far as practicable, ensuring that the parties
are on an equal footing, saving expense and dealing with cases
in ways which are proportionate. However, as mentioned above,
the costs which a losing party is required to pay in a CFA funded
case are necessarily unreasonable and disproportionate because
a large proportion of those costs are effectively a levy on losing
parties to fund other non-related litigation in which they are
not involved. The disproportionality of the overall costs which
a losing party is required to pay is expressly preserved by paragraph
11.9 of the Practice Direction to Part 44 of the Civil Procedure
Rules. This provides that a percentage increase will not be reduced
simply on the ground that when added to base costs, which are
reasonable and (where relevant) proportionate, the total appears
disproportionate. Thus a losing party is necessarily required
to pay costs which are far in excess of what would be reasonable
and proportionate in the circumstances of the individual case.
15. Although on detailed assessment, the
Costs Judge has jurisdiction to reduce both the base costs and
percentage increase, in practice there have been few cases where
the percentage success fee has been reduced substantially. It
is only in the most obvious cases where this has been done. Further,
paragraph 11.9 of the Practice Direction referred to above prohibits
the Costs Judge from interfering with the overall level of costs
if the base costs and the percentage uplift are separately considered
to be reasonable.
16. In our submission, it is not appropriate
in media related cases to assess the appropriate percentage increase
on the basis of a notional bucket of cases with varying degrees
of risk. There are comparatively very few cases in this area of
law and the number of losing cases is extremely small. It is therefore
a misconception that on average solicitors are likely to lose
a percentage of cases. Although perhaps mathematically theoretically
correct, it is therefore not appropriate to suggest that a solicitor
requires a success fee of 100% in winning cases in order to compensate
him for the losing cases.
17. It follows therefore and in any event
solicitors will not refuse to undertake cases if there was a greater
restriction on the percentage increase recoverable as a success
fee. In libel and privacy cases, the base costs of solicitors
and counsel are already substantial, far more than would be recoverable
in, for example, a road traffic case. Base hourly rates of £400
per hour are not uncommon which are almost doubled when applying
a success fee.
THE BLACKMAILING
EFFECT
18. Lord Hoffman made mention of the "blackmailing
effect" of CFA's in Campbell. By this he meant that a Claimant
operating under a CFA who has no financial means and no after
the event insurance can put considerable pressure on media organisations
to settle for fear of running up huge costs that they can never
recover. We have seen this type of threat used on a number of
occasions and a system that allows this must be flawed.
EXECUTIVE SUMMARY
AND CONCLUSION
19. The current CFA regime has a "chilling
effect" on free speech.
20. There should be no success fee in Article
10 cases or success fees should be capped at, for example, 25%.
21. Paragraph 11.9 of the Practice Direction
to CPR Part 44 should be revoked so as to allow the Costs Judge
to look at the overall level of costs.
22. Where the "risk" changes the
reward for taking it should change. For example the success fee
claimed in relation to cases where an offer of amends is made
under s.2 of the Defamation Act 1996 should be reduced, as it
should after judgment or settlement where the only ongoing issue
is the assessment of the Claimant's costs.
23. Costs Judges should be directed to assess
the risk and appropriate success fee in each particular case without
assuming the solicitor needs to be compensated for some notional
losing case for each one which is successful.
Davenport Lyons
Solicitors
November 2005
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