Examination of Witnesses (Question Numbers
1-19)
MR NICK
ARMSTRONG, MR
TONY JAFFA,
MR KEITH
MATHIESON AND
MR MARCUS
PARTINGTON
24 FEBRUARY 2009
Chairman: Good morning everybody. This
is the first session of the Committee's new inquiry into press
standards, privacy and libel. It is an inquiry which we anticipate
will take a number of weeks and we are beginning by concentrating
on the legal side. We have two panels this morning roughly divided
as follows: the first panel representing those who appear for
defendants; and the second panel those who appear representing
claimants. It is probably not an exact delineation but is a rough
guide. May I welcome, on to our first panel: Nick Armstrong from
Charles Russell; Tony Jaffa of Foot-Anstey; Keith Mathieson of
Reynolds Porter Chamberlain; and Marcus Partington, Chairman of
the Media Lawyers Association.
Paul Farrelly: Chairman, could I make
a declaration of interest before we start. I am card-carrying
member of the National Union of Journalists and have been since
I worked as a journalist for Reuters, Independent on Sunday
and Observer, which of course is owned by the Guardian
Media Group. Whilst at the Observer, Chairman, I was a
defendant in a libel action involving Peter Carter-Ruck and Partners;
and, just for the avoidance of doubt, their client was a Richard
Lanni, a very unsavoury Yorkshire former scrap merchant who had
very questionable business dealings with the later convicted fraudster
Stephen Hinchliffe. I make that declaration to make it clear it
is not pertinent to current cases that are live in the media that
we might consider.
Q1 Philip Davies: Could you tell
us if there are any problems, as you see it, with the Conditional
Fee Agreement scheme?
Mr Partington: Where to begin!
There are huge problems with the CFAs; but it is not really the
CFAs—the real problems lie in the base costs of solicitors
who use them against media defendants, the success fees which
are then charged on top and then the After the event insurance
(ATE) premiums. Some of the people who sit behind me, who act
for claimants, they charge £500/£580/£650 an hour;
if you then double that with a 100% success fee you are over £1,000
an hour; you then add VAT on top and you are talking about a huge
figure per hour. On top of that the premiums for ATE insurance
run at roughly £68,000 per £100,000 worth of cover.
The claimant does not pay for that insurance; they incur the premium
but they then claim it back from the defendant. The vast majority
of cases against the media are won by claimants. I estimate that
Carter-Ruck, the main firm, probably lose maybe 2% of CFA cases.
I think it would be interesting to ask them how many CFA cases
they win and how many they lose. So the vast majority of cases
they win but, yes, success fees can go up to 100%. The solution,
we would suggest, is to eradicate the recovery of success fees
from losing defendants. That would still leave Conditional Fee
Agreements, which exist, for example, in Ireland where people
have access to justice; there should then be mandatory prospective
cost-capping of base costs to limit the level of fees which are
charged; and there needs to be a proper examination of ATE insurance;
we would say ATE premiums should not be recovered.
Q2 Philip Davies: Why is cost-capping
used so rarely?
Mr Partington: Because the judiciary
avoid cost-capping.
Q3 Philip Davies: It is not lawyers
that avoid cost-capping then?
Mr Partington: You cannot get
a cost cap with a claimant lawyer unless by agreement.
Mr Mathieson: I think the way
in which the courts approach the question of cost-capping makes
it extremely difficult to make out a case for a cost cap. You
have got to show that costs are being incurred at a disproportionate
rate; and you have got to show that it will not be possible to
control those costs retrospectively. Those are pretty hard tests
to fulfil. There have been very few cases in which cost-capping
orders have actually been made for that reason. While I have got
your attention, may I just mention one particular case I have
had recently which shows the way in which CFAs operate in practice
against the media. This was a case in which I acted for Reuters
who were sued by a professional tennis player—not a well-known
professional tennis player. His complaint was over a report that
he had the worst record in professional tennis. This was not a
desperately important story, nor was it a story which required
much in the way of investigation or defence in the event that
it was eventually to come to court. The tennis player employed
his solicitors on a no-win no-fee basis. Reuters was extremely
keen to defend the allegation. It thought that what it had published
was basically true. There were, as there always are, slight niggles
over aspects of the report, but basically Reuters was very keen
to defend the case, and wanted to defend the case; it wanted to
show that its journalists had done a proper job. Eventually it
decided that it had really no option but to settle because it
was faced with potential costs of trial for this comparatively
unimportant libel case of £1.2 million. Those were the costs
that it was going to have to pay the other side if it took the
case to trial and lost. As you probably know, defendants do not
have great record when it comes to taking cases before juries.
So there was a clear risk even in a case where it was advised
that it had a pretty strong case. It settled some four months
before trial after the case had been going for five or six months;
the costs that Reuters is now being asked to pay the other side
are £250,000; that compares with Reuters' own costs of £31,000;
so there is a massive disparity between the costs that are being
claimed by claimant lawyers and the costs that are actually being
charged to large international media organisations by firms such
as mine.
Q4 Philip Davies: If, as you said,
Carter-Ruck only lose in the region of 2% of cases where they
are on a CFA, why on earth are you as lawyers allowing your clients
to take these cases to court. If you know there is a 98% chance
that they are going to lose surely the best way to cap their costs
and to reduce the costs is to say, "You're on a loser here,
mate. Why don't you just settle out of court?"
Mr Jaffa: I do not think that
is the right way of looking at it. I should say I speak from the
perspective of the regional press, so all your local papers are
the kind of people that I advise, and they are not thinking in
terms of litigation; they are thinking in terms of what happens,
even though we think we are right—"we" the little
(whatever it might be) newspaper of somewhere in any part of this
country. Their sole test is whether the costs of the claim, not
to put too fine a point on it, are going to put them out of business.
I do not think the question you have posed is the right one. I
think the correct question is: if people have a legitimate claim
then the relevant newspaper should apologise. If they do not have
a legitimate claim—if there is an issue, whatever the defence
might be—then the press should be entitled to defend themselves.
At the moment, no regional paper can do that. I went on record
about 15 or 18 months ago in the Evening Standard saying
that I cannot see any regional newspaper ever defending a claim
in the foreseeable future. That is not because they are poor journalists;
not because they publish poor stories; it is entirely due to a
small regional newspaper facing costs based on somewhere between
£400-£600 an hour times a 100% success fee, plus the
ATE premium, plus VAT and so on and so on. That is what it is
all about.
Q5 Philip Davies: I know you did
not think it was the right question to ask but I did ask it, so
if you could have a crack at answering it! Is not the best way
to cap people's costs for you to give better advice to defendants
to say "This isn't worth pursuing through the court because
you're on a hiding to nothing"? If you are going to lose
98% of the cases why incur that risk to your clients?
Mr Armstrong: My interest is on
both sides because I represent television companies by way of
defence to claims, but against the press I tend to act for claimants;
and I have not, in cases that I have handled, had to operate a
CFA. I have been able to settle most of the cases I have handled
without needing a CFA. It is not about black and white; it is
about finding ways of solving legal issues with newspapers, and
most of the time it is possible to resolve that. I am slightly
conscious that these big money cases that preoccupy everyone are
actually, in my experience, the minority of the work that goes
on in media law. The vast majority of those cases are dealt with
within weeks or months without CFAs, at reasonable costs to both
parties, or one of the parties if they pay the costs.
Mr Partington: Most cases are
resolved. To give you an example: there was an article the Guardian
yesterday about how Tesco sued the Guardian and they made
an offer of amends under the Defamation Act 1996, which is a procedure
which is supposed to allow cases to be resolved quickly and relatively
inexpensively. I do not know what the damages were, because I
think it is confidential, but I would be very surprised if the
damages were more than £10,000—they are probably less
than £10,000. That was a case where the Guardian made
an offer of amends—which, as I say, is a set procedure to
try and resolve cases quickly—and the costs bill is £800,000.
Q6 Chairman: Are you suggesting that
your counterparts acting for claimants with a CFA in place are
going to prolong proceedings in order to maximise their costs?
Mr Partington: If I could answer
it like this: in 2002 there was a case called Callery v Gray
and Lord Bingham said in the House of Lords there were three risks
inherent in the CFA system: first, because there was no client
checking on the charges that their lawyers were incurring, there
was a risk that base costs would rise and rise and rise; the second
risk that he identified was the possibility that excess success
fees would be sought; and the third risk was with ATE premiums
there would not be a proper market and they would be out of control.
There is nothing to stop a claimant lawyer taking a case on a
CFA and prolonging it for as long as they can, unless the defendant
makes an offer which they accept. If you take the case Mr Mathieson
referred to where Reuters wants to defend its journalism, there
may be very good reasons why you might not want to make an offer
and that case can be prolonged by the claimant lawyers unless
you are prepared to make a financial offer, which effectively
makes an admission because if they accept the financial offer
they will be entitled to a statement in open court, which is an
admission that you have made a mistake.
Q7 Chairman: You say there is nothing
to stop this—do you think it is happening?
Mr Partington: Without a shadow
of doubt.
Q8 Chairman: On a regular basis?
Mr Partington: Yes.
Q9 Paul Farrelly: A final question
along that track: one area I am interested in, with respect to
the potential abuse of CFAs, is the extent to which they are used
by people who have got deep pockets because they are not means
tested at the moment. The (Naomi) Campbell case was one
interesting example in privacy action. Are you aware of any examples
in libel cases where CFAs have been used by people who could otherwise
afford the action?
Mr Mathieson: Yes, I have got
one which came in last week in which a premiership footballer
has the benefit of CFAs against a number of newspapers. I do not
know what his earnings are but I would guess they are not un-adjacent
to about £50,000 a week.
Mr Partington: Two of the organisations
that are members of the Media Lawyers Association, Trinity Mirror
and News International, are being sued; they are privacy action
by Ashley Cole; he is on a CFA; his lawyer is charging £580
an hour with no doubt 100% uplift; he has three counsel; he has
ATE insurance. Roman Polanski, the film director, he sued in London—and
that might be a topic you will come onto, libel tourism—but
he never actually came to this country to prosecute the action;
Mr Mathieson's firm was acting for the defendants; he was on a
CFA. Cherie Booth was another person who has taken advantage.
I believe Sharon Stone sued using a CFA.
Q10 Chairman: You are not suggesting
these people should not be allowed to use CFAs?
Mr Partington: CFAs are not the
problem. The problem is the recovery of the success fee. We would
say that those sorts of people do not need CFAs with success fees
for access to justice. It has got to be remembered that CFAs were
introduced under the Access to Justice Act 1999 to give access
to people who hitherto did not have access. No-one here is going
to argue against that, but it seems completely wrong that a system
that was introduced for people who did not have access should
be exploited by rich people and their lawyers.
Q11 Chairman: You say it should be
means tested?
Mr Partington: Effectively, yes.
Mr Mathieson: I would just qualify
what Marcus said in relation to the base costs. The success fees
are a problem; but the base costs, that is to say the starting
fee before the application of the percentage uplift, there is
still a problem on no-win no-fee arrangements, in libel cases
in particular, because the client in a CFA has no interest in
controlling the amount that his solicitor is charging. We are
probably labouring the point slightly, but we see these cases
in which solicitors are charging £450/£500/£550
an hour because it is no-win no-fee; the client is never going
to have to pay that; it is the media, in all probability, who
are going to end up paying those sums. If you were to say to a
client, "Look, I charge £650 an hour", or whatever,
the client is going to say, "I'm sorry, that's far too expensive".
On a CFA they are not going to say that and, therefore, there
is that potential for really very high charging rates which can
only be retrospectively controlled, which is itself a problem.
Q12 Rosemary McKenna: What you are
suggesting is rather like people applying for legal aid in taking
forward cases, ordinary people. Is it not the fact that these
people, who are very well off, by winning their cases are actually
establishing case law to help ordinary people when they come to
the courts, when they appeal to the media? Are not the people
who are losing out, in cash, the media, which is why you are saying
that this ought to be stopped?
Mr Partington: If you are concerned
about rich people establishing precedents which other people who
are not so rich can use, that can happen without CFAs and success
fees.
Q13 Rosemary McKenna: But your arguments
are only about money, are they not? They are not about whether
it is right or wrong justice?
Mr Jaffa: That is what our job
is. That is unfortunately the situation we have reached. Our job
has turned from advising our clients on matters of law, to advising
them on money. That is what it has come down to. We spend collectively,
independently of each other, more time than ever before just telling
them what the financial implications are. Let me give you an example
which has just sprung to mind. Probably about this time last year
one of your colleagues, an honourable Member, sued a regional
paper—or threatened to—and at the very first meeting
I had with the editor we spent about 15-20 minutes considering
the legal issues; we then spent two hours considering the financial,
and that was the driving force throughout. Every newspaper, whether
national or regional, but particularly the regionals—the
smaller the more significant this issue becomes—every regional
newspaper is solely concerned with the finances of what is happening,
never mind the merits. That is the harsh reality of it, and it
is all due to the success fee and the ATE premium.
Q14 Rosemary McKenna: But it is not
having any success in stopping the media printing stories about
people that are either inaccurate or plain wrong?
Mr Jaffa: If they are inaccurate
or wrong then they can have a remedy—access to justice via
a CFA—but there is no need for a success fee. The ATE premium,
I would argue, is astonishingly high and unnecessarily high. I
am not suggesting that people should be deprived of their remedies,
either at law or through the PCC. What I am suggesting is that
the success fee element of a CFA is crippling the regional press,
and the ATE premium is crippling the regional press.
Q15 Rosemary McKenna: Then stop printing
stories that are not accurate.
Mr Mathieson: Can I just make
a quick point. Of course the media continues to make mistakes;
the media will always make mistakes; that is one of the by-products
of having a free society with freedom of expression; there is
no way that we are ever going to stop that. The media will try
and improve their standards; but the point about the current cost
of libel litigation is that it is not just about money; it is
about freedom of expression. What is happening is that at the
pre-publication stage the press are inhibited from publishing
stories because of the fear of what it might cost if they get
some part of it wrong, in good faith.
Q16 Rosemary McKenna: Fine.
Mr Mathieson: No, I think the
premise of your question is that the newspaper thinks to itself,
"Well, I've got this completely false story, if only it wasn't
going to cost me I would publish it". That is not the way
journalists work. They work on the basis that they think what
they are publishing, to the best of their ability, is true; but
there comes a point when they think, "Hang on, this is a
bit dangerous. If I've got one little bit of it wrong it's going
to cost me a lot of money". This is particularly true for
the regional press who have fewer resources. That is at one end.
The other end, and this is one reason why I mentioned the Reuters
case, is that media organisations are inhibited from defending
their journalism, from defending those stories, because it is
so expensive to do so.
Q17 Paul Farrelly: From my experience
as a journalist, lest this be thought of purely in monetary terms,
I am aware that many of the actions taken by large corporations
in particular are not primarily about money. There were two cases
that were very notable where the avowed intention of the litigant
was to drive the publisher out of business—that was the
James Goldsmith v Pressdram case and Jonathan Aitken
v the Guardian, where what the Guardian had
printed was true but it was only fortuitous rummaging through
a cellar in Switzerland whereby the Guardian was able to
prove that Jonathan Aitkin was in Paris at the time he was maintaining
he was somewhere else. Do you think, on top of the chilling effect
that defamation laws have already, that the operation of CFAs
has produced a double chilling effect in essence?
Mr Partington: Yes.
Mr Jaffa: Absolutely.
Q18 Alan Keen: If I could make an
observation, first of all. The fact that second-hand car sales
people and estate agents are doing so badly at the moment—I
think there are three professions represented today which have
probably slipped into the relegation zone: journalists, lawyers
and Members of Parliament. We should remember that when we are
discussing these important issues. We have all seen and we anticipated
a good few years ago there was a problem in the banking industry.
We saw the massive bonuses and we knew they were being justified
on short-term gains and it has all come to hit us all. Is there
a structural problem in the legal profession in fees? We have
already established one, the recovery of success fees. That is
one you have established. Is there another one? Is there a problem
in the profession? The money shuttles to and fro around the profession
itself and Keith Mathieson said it is the media that suffer in
the end, because in the end it is the ordinary person on the street
who buys the newspapers or watches TV who suffers, because that
is where the final cost goes down to. Is there another structural
problem in the legal fees, in the legal profession, with the way
that the fees are generated and distributed?
Mr Partington: What I think would
be helpful would be if there was a complete change of approach.
At the moment, traditionally any cost control has been exercised
by the courts right at the end of the case. With CFAs you have
got a double whammy fighting even against the costs. Even arguing
about the costs you are potentially spending a thousand pounds
an hour. The cost control needs to come forward and be done in
a mandatory prospective sense for Article 10 cases. The cost judges,
who are traditionally regarded as the people who control costs,
are on record saying to the Ministry of Justice that their job
is not to control costs. That is what they told the Ministry of
Justice in one of their submissions to one of the consultation
papers from the Ministry of Justice. There needs to be a whole
greater control by the court system of the charges that solicitors
incur and therefore seek recovery of. It goes back to what Mr
Mathieson was saying about the basic hourly rate. If you compare
the hourly rates which we are talking about, for example, with
the rate that people who carry out criminal work would recover
from the public purse, they are way out of line, way out of line.
The way to change it is to have mandatory prospective cost control,
we would say. It must be implemented by an external body, because
unfortunately lawyers will try and get away with what they can
get away with.
Mr Jaffa: Can I add to that by
saying, do not get bogged down on thinking purely about litigation,
because the overwhelming majority of complaints against your local
papers do not go to litigation—they are all settled. So
what people like me end up having to do is look at the rate that
the court apparently will allow, depending upon the location of
the claimant's solicitor. They always claim more, and I have to
try and persuade them that the hourly rate should be reduced,
that it did not warrant a success fee, that the amount of time
they have spent on it is excessive. But there is nothing that
I can actually do, in the absence of any court proceedings, other
than my own charm, personality and silver tongue (which is not
that effective, I have to say); there is no control at all; it
is purely a matter of persuasion. If they say, "No, if you
don't settle on our terms we're going to sue you", which
brings us back to the point we were talking about earlier. Yes,
in litigation there are those issues, but 98% of all complaints
go nowhere near the court, and it is all down to negotiation;
and we are (and I come back again to success fees) in a particularly
weak position. The high hourly rates, for someone who is based
out of London like me, I can only dream of those riches. If only.
We can make an honest living by charging the rates that we charge.
The claimants' lawyers, in my eyes, are earning a phenomenal amount
of money. That is the structural problem that I see.
Q19 Alan Keen: Could I ask about
online newspapers and magazines. The PCC changed its policy to
extend to on-line newspapers, has that made a difference? What
difference has it made? Has there been less defamatory stuff?
Mr Partington: I do not think
it has made any difference. Material published in a newspaper
or on-line is treated in exactly the same way. There is, however,
a problem about on-line archives because there is nothing to stop
somebody finding something in an on-line archive and suing because
of that publication, even though the original article was published
10, 15 or 20 years ago; because every time they download it is
regarded as a fresh publication. The Media Lawyers Association
thinks that should be urgently examined—about whether there
should be a single publication rule, and how we deal with archives;
because there is a danger in which people can bring actions in
respect of material in archives which there is absolutely no possibility
of defending.
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