APPENDIX 2: CONDITIONAL FEE AGREEMENTS
(AMENDMENT) ORDER 2010: EVIDENCE |
Letter from Nicholas Green QC, Chairman of the
I am writing to you in your capacity as Chairman
of the Merits of Statutory Instruments Committee, since I gather
that the Committee is due to consider the Order reducing the maximum
conditional fee agreement ("CFA") success fee in defamation
cases from 100% to 10% at its meeting on Tuesday 16th
This measure is being rushed through quite separately
from any reforms to the rules on costs recommended by Lord Justice
Jackson. It was the subject of a Consultation Paper from the Ministry
of Justice published on Tuesday 19th January 2010,
which reduced the period for responding from the minimum period
of three months stipulated in the Government Code of Practice
to a mere four weeks. Requests from the Bar Council and practising
barristers and solicitors for the period to be extended were rejected,
and the Consultation closed on Tuesday 16th February
2010. Just over a fortnight later, the Government published its
Response on Wednesday 3rd March 2010.
Although I am not an expert in this area of the law,
I have received a number of representations from practitioners
at the Bar who specialise in media and defamation law on both
sides. Their concerns do seem to raise matters which should be
of interest to the Merits Committee on the grounds that the Ministry's
proposed Order is politically and legally important and gives
rise to issues of public policy likely to be of interest to the
House. The key concerns which have been put to me, and which on
the face of it raise matters worthy of parliamentary debate, are
(1) The reason given by the Secretary of State for
deciding to deviate from the Code of Practice was that "in
order to be in a position to implement the proposal as soon as
possible (subject to consultation), it will be necessary to shorten
the consultation period to four weeks." This wording made
it sound as though there was not so much a predisposition to implement
the proposal as a predetermination. What is certain is that the
rush made it impossible for practitioners to respond with reliable
data as to the success and failure rates of actions brought by
claimants on CFAs. As one head of a leading set of media lawyers
pointed out, it was impossible to assemble such figures in the
time available - not least, because client consent needed to be
(2) "It is vital to the maintenance of press
standards that access to justice for those who have been defamed
is preserved": this is a quotation from the Report of
the Commons Select Committee on Culture, Media and Sport, published
on 24th February 2010 (HC 362-I) at paragraph 307.
The Committee disagreed with the Ministry's proposal that the
maximum level of success be capped at 10%, regardless of whether
it is recovered from the losing party or from the client. They
saw no reason why any balance should not be agreed between solicitor
and client. This is not an option which the Ministry appears to
have ever considered.
(3) The weight of the evidence from practitioners
in response to the Consultation Paper was that they would be unwilling
to conduct defamation cases on CFAs if the success fee were no
more than 10%. It is not surprising therefore that the media have
greeted the Ministry's response with acclaim, but it has the most
serious ramifications for access to justice. The injustice of
recoverability from the losing party of 100% success fees, plus
after the event insurance premia, is now to be replaced with the
injustice of lack of access to justice for claimants and the minority
of defendants who have taken advantage of CFAs. This is the consequence
of the unsatisfactory nature of the consultation, which contained
only one option as an alternative to the status quo - the reduction
of success fees to 10%.
(4) The Consultation Paper accepted the principle
that a system of CFAs should be cost-neutral, in other words,
the maximum percentage success fee should be set at a level at
which the success fees recovered in successful cases cover the
base costs lost in unsuccessful cases. On that basis, a 100% success
fee would be justified in cases where the prospects of success
were 50:50 - a win in one case would compensate for the statistical
probability of a loss in another. On the basis of cost neutrality,
a maximum success fee of 10% could only be justifiable if 95%
of all defamation claims were successful. Such evidence as was
produced in the limited time available for response indicates
that the percentage success rate is much lower.
(5) The Ministry attached great importance to a schedule
of 154 cases supplied to Lord Justice Jackson by the Media Lawyers
Association (an association of in-house media lawyers and those
acting for defendants). This was not, as described, a sample,
nor did it include cases against non-members or cases which MLA
members won. Such was the weight given to this survey that in
the Consultation Paper (paragraph 19) it was suggested that the
figures indicated "not a justification for 100% success
fees, but rather the abolition of success fees in defamation proceedings
altogether". There was no attempt to gauge the number
of cases lost, or the cost to practitioners of unrecovered base
costs in a case lost after a trial. Obviously success fees incurred
in a settlement before trial are infinitely less than fees lost
after a week-long trial or longer. The attenuated period for response
made it impossible for practitioners to assemble this data, as
did the fact that the options for consultation were only the status
quo of 100% or the Ministry's proposal of 10%.
(6) Nothing in Lord Jackson's report supports the
measure proposed by the Ministry: Sir Rupert suggested an integrated
package of measures, including so-called "one-way costs shifting"
(under which the defendant pays the costs of a successful claimant,
but an unsuccessful claimant does not pay the defendant's costs)
and a 10% increase in the level of general damages (including
in defamation). Nothing in the report justifies defamation cases
being treated separately and differently from other causes of
action. If, as appears to be the case, the judicial consultees
(the Master of the Rolls, Lord Neuberger and the Senior Costs
Judge) were opposed to the proposal, this would appear to be the
(7) In his press release, accompanying the laying
of the Order before Parliament, the Secretary of State talked
of "levelling the playing field so that scientists, journalists
and writers can continue to publish articles which are in the
public interest". This ignores the substantial minority of
very important cases where scientists and journalists have been
defended on CFAs. In the much publicised recent hearing in the
Court of Appeal in British Chiropractors Association
v. Simon Singh, the scientist defendant was represented
by counsel on a CFA, as was the defendant consultant radiologist
in GE Healthcare v. Thomsen. In the highly important
case of Charman v. Orion Press, involving a Reynolds
defence of responsible journalism, the journalist who had lost
at trial was successfully defended on appeal by counsel on a CFA.
The reduction in the level of the success fee thus threatens to
damage the interests of the very people the Secretary of State
believes that it will assist.
I would be happy to arrange for a specialist media
law practitioner to discuss these issues with you further if that
would be of interest. The proposed Order does appear to raise
issues of public policy that deserve proper and adequately detailed
attention by the House. Justice rushed is justice denied.
Submission from Carter-Ruck Solicitors
We write with regard to the above draft Statutory
Instrument (the SI), originally laid before Parliament on 3 March
2010, by which it is intended to reduce the maximum success fee
in defamation and other media-related cases from 100% of the base
costs to 10%. The proposal is intended to cover all proceedings
for "defamation, malicious falsehood or breach of confidence
involving publication to the public at large" and would
therefore embrace all claims for misuse of private information
where the publication is to the public at large.
We believe the SI should be drawn to the attention
of the House of Lords because of its considerable political and
legal importance and the serious issues of public policy raised
As stated in the Explanatory Memorandum, the policy
background is that "Conditional Fee Agreements (CFAs) were
first made available in 1995 to improve access to justice for
consumers of legal services. Changes introduced in the Access
to Justice Act 1999 extended their use to most types of civil
cases" (save only for certain types of family proceedings).
It would appear from the primary legislation that in regard to
CFAs Parliament decided as a matter of policy not to
distinguish between different causes of action in civil proceedings
(apart from family law, which is excluded). We therefore believe
that this SI which isolates defamation from the rest of civil
proceedings raises serious policy issues which should be brought
to the attention of the House of Lords.
The SI has been laid before Parliament following
a severely truncated 4 week consultation period, despite some
respondents, including the Bar Council, complaining that the four
week period was too short and impeded their ability to respond
properly or fully. It appears to be the intention to rush this
Statutory Instrument through Parliament before the election.
The Explanatory Memorandum to the SI states that out
of a total of 57 responses received to the consultation, "more
than half (53%) - mainly those representing the media's interests
- supported the proposal". This means 47% (i.e. 27 out
of 57) did not support it; it appears from the list of respondents,
that those who do not support it include Lord Neuberger
MR, the Senior Costs Judge, the Bar Council's CFA
Panel and The Law Society.
There is, we believe, widespread concern within
the legal profession that the proposed reduction in success fees
would seriously reduce - if not eliminate altogether - the rights
of ordinary individuals without substantial means to obtain
access to justice in defamation and privacy cases.
The proposed reduction in success fees appears
to be based on unrepresentative data supplied by the Media Lawyers
Association that claimants win the vast majority of defamation
cases. In fact evidence was submitted to the Ministry of Justice
that the success rate of defamation claims is far lower than 100%,
and success fees of 100% are not routinely applied.
A second false premise of the SI appears to be that
CFAs are only used by claimants; we have just settled a case where
we were acting on behalf of a Danish professor who was sued
for libel in London by three companies within the multi-billion
GE Healthcare Group; there is no way this firm could have
taken on a risk of that magnitude if the recoverability of the
success fee had at the time been limited to 10%.
The SI, if introduced will, without doubt, lead to
this firm and others declining to take the risk of acting on a
CFA for clients who have cases which deserve to be heard; without
CFAs the vast majority of people of ordinary means simply will
not be able to afford legal representation to take on wealthy
The logic behind calculating success fees was that,
with a basket of cases, the lawyer's remuneration would be "revenue
neutral" in that what was lost in terms of fees on one case,
would be recovered on cases which were won. Thus, where a lawyer
agreed to take on two 50/50 cases, the probability was that he
would lose one and win one and therefore, with a 100% success
fee, recover on the cases won the same or nearly the same as the
sum lost on the unsuccessful cases.
In practice, however, this logic is flawed because
no two cases are equal. The cost to the lawyer of one loss at
trial, with all the work by then carried out, may exceed the benefit
of 50 "wins" where early settlement can be negotiated.
The media objected to CFAs from the outset. To try
to find an acceptable balance, this firm achieved an agreement
with News International which provided for staged success fees,
by which the success fee rose from nil to 25%, to 50% to 75% if
the case were settled by agreement at different stages. Only if
the case was not settled 45 days or less before trial would a
100% success fee be applicable. The logic of this is that by the
stage of trial both sides presumably believe they have a reasonable
chance of winning, so the prospects of success are truly 50/50
which justifies a 100% success fee.
Originally, in 2007, the Ministry of Justice
agreed that this scheme was workable, but now it seems to have
been rejected simply because the powerful media lobby did not
like it. We attach a copy of the Protocol agreed between ourselves
and News International, which is known as the "Theobalds
Park Plus agreement."
We would be happy to provide the Merits Committee
with any further information or data which may be required.
Protocol between News International and Carter-Ruck
("Theobalds Park Plus agreement")
PART 1 - success fees in media related cases
1. O% success fee
Save as provided in 2-7 below, no success fee will
be recoverable in cases where within 14 days from receipt of the
letter of claim in which notice is given that a funding arrangement
has been entered into or within 14 days of receipt of notice that
a funding arrangement has been entered into:-
a) the defendant makes an offer of amends pursuant
to Section 2 of the Defamation Act 1996 i.e. effectively admits
liability, which is accepted and/or leads to the action being
settled with damages and costs being agreed without court proceedings
or a Request for Detailed Assessment being taken out.
b) the defendant's detailed response to the letter
of claim pursuant to either the Pre-Action Protocol for Defamation
or the Practice Direction on Protocols (for non-libel claims)
admits liability and leads to the action being settled with damages
and costs being agreed without court proceedings or a Request
for Detailed Assessment being taken out.
c) (proceedings are issued solely for the purpose
of a statement in open court.
2. 25% success fee
A 25% success fee will be recoverable where:-
a) a case settles before service of the defence
and the defendant has not responded to the letter of claim as
set out in 1. (a) or (b) above.
b) the defendant makes an offer of amends pursuant
to Section 2 of the Defamation Act 1996 which is accepted but
agreement cannot be reached on damages and Part 8 proceedings
under s. 3 (5) are issued and served.
c) agreement is not reached on damages and proceedings
are issued and served.
d) costs are not agreed and a Request for Detailed
Assessment is taken out.
e) the parties agree to a binding arbitration
on any issue AND the defendant offers to pay for the arbitration,
if the action settles under 1 (a) or (b) above as a result of
the binding arbitration.
3. 50% success fee
A 50% success fee will be recoverable where:-
a) a case settles after the defendant states
or otherwise indicates in a response to the letter of claim that
the defendant will be raising a substantive defence to the letter
of claim or there is a denial that the publication is actionable.
This includes cases in which the defendant disputes that the publication
is (a) defamatory and/or (b) identifies the claimant and/or (c)
amounts to a misuse of private information.
b) a case settles after service of the Defence
but on or before the 14th day following first service of witness
statements. This period shall be extended, if within the 14 day
period following service of witness statements the defendant makes
a Part 36 offer which is accepted.
c) a case settles after the trial of a preliminary
issue (save where the time scale envisaged in stage 4 or 5 below
has already been reached with regard to the hearing of the preliminary
issue, in which case that percentage success fee shall apply).
4. 75% success fee
A 75% success fee will be recoverable where:-
a case settles after the 14th day following first
service of witness statements (or any extension thereto as set
out above) but earlier than the 45th day before the date listed
for the start of trial,
5. 100% success fee
A 100% success fee will be recoverable where;-
a case reaches trial or settles within 45 days before
the date listed for the start of the trial
6. Extensions of time
Any period provided for in this Protocol may be extended
by agreement between the parties. If a Part 36 offer is made and
subsequently accepted the relevant success fee will be the success
fee at the time the offer was made.
7. Costs of Detailed Assessment
A success fee of 25% will be recoverable on the costs
incurred in preparation of and of any detailed assessment hearing
if the case settles under paragraphs 1, 2 or 3 above and in other
cases will be 50% of the success fee applicable to the case at
the point of settlement.
(Nothing in this agreement shall prevent a defendant
from requiring a claimant to have its base costs or disbursements
assessed by the Court in accordance with normal assessment principles,
or from challenging the reasonableness of the claimant issuing
Submission from the Law Society
The consultation paper proposals on which these Regulations
are based suggests that very high legal costs "appear"
to have a harmful effect on the publication decisions of the media
and others. The proposals in the consultation paper represent
a fundamental change. To introduce such a change in response to
a perceived harm rather than a harm that is demonstrable in the
absence of any evidence is, in our view, entirely unreasonable
Our understanding of the reasoning behind the introduction
of the 100% success fee was that as many cases would be won as
would be lost. Adopting this approach a reduction in the maximum
success fee which a lawyer can currently charge from 100% to 10%
of the base costs suggests that claimant solicitors acting on
CFAs in defamation actions currently lose only one in eleven cases.
There appears to be no evidence whatsoever to support this assertion.
The proposals which are being considered in the current
consultation do not reflect the recommendations made by Lord Justice
Jackson. The current proposals are completely different to those
proposed by Sir Rupert Jackson and appear to have been introduced
before any proper consideration of his report has taken place.
The Regulations should be withdrawn while the Jackson review is
being considered by Government and other stakeholders.
Submission from Professor Moorhead of Cardiff
The Ministry of Justice commissioned myself and two
economists (Professors Fenn and Rickman) to investigate the feasibility
of research work in relation to, inter alia, conditional fees
in defamation cases. The basis of that was a perceived lack of
evidence in the field to judge whether the approach to costs generally
on conditional fees was leading to inappropriate expense. It should
be noted that the Government has instead decided to proceed on
the basis of a consultation without the benefit of the research
base it originally felt was necessary when commissioning the scoping
work. I am aware of no objective evidence base from which the
Government could draw its calculations for the 10% fee beyond
that provided by those lobbying for one side or other in the debate.
Against that background the outcome, a suggested
10% cap on success fees in defamation proceedings, is somewhat
surprising. Without persuasive evidence to support it, the basic
economics of conditional fee agreements would suggest that at
a level of 10% uplift would prevent all but the most meritorious
cases from proceeding on a conditional fee. For rich litigants
this presents no problem, for poorer litigants this presents a
major impediment to access to justice. That is not to diminish
the significant problems that arise in relation to costs in defamation
proceedings and the broader public interest issues at stake, but
the 10% limit is a questionable reaction in terms of its proportionality.
It is also a reaction taking place at a time when Lord Justice
Jackson has delivered a report which looks at these issues much
more fully and in the broader context of civil costs as a whole.
Submission from Which?
On the CFA Order, while we do not have specific evidence
on the direct impact on consumers, we can give you our views on
the beneficial impact on our organisation - the leading consumer
body in the UK - and therefore indirectly on consumers. CFAs are
designed to enable access to justice for cases with merit and
the uplift should vary according to the merits of the case and
its likelihood of success.
As a publishing organisation, we are subject to defamation
threats on a regular basis. It is common practice for claimant
libel lawyers acting on a CFA basis to have a 100% uplift irrespective
of the claimant's chances of success. While we would always seek
to defend any unjustified claim, it is possible that some publishers
will hesitate to do so because of the potential legal costs, not
the damages that may be awarded. By restricting the uplift to
10%, publishers will be encouraged to more robustly defend their
position. This should have the indirect benefit of encouraging
fair free speech and will enable an investigative and research
based organisation such as Which? to continue its work on behalf
of consumers. We have no evidence that ordinary consumers will
be affected by this CFA Order and we do not know how many 'ordinary'
consumers (as opposed to high profile individuals who can afford
legal fees without the need for a CFA) are likely to bring defamation
cases. However in cases where an 'ordinary' consumer (as opposed
to someone in the public eye) does bring a defamation case, we
would hope that a maximum 10% uplift would not reduce their access
to justice. In our view, what matters is the merits of the case,
not the level of uplift in legal fees that may be payable.