“Reframing Libel Costs” – Razi Mireskandari

14 11 2010

This is a paper which was given at the City University Forum on “Re-Framing Libel” on 4 November 2010.

Introduction

Libel practitioners are increasingly partisan. Most firms are now seen, and market themselves, as either “Claimant” or “Publisher/Defendant” firms. Our libel work at Simons Muirhead & Burton is split almost down the middle. We believe that our clients’ best interests are served by the experience we have gained in acting for both sides. We have no generic interest in exclusively promoting the interest of one side over the other.

Although I appreciate that this Symposium focuses on libel, a libel claim is a form of personal injury which is a civil claim. So the costs regime that applies to civil claims applies to libel claims. The costs of libel proceedings can therefore only be properly understood in the context of costs in civil actions generally.

 

The Historical Context

 

In England costs are usually paid by the losing party to the winning party. The level of those costs, if they are not agreed, is assessed by costs judges who are specialists in the field. Costs are assessed according to what the court determines was reasonably incurred. The two most important elements of base costs are the hourly rate and the time spent. The former depends on the experience of the fee earner, whether the case involves a specialist area of work, urgency etc. The latter needs to be evidenced by appropriate records.

Civil Legal Aid used to ensure access to justice to those who could not otherwise afford it.  To be granted Legal Aid, a means and merits test had to be satisfied.  Provided your claim had a reasonable prospect of success and you passed the means test the state would pay your legal fees and would recover whatever monies were paid to your lawyer from the proceeds of the action.

Furthermore, no costs order against a legally aided party was enforceable without the leave of the court. This in practice meant that a litigant could not recover any costs from a legally aided opponent unless it could show e.g. that they had just won the lottery (or its equivalent – the pools – in those days), so there was no danger of a legally aided party losing their home because they lost their case.

Crucially legal aid, for reasons that today appear archaic, was not available for libel cases.   Many felt this was wrong (why cannot a person of modest means protect their good name?) and some lawyers were prepared to bend the rules in order to sustain an action by pretending they were going to charge their client, when in fact there was no prospect of the client being able to afford their fees. This charade was necessary because lawyers cannot recover from another costs in excess of what their client is obliged to pay them (this is known as the “indemnity principle”).

Civil legal Aid is now only available for very limited types of cases.   To afford access to justice, Legal Aid has been replaced by Conditional Fee Agreements (“CFAs”) commonly known as “no-win, no-fee” agreements and After the Event Insurance (“ATE”). It is important to bear in mind that the CFA/ATE regime replaced the legal aid; it operates in all areas of civil litigation be it personal injury, professional negligence, breach of contract or other.  The indemnity principle has been effectively waived to allow CFAs and ATEs to operate.

CFAs allow lawyers to act for any client and only recover their reasonable costs plus a success fee of upto 100% if their client is successful. Where a lawyer acts under CFA the success fee is also recoverable from the losing party.

ATE insures a client against adverse costs orders, the premium for which is recoverable from the losing party even if the insured has not paid any premium.

The Problem

 

Publishers, who are almost invariably defendants in libel cases, are increasingly finding themselves having to defend actions instigated by Claimants on a CFA with ATE. If they lose, their costs liability is thereby doubled and on top of that they are having to pay the ATE premium which can be hefty indeed.

The exposure to costs is, under the current regime, so great that it has undoubtedly had a chilling effect on free speech. Publishers are much more concerned about the risk attached to what they publish and are more likely to settle claims to avoid the massive costs liabilities which would be incurred, especially if the case were to go trial.

Salt is rubbed into publishers’ wounds by the fact that Legal Aid was not even available for defamation cases in the past, whereas now CFAs and ATEs are available to anyone, irrespective of means, even very wealthy individuals, who can (and do) get the benefit of them.

Undoubtedly the present system is untenable. Reform is needed. But the trick is to ensure that access to justice is not denied. A libel claim is often the only means of curbing the excesses of the rampant (and often entirely unprincipled) tabloid press in this country. No one today would suggest that a libel action should only be available to the rich.

Reality

Libel law is complex. Libel actions should be conducted by specialist practitioners. Libel actions can be simplified (and sensible attempts to do so should be encouraged) but its complexities cannot eradicated.

The Legal Aid Board, I understand, had a department of about 200 people which means tested Legal Aid applicants. Any reform which involves means testing, is not practically feasible.

It is impossible to know for certain but I would be very surprised if most libel complaints, whether pursued to trial or not, were not against the tabloid press. The lawyers acting for these publishers are very experienced. Anyone who has been involved in litigation against the tabloids will tell you they will leave no stone unturned to pursue their interests – sometimes at whatever cost. But libel defendants, increasingly in today’s world, come in many shapes and sizes; many have nowhere near the resources available to the tabloid press.

The maximum payment for general damages in libel is about £225,000. That sort of sum is only very rarely awarded – it would only be appropriate for a false allegation of terrorism, murder, paedophilia or the like which was fought all the way to trial.  The vast majority of claims are settled at well below £100,000 – most for far less than that.

If a case goes to trial, the trial judge, after judgment, exercises his jurisdiction as to liability for costs. But the assessment of the amount of costs actually payable, if it cannot be agreed, is carried out some months later by specialist costs judges. Costs in a heavily contested libel claim that goes to trial before a jury could easily exceed £350,000 (excluding CFA success fee, ATE premium and VAT). Attempts to date to regulate costs by judges exercising case management control more robustly whilst the action is progressing, or by costs judges applying concepts such as proportionality when assessing costs, have largely failed to limit costs, certainly to a level that publishers or their insurers would find acceptable.

The Solution

In December 2009, Lord Justice Jackson published his comprehensive review of civil litigation costs. In essence he recommended:

  1. that CFA success fees and ATE insurance premiums should cease to be recoverable from the losing party;
  2. raising the general level of damages in defamation and breach of privacy proceedings by 10%; and
  3. introducing a regime of qualified one-way costs shifting (whereby the Defendant/publisher does not recover its costs even if it succeeds in defending the claim, thereby negating the need for ATE insurance).   If this recommendation is accepted, it is suggested that procedural rules will need to be amended  to provide:

“Costs ordered against the claimant in any claim for defamation or breach of privacy shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including:

(a) the financial resources of all the parties to the proceedings, and

(b) their conduct in connection with the dispute to which the proceedings relate.”

I suggest that if the above proposals were implemented access would be denied to the vast majority of those wishing to bring a claim in libel because (adopting the same numbering):

  1. Damages in the vast majority of cases are insufficient to cover CFA success fees and ATE premiums.  Without these, lawyers would only be prepared to take on cases that would be very likely to succeed and Claimants (unless very wealthy or with nothing to lose) would not be prepared to complain because they would risk losing their home/being made bankrupt;
  2. I have difficulty envisaging how this would be implemented especially where the award is made by a jury. Would the judge simply add 10%? In any event 10% on what is often a relatively modest damages award does not address the problem at 1 above;
  3. again, I have difficulty envisaging how this would be implemented in practice, means testing is simply too expensive to put into practice.

However, Lord Justice Jackson does leave the door at least slightly ajar as to alternatives where he says in his report:

“If, contrary to my recommendations, additional liabilities continue to be recoverable and the costs shifting regime remains as now, then my fallback recommendations are as in chapters 9 and 10 above. In other words there should be fixed and staged success fees, staged ATE insurance premiums and so forth.”

In my view this is a far more solid basis for reform; it addresses the unfairness of the present costs regime by sensibly “reframing” it rather than imposing radical change.

My proposal for a costs regime that would work well in practice, strike the right balance and give clarity as to costs to all parties is as follows:-

1.       There be an automatic costs cap in place of £350,000 in respect of base recoverable costs.  Costs above this figure to be disallowed unless the Court allows a higher figure upon application by the relevant party.

2.      Hourly rates for fee earners to be agreed across the board at no more than £375 for an experienced senior libel expert with appropriate hourly rates for other fee earners.

3.      The CFA success fee, which would be recoverable inter parties, to be a maximum of 50% of base costs, only recoverable if the case settles within 60 days of the beginning of the trial.  Of that 50%:-

(i)        80% would be recoverable if the case settles earlier than 60 days before trial;

(ii)       60% would be recoverable if the case settles earlier than the first date for disclosure;

(iii)      40% would be recoverable once the claim is issued;

(iv)      20% would be recoverable if the claim settles pre-action.

No success fee recoverable for costs assessments.

4.      The same staged fees to apply to Counsel’s fees.

5.      ATE insurance premiums recoverable but initially limited to £500.  Thereafter, the level of premium recoverable should be staged as in 3 above.  With increased competition in the ATE market the cost of ATE insurance should reduce over time (there are signs that this is already happening).

6.      Publisher exposure to ATE premium limited to £500 before notification.  To avoid any higher premiums it can then elect whether to undertake not to enforce a costs order (in which case it would be unreasonable to charge any further ATE premium).

Lord Justice Jackson also recognised that sensible reform of present procedures could lead to significant costs savings, for instance:

“Early resolution procedure. The Libel CLAF Working Group has put forward an interesting proposal for an early resolution procedure. In my view, the working group’s proposal and the issue of early resolution generally merit consideration by specialist practitioners and judges. I commend these matters to them for further analysis”.

I here disclose an interest; I am a member of that Working Group which is now chaired by Sir Charles Gray (former specialist defamation High Court Judge).

Our current main focus is to propose a procedure that will allow the court to determine the meaning of the words complained of so that the litigants can focus their efforts on that meaning throughout the litigation. One of the unique difficulties of defamation claims at present is that the parties must prepare for trial without knowing which of the pleaded meanings will find favour with the jury/trial judge. It is like trying to hit a moving target and significantly increases costs. I feel confident that we will be able to make proposals which will help to reduce the costs of libel trials.

There is more that could be done procedurally but I have in mind my remit and am concerned not to stray from my remit of discussing costs.

Conclusion

Change is needed, and desperately. But there is a danger of overcompensating for the unfairness of the present regime. This is particularly so when the parties on one side of the debate are far better placed to promote their own self interest through the press.

In today’s world it would be wholly unacceptable for anyone, however poor, to be denied access to justice in libel.

A change in the cost regime of the type indicated above would restore proper balance.

The tabloid press, particularly, has been so vehement in its opposition to CFA & ATE’s that it wants them abolished for media cases (including privacy claims). Their committed lobbying will have its desired effect if Lord Jackson’s proposals are implemented. Our law says that a proper balance must be struck between freedom of speech and the right to reputation and a private life. The balance is often very fact sensitive so each case needs to be considered on its merits. It is vital that we have a costs regime that allows this to happen.

One final note; it is often overlooked that CFA’s and ATE’s  are also available to Defendants (including publishers). I suspect they have rarely been used to date because of philosophical rather than practical concerns. Having said that, I understand that the Telegraph has been represented several times on a CFA. I believe they will be increasingly used in the future if a regime such as the one I suggest is implemented.

Razi Mireskandari is a the managing partner of Simons Muirhead & Burton and heads their media and commercial litigation departments.

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3 responses

14 11 2010
Tweets that mention “Reframing Libel Costs” – Razi Mireskandari « Inforrm's Blog -- Topsy.com

[...] This post was mentioned on Twitter by Media Law UK and Reframing Libel, INFORRM. INFORRM said: "Reframing Libel Costs" – Razi Mireskandari: http://wp.me/pMDHB-1pb [...]

19 11 2010
Opinion: “Reframing Libel Costs – Another Perspective” – Keith Mathieson « Inforrm's Blog

[...] first response to Razi Mireskandari’s paper on reframing the costs of libel was to reflect that some useful reframing might be achieved if Razi were to reduce his own charging [...]

22 11 2010
Opinion: “Reframing Libel Costs – a reply to Keith Mathieson” – Razi Mireskandari « Inforrm's Blog

[...] a paper to the “Re-framing Libel” forum on the question of costs.   This was posted on this blog.  On 19 November 2010, Keith Mathieson responded to my paper with what he described [...]

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