Opinion: “Libel Success Fees: Myth, Reality and Justice Denied” – Steven Heffer

I will begin with the myth.  Claimant libel lawyers win almost every libel case they bring and charge double their fees which must be paid by the Defendant, usually a media organisation.

The reality is very different as I will go on to explain.

Background

Prior to 1995 conditional fee agreements (CFAs) were unlawful and contrary to public policy.  CFAs were first made enforceable under the Courts and Legal Services Act 1990, brought into effect in 1995.  Initially, this related to personal injury cases.  As the most recent government consultation makes clear, the initial introduction of CFAs was intended to plug the access to justice gap for those who did not qualify for Legal Aid but were too poor to afford to pay for legal services.  In 1998 the categories for which CFAs were permitted was extended to all civil proceedings except family.

The maximum success fee was set at 100% of base costs, under the first Order in 1995.  It was considered that this would facilitate greater access to justice. If lawyers could charge an uplift of up to 100% it would encourage them to accept cases with a 50/50 chance of success.  It was hoped that success fees recovered in winning cases would balance the time and cost lost in unsuccessful cases and those turned away at an early stage.

CFAs were significantly extended under the Access to Justice Act 1999, when recoverability of success fees and ATE insurance premiums from the unsuccessful opponent were first introduced.  Again, this was primarily to ensure access to justice for people outside Legal Aid eligibility.  It was recognised that there were many individuals who could not afford to litigate without putting their homes or assets at risk. The intention was to ensure that the expense of the risk was met by the losing party and not by the Claimant, for example out of their damages.

Over a period Legal Aid was removed for many cases and the use of CFAs was extended.

This was a government-led shift and the role of the CFA was promoted as a core method of funding litigation.

The recent government consultation paper accepts that there is a general consensus that CFAs have increased access to justice for those who might otherwise not have been able to afford to bring a claim.  It goes on to say that those costs represent a burden on the losing party and inhibit their access to justice.  “The benefits for access to justice for claimants in CFA cases have therefore been achieved at a substantial additional cost to defendants”.

Before CFAs were permitted, libel claims were the preserve of the wealthy. There was no Legal Aid available. Claimant libel lawyers would occasionally undertake work informally on a “no win no fee” arrangement but such cases were rare which meant that newspapers could pretty much say whatever they wanted about those less well off, without fear of a libel claim.

10 Years of Change

In the last 10 years, there has been a radical shift in access to justice.  This was exactly what the government had set out to achieve.  In libel cases, Claimants were able to pursue proper claims (without recourse to any assistance from Legal Aid or other government support) and where they were successful, the burden of the extra fees involved would fall on the Defendant.  The rule has always been that the loser pays.   It is, of course, in the sole power of the Defendant to settle proper claims early.

Why then has this caused so much controversy over recent years?  The reason is simple.  Newspaper and other media groups have been subjected to numerous claims from individuals who had hitherto been unable to enforce their legal rights against them.  Where newspapers have wrongly trashed reputations, there has been a remedy for the individual, not just the wealthy.

The Media Campaign

There has been a sustained and highly organised campaign led by media organisations to bring an end to the regime which the government introduced to give access to justice.

Much has been said about the chilling effect on freedom of speech, on scientific debate and on small publications.  This is a bit of a side show.  Most defendants who end up paying substantial damages and costs in libel cases are very large and profitable media organisations.   Most of the cases where defendants end up paying substantial costs and ATE premiums arise from a defendant deciding to defend a claim which should have been settled at the outset.  All libel lawyers can give many examples of such cases.

Government Attempts at Reform

In the run up to the last election the Lord Chancellor and Justice Secretary Jack Straw took up the case for costs reform.  He considered it a matter of urgency that the success fee chargeable should be reduced from 100% to just 10%.   This proposal was based on the myth, rather than evidence based. Had this been made law the result would have been a return to the previous position where only the rich could sue for libel, or defend a libel claim.

The proposal was criticised by the Law Society, Bar Council and senior judges as well as Lawyers for Media Standards (LMS).

It came close to being put into effect but after extensive lobbying (and a threat of judicial review against the government by LMS) the proposal was eventually dropped.  The urgency was so great that it apparently justified the last government ignoring its own code of practice on consultation.

The press and political campaign has started again with renewed vigour in 2011, with a number of pro reform press articles and a new government following the media line and announcing its determination to pursue libel and libel costs reforms.

Nick Clegg has latched onto libel tourism, an issue much loved by reform campaigners, but with no evidence to support the existence of any real problem. He has also taken up the campaigners’ line on costs, again based on the myth, rather than evidence.

Press Coverage

I have complained previously of my deep concern at the extensive and completely one-sided reporting of this issue by the press so that reforms are being considered within an environment where the reality of this area of law plays no part.

Only last week John Kampfner (Index on Censorship) claimed in the Independent that the defamation culture is skewed towards the claimant (who in an unbelievably prejudiced generalisation) he describes as” usually the rich, the powerful and quite often the plain dodgy.”  Some might say that is more apt as a description of newspaper defendants.

The reality is that most libel claims are brought not by celebrities or the rich but by individuals with modest means seeking to defend or restore their reputations against powerful media groups.  The CFA regime has enabled clients to successfully bring claims, receive their damages in full and it has been rare for lawyers to recover anything like a 100% uplift on fees, despite all that has been said on the subject.  It is noteworthy that when the MLA produced their own schedule of statistics for the Jackson report, they did not reveal the number of cases in which they had actually paid 100% success fees – whether by agreement or following detailed assessment.

Reality and Statistics

Of course it is the case that libel lawyers tend to take on cases on a CFA which they believe their clients are likely to win (and surely the media would not want every case pursued regardless of merits), but there have been many examples of such cases being lost and the risk for the lawyer is great.  The loss of one libel trial can wipe out any advantage from receiving an uplift in numerous other cases.  All Claimant lawyer firms are aware of this and all have occasionally suffered heavy losses.

LMS recently commissioned a report from an independent statistician, analysing 125 sets of anonymised data from member law firms.  Of the 125 sets, 26 were CFA cases and 99 were without a CFA.

The preliminary results are interesting.

• For cases without a CFA the average percentage of fees recovered by the lawyer was 93.5%.  81% of cases without a CFA recovered above 90% of the fees the lawyers were entitled to charge.  This is not surprising – where lawyers are charging their own clients on a privately funded basis, one would expect almost full recovery of legal costs.

• For cases with a CFA the average percentage of fees recovered from the total fees entitled to (which includes the CFA success fee) was 67.6%.  Under a CFA, of course, the lawyer can only recover costs from their client’s opponent.

• In 25 out of 26 cases (96%) the lawyers recovered under 28% of the success fees that they were entitled to.

• The highest percentage success fee recovery in the data was 61.5% of  the success fees entitled to.  The next highest value was 27.3%.

This gives the lie to the media claim that claimant lawyers are able to double their fees in successful cases.  The reality is that lawyers lose money from CFA cases.  Indeed the statistics do not include the huge quantities of time that all Claimant lawyers spend dealing with initial enquiries and requests from individuals with potential claims, the vast majority of which are turned away as having no merit.  This “gatekeeper” role undoubtedly saves the media significant time and costs which would be incurred if the claims were instead notified to them.

LMS will continue to compile statistics from law firms with a view to presenting the results to the government departments tasked with consulting on this area.

Justice denied

It is clear that solicitors undertaking libel CFA work are already losing out on their costs, in order to provide their clients with access to justice, so that proper claims can be pursued.  Any costs reforms which substantially worsen the position will inevitably mean that few libel lawyers will continue to conduct this loss making work, leading to a denial of justice to the wronged individual.

If you would like to join Lawyers for Media Standards or to provide relevant statistics please contact Steven Heffer at Collyer Bristow LLP.

This article was originally published in the Law Society Gazette and is reproduced with permission and thanks