Opinion: “Ken Clarke Stamping out Compensation” – Steven Heffer

1 04 2011

This week’s news release from the Ministry of Justice was headed “Clarke stamping out compensation culture fears”.  It might have been headed simply “Clarke stamping out compensation”.

The paper talks of an “unwieldy justice system (which) is costing businesses millions of pounds and deterring individuals from using the justice system…

Let’s be clear about this.  The businesses in question are wrongdoers who have broken the law and are required to pay compensation.  The effect of the proposals announced is to shift a major part of the costs burden presently borne by the wrongdoer and to impose that burden instead on the individuals who have been wronged.

Justice Secretary Kenneth Clarke said

an effective system of civil justice is one of the cornerstones of a civilised society.  Without it businesses couldn’t trade, individuals couldn’t protect their liberties, and the Government couldn’t be held to account.  But, despite this, most people dread going to court because of all the cost and anxiety it involves.  We must change that by helping them to avoid court where possible and cutting costs where that is unavoidable”.

The statement is disingenuous.  The proposals are a major attack on access to justice and the reforms are intended to relieve businesses (media organisations and insurers) of litigation costs, to the detriment of those who have been wronged and in many cases have already suffered heavy losses.

In reputation cases the position is stark.  There can be little doubt that the reforms mean that people who are defamed will be denied justice.  However damaging the lie, the individual may be unable to find a lawyer to take the case, if any success fee and ATE premium is to be borne only by the claimant.

Professor Alistair Mullis, Head of the School of Law at the University of East Anglia, and a specialist in media law, has commented

the median damages award in defamation cases since 2004 is just over £20,000.  The success fee for a lawyer would therefore be £5,000 against which the lawyer has to balance  the risk of writing off possibly hundreds of thousands of costs in the event that the case is lost.  No sensible lawyer will take such a claim and the consequences will be that no-one, apart from the very rich will be able to afford to bring a claim.  The result:  access to justice will be denied  and serious injury to reputation will go uncompensated.  The media must be rubbing its hands with glee”.

Lawyers are entitled to charge success fees so that they are able to take on cases which lose on a contingency fee basis.  The extra amounts in cases in which the claim succeeds are supposed to fund the cost of representing those whose claims fail.

ATE insurance protects claimants against the risk that they may lose and have to pay the other party’s costs.  If they win the recoverability of the premium transfers this risk to the losing party.

So who should bear the costs of funding litigation and allowing access to justice?  The MOJ’s view (despite all the evidence to the contrary) is that it should be borne by the winner in the litigation out of the damages which are meant to be compensation for losses suffered.

The Bar Council (in its response to the consultation) said it could see very little logic or sense in this result.  The wrongdoer profits at the expense of those whose rights have been vindicated.

It is manifestly unfair to transfer the costs of funding from unsuccessful defendants to successful defendants and successful claimants.

In defamation actions the majority of defendants are substantial media organisations.  They are able to reduce the risk of incurring these costs by early settlement or, dare I suggest, a more robust approach to checking the facts and responsible journalism.  In other cases, the majority of defendants are insurers who can spread the risk by increasing premiums.

There has been no proper impact assessment by the MOJ in support of the proposal nor any proper consideration of the alternatives including staged success fees.

Defamation is a special case but the MOJ does not appear to think so.  Damages are relatively small and are not the major consideration and the use of CFAs is common and necessary for such actions to remain viable.

There can be no doubt that newspapers and other media organisations will welcome the reform.   As we learn every day of new details of media abuses, the Government plans to introduce measures to protect the media from being sued.

The CFA reforms announced will be a major blow to the ordinary individuals whose reputations are wrongly damaged or whose privacy is breached by the media.

The speed with which the reforms were announced is astonishing.  The consultation closed on 14 February.  Can we really believe that in that short time the Government has digested, truly considered and given due weight to the extensive responses it received before formulating the proposals?  Or was it the case that the consultation process was just going through the motions. Did the Government already have a clear plan to bring in these reforms, despite strong opposition from the Bar Council, the Law Society, Lawyers for Media Standards and leading academics and  professionals who are experts in defamation and privacy law and practice?

What can we expect from the consultation on the draft defamation bill?  This bill came about after years of lobbying and campaigning by powerful media organisations and their lawyers.

Before reforms were announced and the draft bill was published, Lawyers for Media Standards asked the MOJ (under a Freedom of Information Act request) just how many meetings there had been between the MOJ and media organisations over the past two years to discuss libel law reform.  The MOJ responded that it was not in the public interest to give that information.

The public’s voice has not been heard in the “debate” and there has been scant regard to real public interest considerations.

It is comforting that Ken Clarke considers an effective system of civil justice one of the cornerstones of a civilised society.   Quite how the CFA reform proposals will help protect individual liberties and hold the Government to account is hard to see.

Steven Heffer is chair of Lawyers for Media Standards and Head of Media at law firm Collyer Bristow LLP.

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2 responses

1 04 2011
Alastair Mullis

While I agree with pretty much everything Steven writes, I should point out (by way of correction to what I said on the morning Ken Clarke announced the changes in the costs regime) that it would appear that lawyers in defamation and privacy cases can still claim up to a hundred percent uplift if successful (https://inforrm.wordpress.com/2011/03/29/news-conditional-fees-the-government-responds-to-the-consultation/#more-8448).

The difference under the new system is of course that the uplift has to come out of the claimant’s damages (increased by a laughably small 10% – the median award would therefore increase from the current #20,000 to #22,000) and not, as currently, from the defendant. While this may make claimant lawyers slightly more willing to fund a claim on a CFA basis than if they could only recover, as I had thought was the case, a 25% uplift, what sort of incentive does it give a claimant to bring a claim? Several months of hell and at the end of it you recover no damages (because you have to hand them over to your lawyer by way of uplift for the risk s/he has taken) and you get no apology. The claimant’s only vindication will lie in the judgment, which few will read and the defendant will do little or nothing to publicise. Moreover, the claimant if he loses is potentially liable to pay the defendant’s costs. The proposed ‘reform’ not only makes it uneconomical for lawyers to run claims on a CFA basis but no sensible claimant will run the risk of suing where he might recover no damages if he wins or find himself liable to pay the defendant’s costs if he loses. I repeat the point I have made before that the media must be rubbing its collective hands with glee.

1 04 2011
INFORRM

The Government’s decision to remove recoverable ATE premiums and not to extend “one way costs shifting” beyond personal injury claims means that only those with nothing to lose will bring defamation and privacy cases on CFAs – even if they can find lawyers to take them.

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