Mirror Group Newspapers’ European court victory in the Naomi Campbell privacy case will end the current ‘no win, no fee’ cost system in such cases, according to a senior partner at Carter-Ruck.
Nigel Tait, whose law firm has represented a number of clients on “no win, no fee” conditional fee agreements, said MGN’s victory would bring about the end of legal firms claiming 100 per cent success fees in such cases.
The European Court of Human Rights ruled earlier this week the Daily Mirror publisher’s right to freedom of expression was violated by a “success fee” it was forced to pay after losing a privacy case brought by Campbell over a story about her drug addiction.
The ruling was against the UK Government, which sanctioned the “success fee” formula in which lawyers in CFA cases stand to gain hefty bonuses against the losing defendants.
MGN said the ruling proved the system of success fees was flawed and would increase pressure on the Government to abolish the recovery of such fees.
Tait, whose firm has in the past successfully used CFA’s against leading newspaper groups, said the end of charging large success fees was in sight but warned that the Government’s current proposals to replace this system were unworkable.
He told the Press Association: “There is no doubt that the decision in MGN v UK heralds the end of the 100 per cent success fee in publication cases in the near future.
“But the facts in Campbell v MGN also demonstrate that the current Government proposals for ensuring access to justice in this field will not work.
“Ms Campbell was awarded damages of £3,500.
“The Government’s current proposals are that damages in this field should be increased by ten per cent – in this case, that would be £350 – to compensate a claimant partly for the additional fees he or she may have to pay his or her lawyers.
“It is then proposed that the lawyers can share 25 per cent of the damages – which would be £962.50 in the above scenario – as compensation for the risk of taking the case on a no-win, no-fee basis.”
MGN complained to the European Court that it had been saddled with around £1m of costs (including success fees) after the Campbell case.
Tait said: “It is also proposed that the recoverable base costs will be substantially reduced by a new test of proportionality – say by £100,000 in the above case.
“It is also proposed that conspicuously wealthy claimants will not be able to obtain After The Event insurance (ATE) to cover their costs if they lose, which would have left Ms Campbell on the line for, say, £350,000 in costs if she were to have lost.
“In a heavily fought and ultimately unsuccessful case brought under a CFA it can be seen that the lawyers could lose hundreds of thousands of pounds without any hope of recouping such losses.
“They will soon start refusing to do CFA work in this field unless there is some recoverable success fee, albeit not at 100 per cent.
“In the above scenario, it would not have been economic for Ms Campbell’s lawyers to take the case on a no-win, no-fee basis, nor for Ms Campbell to bring the action on a privately paying basis.
“Unless the Government does something to protect the interests of the ordinary litigant who cannot afford to pay the difference between actual costs and recovered costs, and who cannot afford to take the risk that they may pay costs if they lose, we will be going straight back to the bad old days when the first question the editor asked his lawyer was not ‘can we prove it?’ but ‘can he afford to sue us?’.”