Fighting back on conditional fees

When can a lawyer legally charge £800 an hour? When he is a partner in a specialist claimant defamation practice, acting on a conditional fee agreement CCFA.

And how does that lawyer justify charging so much? The explanations given for mark-ups of up to 100 per cent on such a solicitor’s basic charging rate (“the success fee”) are found in his “risk assessment” served on the paying party when it comes to the time to pay.

Factors relied upon include: “a high degree of uncertainty and unpredictability is involved in all libel cases, particularly in view of the fact that trial is generally by judge and jury rather than by judge alone” and “the court may make an error of law that we may be unable to appeal on your behalf or an unexpected finding of fact that prevents you from winning”.

The mystique of libel actions includes the common perception that they are difficult and therefore justify a higher assessment of risk. Cases that make it to a jury trial will carry significant risk. But does that apply to every libel case? No.

The same risk assessment may include something to the effect of: “The defendant is likely to make an offer of amends. The offer of amends regime provides an exit route for journalists who make a mistake and are prepared to admit as much and to make amends.”

However, not all cases are “uncertain and unpredictable”. Sometimes a newspaper makes an innocent and obvious mistake. Sometimes the paper will have already apologised. In other cases it will be bound to apologise and to offer to make amends as soon as it receives notice of the complaint. The only real issue in such cases is how much the damages will be.

Such was the position in the recent case of Gazley v News Group Newspapers, a straightforward case in which The Sun had made the serious but innocent mistake of publishing the wrong photo of a man accused of being a paedophile.

Given the obviousness of the mistake, the day after Gazley’s solicitors’ letter was received, the newspaper made an unqualified offer of amends. It had already, on receipt of the initial oral complaint from the claimant, immediately published a prominent apology. It also agreed to publish apologies by way of advertisements in the regional newspapers circulating where the claimant lived.

So should the claimant’s solicitors in such a case be able to recover a success fee of 100 per cent? The costs judge decided they should not and restricted the success fee to 20 per cent.

A win was defined in the claimant’s solicitors’ CFA as the recovery of damages in excess of £10,000, but The Sun had already admitted liability, published an apology and offered damages of £10,000 and costs when the CFA was entered into.

Perhaps unsurprisingly the costs judge considered that the risk of a judge awarding less than £10,000 under the offer of amends procedure was slight.

Worse still for the London solicitors concerned, the costs judge ordered that they could not recover their usual charging rates but only the rates of a Norwich firm because their expertise had not been required in this case. This reduced the partners’ hourly rate from £400 to £200 an hour. Overall, the solicitors’ costs of almost £92,000 were reduced to just over a third of that figure, this including the 20 per cent success fee.

Furthermore, News Group, which had made an earlier offer on costs that exceeded what the claimant recovered, was awarded its costs of the assessment in the sum of £10,000.

This might be seen as a rare victory for the media on CFAs, but it puts paid to the suggestion that all libel cases attract a success fee at 100 per cent. The court will form a view on a case-by- case basis.

Nicholas Alway is a partner in the media department of Farrer & Co

Nicholas Alway

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