Journalists, editors and news organisations across all sectors have joined a growing movement demanding the Government takes action on conditional fee arrangements in libel actions.
They argue the fees are extortionate, unfair and are having a significant impact on freedom of speech.
Today, Press Gazette launches a campaign calling for reform to a system which is already costing news organisations millions – and could lead to a smaller newspaper, magazine or website going out of business altogether.
The campaign has been launched after a rare show of unanimous
defiance from 22 media organisations, including almost every national newspaper and broadcaster, which has called on the Government to recognise that plans to reform the law relating to CFAs – in response to a Ministry of Justice consultation – are wholly inadequate.
CFAs were brought in under ‘access to justice’reforms and have been a growing problem for media organisations in recent years.
They enable lawyers to take libel cases under no-win, no-fee deals whereby they are compensated for the risk of failure by being able to charge the losing side a 100 per cent uplift on their normal fees.
But while the system was designed to help the less well-off, it is also now being exploited by the rich and famous. It also means the fees charged by lawyers can dwarf the sums paid in compensation to claimants.
In 2005, supermodel Naomi Campbell (pictured) won a long-running privacy battle versus the Daily Mirror. She was paid £3,500 in damages, but her lawyers Schillings – with its 100 per cent fee uplift – left the Daily Mirror with a costs bill of £1,086,295.
Senior partners from firms such as Carter Ruck and Schillings can potentially charge up to £600 an hour in libel cases, it is claimed which, when combined with a 100 per cent success fee, means news organisations could be liable to pay £1,200 an hour plus VAT, or £23 a minute.
Multimillionaire film actress Sharon Stone used no-win, no-fee to sue the Daily Mail for libel in 2006 – and the paper paid her costs.
Carter Ruck gave The Sun a £91,779 bill in 2004 after it falsely identified a man as a paedophile – even though the paper immediately admitted the error and offered to pay damages. The bill was reduced on appeal.
The Ministry of Justice consultation document on CFAs admits that success fees have ‘encouraged the settlement of unmeritorious claims which inhibits the freedom of the press”.
The consultation suggests one solution to the issues raised by CFAs is the widespread adoption of Theobalds Park Plus agreement – based on a deal struck between Carter Ruck and News International.
It sets out staged lawyers’ success fees depending on when the two sides settle the dispute, ranging from nothing to 100 per cent, and gives 14 days for defendants to offer to settle through an offer of amends.
But the other media groups say this time limit is inadequate and they criticise the consultation for not properly addressing After the Event insurance which is supposed to cover a media organisation’s own legal fees if it wins – but which in reality often leaves them out of pocket because it has a £100,000 limit.
The consultation document admits that the fear of media companies paying as much as £1m in damages and fees could see editors ‘avoiding whole areas of investigation which might be thought likely to result in a claim”.
Despite the Theobalds Park Plus agreement, Times Newspapers’ legal manager Alastair Brett said he supports the campaign for Government action on CFAs and agrees that lawyers’ fees have spiralled out of control.
He said: ‘I don’t think there is any serious disagreement between News International and the rest of the media on this. We have entered into an agreement which we felt was better than nothing.
‘The one thing which we are all in agreement over is that the Carter Ruck and Schillings’ base fees of £500 an hour is absolutely exorbitant – it’s outrageous.’
Brett said that to take the entire CFA system out of the statute book would need primary legislation ‘which we’re never going to get”.
Defending the Carter Ruck agreement’s 14-day limit, he said: ‘I feel that we at News International have been pretty practical – in the vast bulk of cases you know early on whether you are going to fight the case.’
Associated Newspapers‘ legal director Harvey Kass said that the Theobalds Park Plus agreement was ‘a step in the right direction”, but only represented the ‘rearranging of the deckchairs on HMS Freedom of Expression”.
Kass wrote in his submission to the Ministry of Justice that in a case two years ago Associated was threatened with legal fees for a libel claimant of £3.5m. Fortunately for Associated, on this occasion it won the case and did not have to pay.
But Kass said: ‘The inherent risk of defending such claims is clear. The world has gone mad when the cost of defending one article would, if unsuccessful, equate to the annual cost of about 100 journalists’ salaries.”
Society of Editors director Bob Satchwell said: ‘Obviously, it’s only right and fair that people who are not well off should have access to justice, but the balance has gone so far the other way that even relatively wealthy publishers – such as national newspaper groups and the BBC – are encouraged to settle libel actions because of the punitive fees regime.
‘This is not justice, it’s just [profit] for lawyers and it has a major effect on serious investigative journalism.
‘How can a system which is supposed to provide access to justice for the relatively less well off be sustainable if wealthy celebrities can use it as well.”
Media lawyer Jaron Lewis, from Reynolds Porter Chamberlain, who is coordinating opposition to CFAs, summed up the problem for news organisations: ‘The biggest problem is the overall cost of defending a libel action.
‘If a media defendant wins, it will rarely get its legal costs repaid by an impecunious claimant.
‘If it loses, it has to pay the claimant’s lawyers double their usual fee, as well as its own legal costs. This means that claimants worthy of censure are succeeding with libel claims simply because the media cannot afford to defend them.”
Additional reporting: Rachael Gallagher and Sarah Lagan