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Opinion: “Reframing Libel Costs – Another Perspective” – Keith Mathieson

My first response to Razi Mireskandari’s paper on reframing the costs of libel was to reflect that some useful reframing might be achieved if Razi were to reduce his own charging rate from the £600 an hour (plus VAT) he is seeking to recover from two of my newspaper clients he is currently acting against.  That scenario being somewhat unlikely, it may be more useful if I address some of his observations on costs as well as his suggestions for reform.

The problems

Razi is right to say that costs (including those charged by his own firm) have a chilling effect on freedom of expression.  He is, however, wrong to suggest that the ‘massive costs liabilities’ to which publishers are exposed will be avoided if they settle.  The system currently in operation means that costs are likely to be massive even if they settle.  Only by settling at the very earliest stage – not always a feasible option – can a defendant avoid a significant bill from the claimant’s lawyer.  Even an early settlement may result in a publisher having to pay a five-figure sum.  In a typical case, the claimant’s lawyer will have incurred costs of up to £5,000 (sometimes even more) before the publisher even knows he has a problem on his hands.  And if the claimant is planning to take out ATE insurance, the publisher will know that if he does not settle within 42 days, he will be exposed to at least a further £4,000, maybe £5,000, unless he settles within that period – a further incentive to get out on the best terms available.

Razi notes that the level of costs, if not agreed, is assessed by specialist costs judges.  What he fails to mention is that assessment is a last resort.  The recondite nature of costs assessment means that even experienced litigators have to employ specialist costs lawyers to guide them through the process – at yet more expense.  Defendants (known as ‘paying parties’ in the arcane lexicon of the Supreme Court Costs Office) have to fight with one hand behind their backs since they are challenging the time the other side have spent on the case without ever being allowed to see that party’s files (for reasons of legal privilege).  In the meantime, the costs clock keeps ticking; and claimant lawyers can even get success fees (up to 100%) on costs assessments – after the case is finished!

The solutions

Lord Justice Jackson’s proposal that success fees and ATE premiums should cease to be recoverable from defendants probably reflects his view that such ‘additional liabilities’ are, in the context of libel claims, unnecessary and disproportionate.  According to Razi, damages in the vast majority of cases are insufficient to cover success fees and ATE premiums.  While Razi sees this as a reason why the defendant should pay them, I see this as demonstrating the utterly disproportionate nature of these liabilities.  I have just settled a libel case in which the claimant’s lawyers said they were absolutely confident of the strength of their client’s case, having received unequivocal advice from Counsel that their client would win substantial damages.  Once the case settled, I was faced with a demand for a 100% success fee on the basis the case was 50:50 when the CFA was signed three months previously.  The ATE premium for £100,000 of cover in libel cases is now around £72,000 (of which the claimant will of course pay not one penny whatever happens).

In Razi’s opinion, lawyers will only take on cases that are ‘very likely to succeed’ if claimants have to bear their own success fees, meaning some claimants with good cases will lose out.  This is open to serious doubt.  I have seen little or no evidence that experienced practitioners such as Razi and his colleagues ever take on cases other than those that stand a high likelihood of success.  It would be interesting if Simons Muirhead & Burton and other firms representing claimants on CFAs were to disclose publicly the number of CFA cases in which they have failed to recover any costs – so far as I know, this information has never been made publicly available despite having been requested many times over the past few years, including by Lord Justice Jackson. Mark Thomson, at the time a partner of Carter-Ruck, told the House of Commons Culture, Media and Sport Committee on 24 February 2009 that Carter-Ruck was providing anonymised data to “various committees” that were looking at costs.  To the best of my knowledge, this data has yet to see the light of day.

Lord Justice Jackson has proposed that in order to mitigate the effect of claimants having to bear their own success fees, damages in defamation and privacy cases should be raised by 10%.  While Razi has a practical difficulty with this proposal, my problem with it is more one of principle: I simply fail to see what evidence exists to justify success fees in any libel or privacy case and it follows that I see no reason why damages should be increased to allow such fees to be paid.  Most of the media litigation we defend is not pursued with the benefit of CFAs and there is no evidence to suggest that CFA cases would not be pursued if no success fee were available.  Success fees in libel and privacy cases appear to me to be nothing more than a windfall profit for lawyers practising in the field.

Razi objects to Lord Justice Jackson’s proposal for qualified one-way costs shifting on the ground that this would require means testing, which Razi says is too expensive.  I’m not sure that Lord Justice Jackson does envisage means testing, but even if he did, the courts are accustomed to dealing with statements of assets in cases where a party’s ability to pay is in issue.  My objection to one-way costs shifting is that if a claimant is never going to be liable for the defendant’s costs, a defendant has no effective means of incentivising a claimant to settle by means of Part 36 or similar offers.  In many cases, a claimant would have the defendant over a barrel.

Practice Direction 51D of the Civil Procedure Rules comprises a pilot costs management scheme for defamation cases.  Razi’s paper omits to mention this scheme, which applies to cases commenced after 1 October 2009 and is currently scheduled to end on 31 March 2011.  The stated purpose of the scheme is to manage the litigation so that the costs of each party are proportionate to the value of the claim and the reputational issues at stake and so that the parties are on an equal footing.  The essential feature of the scheme is that the parties are required to prepare and get court approval for costs budgets for the case.  If costs are unapproved, they will be recoverable only in exceptional circumstances.  While there are some problems with this scheme (which of course does not apply to pre-action cases which form the majority of libel claims), it is an innovation that should be welcomed by anyone concerned with the costs of defamation litigation and it will be interesting to see whether the scheme has been a success when it concludes in just over four months’ time (though I suspect it may have to be extended further in order to judge its effectiveness).

In the meantime, while I would welcome some of Razi’s proposals – such as the reduction in the maximum success fee to 50% with only 10% being recoverable if the action settles pre-action (an admission, surely, that claimant lawyers on 100% success fees have been taking the mickey for too long) – these suggestions are really just tinkering at the edges of a problem that needs more fundamental reform, including the total abolition of success fees.

Keith Mathieson is a partner at Reynolds Porter Chamberlain, specialising in copyright, defamation, freedom of information and privacy.

1 Comment

  1. Elaine Decoulos

    This is all a bit much coming from ‘my friends’ at RPC. So, what is his view on claimant litigants in person? I am aching to know. He moans about Razi’s costs, but what about his own costs orders against just claimants such as myself?

    I have much to say about his proposals or rather lack of them. For a start, his view on cost shifting says it all. He says and I quote:

    “My objection to one-way costs shifting is that if a claimant is never going to be liable for the defendant’s costs, a defendant has no effective means of incentivising a claimant to settle by means of Part 36 or similar offers. In many cases, a claimant would have the defendant over a barrel.”

    Well, that is what is suppose to happen if the claimant has a good claim. They should have the defendant over a barrel, as he puts it. If they do not have a just claim, an application can be made to strike it out. But, if the claimants has been wronged, they deserve swift justice. That is called a justice system that works. He only wants it to work for his clients.

    Unfortunately for him, Britain claims to be a democracy and is suppose to have a fair and just legal system. That is what most of the rest of the world believes about Britain, despite it not actually being the reality. Costs create the biggest problem and that is just what Lord Justice Jackson is trying to change. He wants to bring Britain retroactively into the 20th and 21st centuries. It is long overdue.

    The solutions Mr. Mathieson presents are not solutions at all. They are justifications for the status quo with a reduction in success fees. However, he says he wants those abolished. But what does he propose to replace them with if he is against costs shifting?

    He complains about Razi’s costs, yet he knows he is on thin ice with regard to his own and his client’s behaviour regarding people like me. Should I spill the beans in my own blog? Publish a book about it in the US? It has certainly crossed my mind.

    My proposals for costs reform in libel:

    1. Costs shifting as proposed by Lord Justice Jackson. This will help all sorts of people with just civil claims in the UK, particularly with the cuts in legal aid. There is no other way forward. The alternative is staying in the dark ages.

    2. Give the claimant an option: You can have a CFA with 50% success fee, less if settled early OR a 30% increase in damages rather than the 10%. That brings in a US style contingency fee, as proposed by Lord Justice Jackson, but with a greater incentive for early settlement with 30%.

    Most of you know I am American and I have to say this system works well for the most part. You very rarely hear Americans complain about solicitors in the way one does in the UK. That’s because they provide a good service and both sides are happy.

    3. Reverse the burden of proof for libel. Initially, I did not believe this was necessary, as I could see the reasoned argument that the person or publisher who made the alleged libel should prove it to be true. However, in practice it does not work. I know from bitter experience. It causes abuse on both sides, not just by wealthy claimants. Wealthy defendants use it to make endless applications for interlocutory hearings. They play the victim and poor me to the judge, moaning about their predicament. I now believe it is one of the prime reasons why libel claims take so long.

    4. Libel judges need to be more proactive in case managment and stop abuses early. As Dominic Crossley said in his paper about the length of libel actions, there is something called CPR 1.0, the Overriding Objective. For some reason, it is rarely taken into consideration by judges. It seems to clash with the current costs structure. With costs shifting, it can be more easily applied.

    5. Misbehaving legal practitioners need to be reprimanded more easily and readily. Judges need to be on the look out for abuse and nip it in the bud early in the litigation, particularly when there is a huge imbalance between the parties. Again, this is what the Overriding Objective is suppose to achieve, but does not in practice. I believe it is because the judges do not seem to have the tools to make it applicable.

    6. This does not seem to have anything to do with costs, but I also think the limitation period for libel should return to 3 years, rather than the current one year. There are occasionally people like me who have been libeled across several publications at once and who, unlike the McCanns, have difficulty obtaining CFAs because of the wealthy parties involved.

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