The Ministry of Justice Consultation on Civil Litigation Funding closed yesterday, 14 February 2011. The Ministry is consulting on the proposals in the Jackson Report and, in particular, the suggestion that CFA success fees and ATE premiums should no longer be recoverable from the unsuccessful party. It is provisionally in favour of this proposal. If this is implemented it will have a substantial impact on claims for defamation and misuse of private information. There is a useful House of Commons Library “Standard Note” explaining the background to the proposals.
A number of consultation responses and other contributions to the debate have been made publicly available. Lord Justice Jackson has published his own response – in general he welcomes the government’s proposals. The specialist media and technology insurer Hiscox agreed, criticising some claimant law firms for “manipulating and inflating costs in defamation and privacy cases”.
The “Access to Justice Action Group” takes a radically different view, arguing in favour of a reformed version of the current system. It is supported by the Legal Expenses Insurance Group. An independent panel of law academics is reported as having described the proposals as ‘misleading and ‘inconsistent with a fundamental principle of civil justice’. This report, “On a slippery slope – a response to the Jackson Report“, rejects the contention that excessive costs in the present system can be attributed largely to the use of CFAs. The report makes two recommendations:
- That the government reject the core Jackson proposal to take the lawyer’s success fee out of the injured person’s damages; and
- That the government should appoint a commission of inquiry to gather and assess evidence about the costs of civil litigation. Insurers would provide “unimpeded access” to anonymised case files.
The Bar Council has published an 86 page response to the Consultation. It believes that cost reduction is welcome but must be targeted to safeguard access to justice. The Bar Council expresses the view that that the proposals “are likely to have a significant impact in reducing access to justice“. Its response to the basic question as to whether CFA success fees should continue to be recoverable from the losing party is that, with the exception of larger, commercial cases “CFA success fees should be recoverable in all other cases, and in particular personal injury cases, defamation and public law cases“. It also expresses the view that ATE premiums should continue to be recoverable.
The Bar Council’s views on the position in defamation cases will be of interest to our readers. It suggests that the following considerations are relevant :
(a) The majority of claims in defamation and privacy and probably the vast majority of litigation in this area concerns claims brought by private individuals against hugely wealthy newspapers.
(b) Defamation litigation is also the only really effective means of regulation of a press that can often commit serious wrongs against individuals, and as such is in the public interest.
(c) The use of CFAs is not confined to Claimants, however. CFAs have been an important means by which “bullying” defamation claims by wealthy individuals/corporations have been defended.
(d) Human rights considerations are involved. In addition to the Article 6 rights of claimants and defendants, other human rights are in issue: a claimant’s article 8 right to reputation/privacy and a defendant’s article 10 right to freedom of speech.
(e) Actions in defamation and privacy have no impact upon the taxpayer. Taxpayer funded bodies are rarely defendants.
(f) Damages in defamation cases are generally not high, and often not the most important remedy: injunctions and apologies are of great importance. General or aggravated damages are very low ‐ on average about £20,000. Damages in privacy claims are even lower.
(g) Defamation claims are highly fact sensitive; as in some cases are privacy claims, particularly where the public interest defence is involved. It is therefore difficult to gauge the merits of claims with certainty in advance.
In relation to the recent decision in MGN v United Kingdom, the Bar Council response says this
“the importance of that case ought not to be overstated. It very much arose from a unique set of facts (§218): a wealthy claimant (not “in the category of persons considered excluded from access to justice for financial reasons”); lawyers who did not do other CFA work “for impecunious claimants with access to justice problems” and therefore would not use their success fee to fund such work (as was the intention behind the CFA regime); miniscule damages of £3,500; and huge and unrepresentative base costs, by reference to which the success fee was calculated. It also needs to be borne in mind that the ECtHR heard no submissions about the good work achieved by the current CFA system in enabling people of modest means to uphold their rights” .
The Bar Council’s conclusions in relation to defamation cases are as follows:
“The proposals made in the consultation paper would, in our view, simply not work in defamation cases.
(a) If success fees are not recoverable, then they would have to be paid out of damages. Even where damages are in issue – and they are often not in such cases – then the quantum of damages is simply too low in order to make such a system workable. This would of course be even more the case if ATE premia also had to be paid from damages. A 10% increase in general damages is not in any sense a sufficient increase to make such a system workable.
(b) Defendants who needed access to justice would not stand a chance. There would be no incentive for lawyers to act for them. At most such lawyers would be able to recover taxed down base costs in return for assuming substantial risk. The same success fee regime ought to operate for claimants and defendants. 
The response goes on to suggest a system of staged success fees with a low recoverable success fee of 10% ‐ 25% applying to proceedings which were concluded up to 35 days after the disclosure of documents. The success fee would then rise to 50% if the case was one of the very few which continued after the 35 day period.
We have not yet seen the consultation responses of the Media Lawyer’s Association and other groups which have been campaigning on the issue of CFAs in publication cases. We will post these when they become available.