Libel lawyers are known for liking a scrap, and their predilection is about to be satisfied. The big guns of the defamation world are gearing up for a debate about the way they bring their claims -one that promises to be more than a little heated.
If the days of the huge jury awards are over, libel actions continue to provide handsome payouts to lawyers, thanks to "no win, no fee" deals. Libel lawyers got in on the act of "no win, no fee" work when the deals were extended to defamation three years ago. The deals - known as conditional fee arrangements, or CFAs - hadalready been in existence for personal injury claims since 1995, when the Government decided to axe legal aid for accident claims.
Now, the Department of Constitutional Affairs is re-visiting the whole system. In June it initiated a wholesale review of CFA arrangements, to see, among other things, how the system could be simplified. The consultation period ended last weekand many defendant libel lawyers have seized their chance to castigate the way in which libel litigation has burgeoned under the system.
Libel lawyers on the receiving end of claims fear that the "no win, no fee" schemes are providing a springboard for chancey actions - and pushing up legal fees into the bargain. David Hooper, a libel lawyer with Reynolds Porter Chamberlain, has criticised the "scandal" of libel CFAs, in which, he says, "dubious claims [are] encouraged by lawyers." Under a CFA, if a claimant lawyer loses a claim, he does not get paid, but if he wins, he is paid a bonus, known as a "success fee." The Law Society has a ready reckoner to calculate the amount of success fee. Soif the prospects of success are 100%, the success fee is 0%; if they are estimated at around 80%, it is 23%; and if there is a 50% chance of winning, the success fee is 100%. With many London libel lawyers charging £400 an hour, a 100% success fee can easily lead to a charging rate of not far shy of £1,000 an hour.
A claimant can take out insurance to cover the payment of a defendant's costs if he loses, known as after-the-event (ATE) cover. The premium for ATE cover is recoverable by a winning claimant, but if that claimant does not take out insurance, and loses, a defendant may have trouble recovering its costs. The whole caboodle - a CFA with a probable success fee of 100%, but without insurance - was described in recent litigation involving The Telegraph Group as "the ransom factor." As Caroline Kean, a libel lawyer with Wiggin and Co, says: "CFAs in libel cases are potentially subject to abuse. Libel law is still heavily biased in favour of claimants, who have a low burden of proof compared to other cases. In these circumstances, huge success fees are very hard to justify."
Not surprisingly, lawyers who act for claimants see things differently. Nigel Tait, a partner with Peter Carter-Ruck and Partners - whose firm is widely credited with pioneering the use of CFAs in libel actions - says: "The problem is more apparent than real, not least because libel claims have decreased hugely in the past five years."
Tait cites some statistics. In 1997, there were 452 writs for libel, but last year the figure was only 128. And he adds: "The libel sets [of Chambers] have perhaps two trials a year now, a massive drop from the heyday of libel in the early to mid 1990s."
But doesn't this bear out the defendant lawyers' views, that CFAs are forcing settlement of claims, regardless of their merits, because of "the ransom factor"? "It is easy to complain about libel CFAs," says Tait, "but remember that they were introduced under Lord Woolf's Access to Justice reforms. A CFA enables someone without means to bring a claim and levels the playing field so that libel is no longer a rich man's game."
The firm now handles some 20-25 per cent of claims on a CFA basis. Tait refers to a recent case, when Lynn Walker was accused of attempted murder by the Newcastle Chronicle. She was on income support, had no means to fund a libel action, and so sued the newspaper herself as a litigant-in-person. Tait says that Walker came to him five weeks before the trial, whereupon he took her case as a CFA. He obtained £100,000 in damages for her. "The newspaper had got it wrong," says Tait. "If it hadn't been for the availability of a CFA, Lynn Walker would never have obtained justice."
Tait accepts that a victory such as this has a huge upside for lawyers such as him. In another case, his firm recovered over £250,000 by way of a success fee, when Tait acted on behalf of a surgeon, Joe Rahamim, who won £175,000 damages and an apology from three defendants, Channel 4, ITN and journalist Duncan Campbell. Tait insists, though, that in the absence of the CFA regime, Rahamim would never have been able to take action, and is adamant that there is a place for CFAs in libel.
It has not been win-win all the way. A case brought by the firm for the accountant John Stuart Condliffe against Private Eye was dropped in November 2001. The satirical magazine was awarded £100,000 and the legal fees were estimated at £1.75m - a bill the firm had to pick up. Tait says that the possibility of losing a case is another factor justifying the success fee, and other firms, including David Price, Schillings, Bindman & Partners and Russell Jones & Walker, have developed a CFA practice.
So are CFAs a potential abuse of power, or a force for good? The Department of Constitutional Affairs is unlikely to row back on a reform which it hailed as widening access to justice. But if there is not to be a chilling effect on newspapers, then perhaps officials should look at a cap on the legal fees chargeable in libel claims taken ona "no win, no fee" basis. At present the 100 per cent "success fee" means a double win for the lawyers. Newspapers, though,may face the choice of settling a less-than-worthy claim - or risk an inflated legal bill.