Conditional fee agreements - who really benefits?
08 Apr 2011

Tamsin Allen is sceptical of Ken Clarke’s reforms of defamation fees

Ken Clarke’s proposals to make success fees recoverable from the claimant are wrong. Wrong in principle and in practice. They will decimate access to justice for ordinary people in libel and privacy claims. Libel and privacy may again become “a rich man’s game” at a time when those who are not rich and famous are more likely than ever before to be the focus of false or intrusive stories in the press. The media, assisted by various campaigns for libel reform, has conducted a campaign in which the only truth is that freedom of expression is deeply compromised by libel law and the fear of huge success fees leads to the suppression of the truth by the rich and powerful. But there is another, equally important, truth which is that the rich and powerful press sometimes unjustly attacks individuals who face huge difficulties in obtaining justice. Justice in this context is compensation. If someone has been harmed, compensation is intended to put them, so far as possible, in the position they would have been but for the wrongdoing. It should be paid by the person responsible for the harm. The ability to recover success fees from the wrongdoer makes the system work.

Ken Clarke’s alternative is to take the success fee out of the client’s damages. For a start, damages in libel and privacy cases are often very small as the main purpose of bringing the claim is to stop the invasion of privacy, or restore a reputation. To take a success fee from the claimant would mean that the compensation payment, the amount paid to recognise the hurt and damage caused, would be lost. If lawyers decide not to take anything from their clients, they will only be paid a proportion, typically 75 per cent, of the actual costs, and no success fee. That means that most firms of solicitors will not be able to afford to lose cases. A libel trial requires years of near full-time work. If it is lost, nothing is paid. Libel is a risky business — juries make strange decisions, the law requires clarification by the Court, evidence is unpredictable. The upshot — few if any firms will take on libel or privacy claims on CFAs. Counsel’s position will be even worse — an unsuccessful CFA can mean no personal income at all for a very long period of time. There will be few barristers willing to take that risk without anything to redress the balance.

Ken Clarke’s proposal actually replicates the deeply unsatisfactory situation in the first years of CFAs. A good example of how this operates in practice is Reed and Lillie — a libel case in which two young nursery nurses were accused of sexually abusing children in their care. We took on this case on a CFA — the old (soon to be new) version where success fees were recoverable from the person harmed, not the wrongdoer. Eventually we had to withdraw for unrelated reasons, but it was almost impossible to find replacement solicitors on that sort of a CFA. Finally we did — but the new firm, a small outfit, took enormous risks in representing the claimants over a 6 month trial requiring almost full time work. Outcome was victory for the two — Mr Justice Eady said in his comprehensive judgment that there should be no stain whatever on their reputations, and that they deserved their damages many times over. Indeed they did. Two innocent young people had been destroyed by the media to the point where they were in hiding, in danger from vigilantes and considering suicide. The verdict restored their confidence to the extent that Dawn Reed decided to qualify as a lawyer having experienced the system’s ability to right a serious wrong.

However, the success fee was recoverable from their damages. Although they deserved every penny of their damages, the amount they actually received was a fraction of the amount they had been awarded by the jury, their solicitors having retained a sum for the success fee.

One of the concerns of Jackson and Clarke has been that lawyers’ fees outweigh claimants’ damages. That is inevitable in libel and privacy claims where damages are not the only, or sometimes the main, remedy. This idiotic proposal will ensure that claimants lose a substantial chunk of their damages and lawyers either profit from money which was supposed to compensate the client, or do not take the case at all. Those firms which will take the risk will be few and far between — and may well find it impossible in the longer term. Who will profit from this? The wrongdoer. In my view, the chilling effect of huge libel costs will be swapped for an even more serious chill — a freezing up of the justice system for ordinary libel and privacy claimants.

Recently I was contacted by a family who had been falsely accused of involvement in terrorism. A kind middle-aged couple with a lifetime’s work in professional child care who had made the front pages on the basis of a completely fabricated story. They were accused of allowing children to be put in the line of terrorist fire. They decided not to sue — not because the claim was risky legally, but because I could not give them a cast iron guarantee that they would face absolutely no financial risk. They were a prudent and cautious pair, already traumatised by the events described and the fall out from the media attention. Their careers had been ended by the media and they were scared by the prospect of any financial risk at all. The false and invented allegations were allowed to stand.

Ken Clarke’s proposals would mean that there will be many more in the same position. The consultation document says that claimants should have an involvement in costs — in other words, that there should be a risk to them even if they win. But why should they face a risk? They are the victims in the story and there is only one way in which they can find justice — through the court. Lawyers’ costs are too high, we all know that. But we have mechanisms to control costs which should be properly used. Making the victims pay is not the answer.

As it is, if (or when) these proposals become law, I will have to tell my clients that they will face a difficult and stressful fight and that there is a possibility that they will lose their damages even if they win. Given that the law as it stands does not provide for any prompt remedy to vindicate them (such as a mandated apology) damages are really the only public measure of the wrong, and one of the few controls on press excesses. I doubt any of them would want to take the risks in those circumstances.

My firm will then have to decide whether to take well-deserved and hard-won damages from our own clients, or to take on CFAs where we must win and even then we will not be paid the full costs. Every case we don’t win will mean that we are paid nothing at all for the entire body of work, often about a year’s worth, and there will be no way of making that up elsewhere. And we will have no prospect at all of recovering a success fee in claims where we represent defendants on a CFA as there will be no damages — is that really what was intended?

In these proposals, Ken Clarke and Jackson have lumped together lawyers who they see as cynical greedy ambulance chasers with those who challenge abuses of power and represent victims of serious injustice. That is rather like lumping together everyone employed in the media, from the editor of a serious weekly magazine to a paparazzo camped outside a big brother contestant’s house. It misses the point. The point is that a functioning healthy legal system in which any individual can challenge monolithic interests needs lawyers willing to represent those individuals and an outcome which is fair. Such challenges help rather than hinder the existence of a vital, inquiring free press. For me, the dividing line should not be between claimant or defendant, between lawyer or the media. It should lie where the abuse of power lies. Sometimes power is abused by the media, sometimes by libel claimants. Freezing up the system helps no one except the paparazzo.

Tamsin Allen is head of Media and Information law at Bindmans LLP. Her particular emphases include defamation and privacy, information and data protection, and human rights.

3 responses to “Conditional fee agreements – who really benefits?”

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  2. Aileen M says:

    “That means that most firms of solicitors will not be able to afford to lose cases.”

    Perhaps the changes to the defamation law would mean they no longer agree to take on clients likely to lose, then.

    As a person who is being threatened with a suit from someone who has no-win-no-fee representation but is likely to lose, I see these actions for what they are, an attempt to intimidate and harass myself (another private citizen) who can no more afford the case than the claimant can. But he’s not the one who has to pay, in any sense of the word.