No-win, no-fee deals hold newspapers to ransom, libel lawyers claim

Defendant libel lawyers were complaining of the ‘ransom factor’ of conditional fees last week, following a recent ruling in the High Court on the “chilling effect” of conditional fees in defamation cases.

Adam Musa King v Telegraph Limited involved a claimant, represented on a conditional fee agreement (CFA), who complained about allegations made in two articles run in The Sunday Telegraph in October and December 2001 entitled ‘Two white suspects in bin Laden probe’ and ‘British Muslim targeted by FBI for terror links’. The Telegraph applied to have the case struck out, arguing that the means of funding amounted to “an abuse of process”.

“There is no doubt that the case has highlighted a genuine cause for concern,” reflected Mr Justice Eady. “There is certainly the potential for a chilling effect on investigative journalism and for significant injustice.” It was the first time the High Court has considered CFAs in a libel case and the case is set to go to the Court of Appeal.

The defendant argued that because of the ways CFAs operate in libel cases there is a huge commercial pressure to settle rather than fight. It was claimed that if the newspaper lost the case it would be faced with not only damages, but invariably a 100 per cent success fee. But even if it won, the defendant would be lumbered with its own costs because claimants would not have taken out after-the-event insurance because it was prohibitively expensive (often in the region of 35 per cent of the costs insured).

“It is scandalous, the courts have become a complete claimant lawyer bonanza,” commented David Hooper, a leading libel lawyer and partner at Reynolds Porter Chamberlain. According to Hooper, a 100 per cent success fee means some claimant lawyers were effectively charging £700 an hour. CFAs were originally welcomed by many lawyers as opening up the libel courts, which have been regarded as the preserve of the very rich because of the absence of legal aid. Hooper notes the democratising impact of ‘no win, no fee’. “But this has gone to the opposite extreme and there is now a casino element to costs and it can be used [to hold defendants] to ransom,” he complained. “There is a real threat to the freedom of speech. The pendulum has swung right the other way.”