This week, the Ministry of Justice (MoJ) has published its own costs consultation. The latter has the potential to devastate the profitability of media practices operating conditional fee arrangements (CFA).
Justice Secretary Jack Straw has proposed that success fees in defamation cases should be slashed dramatically from 100 per cent to ten per cent.
This will be welcomed by the media. Newspaper editors have long campaigned for a reformation of the CFA regime, which they argue strangles freedom of speech.
In his review, Jackson LJ highlights comments made by Bob Satchwell of the Society of Editors. “To those of us on the receiving end of what was supposed to be a safety net to compensate lawyers for no win, no fee cases that their clients lost, the system has become a gravy train financed by the media to reward lawyers who in reality face little risk,” Satchwell states flatly.
It is difficult to deny that media lawyers have profited from the CFA regime. Take Schillings as an example. At the 2007-08 year end the firm’s six partners produced revenues of more than £1m each with an annual turnover of £6.3m. This rose marginally at the 2008-09 year end to £6.9m.
In 2004, Schillings sought costs of £594,470 for a two-day House of Lords hearing in which senior partner Keith Schilling represented supermodel Naomi Campbell in her claim against the Daily Mirror. The costs were met by the newspaper because Schillings operated on a CFA basis with 100 per cent success fee.
Hollywood actress Sharon Stone, footballer Ashley Cole, boxing promoter Frank Warren and Cherie Booth have all used CFAs against newspapers and as defendants the newspapers have paid the legal fees. Some cases have settled out of court purely because the newspaper is unwilling to risk being landed with claimant costs.
Schilling was wrong when he said of the ruling in the Naomi Campbell case: “The decision is not a blow for freedom of information, and the press will welcome responsible laws on privacy.”
Instead the press was outraged that the judiciary, most notably Mr Justice Eady, appeared to be introducing privacy laws through the back door.
The media formed a lobbying group made up of 22 organisations and set about persuading the Government to put a cap on exponential costs in libel cases (4 February 2008).
The Culture, Media and Sport Select Committee spent most of 2009 examining press standards, libel and privacy. It is due to publish a report in the coming weeks and it is likely to highlight criticisms levelled at claimant libel lawyers.
The MoJ, meanwhile, has moved ahead and issued its four-week consultation on success fee capping. It signals the end of the line for the claimant lawyer gravy train.
As one lawyer says: “It appears that the Government wants to implement this measure through secondary legislation in a matter of months.”
Director of editorial legal services at The Guardian Gill Phillips welcomed the news, saying: “This is the light at the end of what has been a long dark tunnel. We’ve been saying for too long that costs in publication proceedings were manifestly unreasonable and disproportionate and resulted in a serious interference with freedom of expression.
“Coming after the encouraging recommendations of the Jackson report, I welcome the MoJ consultation paper as the beginning of what I hope will be a full-scale process of reform in publication proceedings.”
The proposals put forward by Jackson LJ could take years to be implemented to allow lawyers time to adjust their business models.
By contrast, the enforced cap on success fees in defamation proceedings could become law before the general election.