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The Law Column: ‘No win No fee’ agreements back on agenda

Legal claims funded by ‘no win no fee’ agreements have burst back onto the scene in the last few days, as the Government’s Bill to reform the system of litigation funding continues its progress through Parliament.

Is this the beginning of a rearguard action by claimants and their lawyers?  Probably.  But it would have been naïve to think that such a lucrative revenue stream would be given up without a fight.

Readers will probably be familiar with the workings of ‘no win no fee’ agreements and the chilling effect they have on freedom of expression – but a quick recap might be useful.

Essentially, lawyers agree with their claimant clients that the legal fees incurred in bringing claims will not be paid by the claimants themselves, but by the (losing) defendants if and when the claims succeed.

As a reward for taking the risk of not getting paid, the lawyers are entitled to claim an uplift of up to 100% on their base hourly rates, the so-called “success fee”.  As a result, publishers frequently face claims for costs based on hourly rates of £700, £800, or even £900 per hour.

And don’t forget that the premium (£67,000) for the insurance policy which Claimants often obtain in case an order for costs is made against them, also has to be paid by the loser.

In his December 2009 report into the funding of libel claims, Lord Justice Jackson, described this particular arrangement as “the most bizarre and expensive system that it is possible to devise”.

Nearly two years on from Jackson, the Government introduced the Legal Aid, Sentencing and Punishment of Offenders Bill.  When it was introduced last year, publishers, journalists, and their lawyers saw some relief in sight from the injustices created by the current regulations.  But the battle is far from over.

First, and somewhat unexpectedly, during a hearing last week of the Parliamentary Joint Committee on Privacy and Injunctions, members of the Committee went beyond their remit and raised this issue again with two senior Trinity Mirror executives – Richard Wallace (editor of the Daily Mirror) and Marcus Partington (Trinity Mirror’s senior in-house lawyer).

It’s not the first time that the Peers and Honourable Members who sit on the Committee have asked about legal fees in reputation cases, so it seems this is an issue that concerns them.

As you would expect, Messrs Wallace and Partington took the opportunity to explain the realities of life to the Committee.  They both spoke of the chilling effect of “exorbitant” legal fees on the regional press, and how these fees inhibit the ability of the regional press to report on contentious local issues and to hold local institutions to account.

Second, at the beginning of this week, the Law Society (which represents solicitors inEngland&Wales) issued its formal response to the proposals contained in the relevant part of the Legal Aid, Sentencing and Punishment of Offenders Bill.

The stance of the Society is unequivocal – they don’t like the proposals, and they want the Government to think again.  The Society’s chief executive, Des Hudson, was particularly outspoken, though  to be fair, Mr. Hudson clearly had personal injury cases in mind when he made his remarks, rather than claims involving freedom of expression.

And third, also on Monday of this week, John (now Lord) Prescott argued strongly in favour of ‘no win no fee’ agreements in the Lords during the Committee stage debate of the Legal Aid, Sentencing and Punishment of Offenders Bill.

Speaking from his own experience (his phone hacking claim against the News of the World was financed by one of these agreements), he claimed that the Bill’s proposals “will see power shift away from the weak and to the strong”, and added “this Bill is nothing about better civil justice, it is about disadvantaging the vulnerable and that’s what we should not accept”.

Most journalists will look askance at these claims, and will want to know what His Lordship has to say about the unfairness, the injustice, and the expense that is inherent in the current regulations.

Which is the point Lord Lester made in response.  He reminded the House that in the past, claimants have “abused their power by running up enormous legal costs, even in cases where there was no real defence, with the result that the defendant, normally a regional or national newspaper, was faced with a situation where the damages might be £20,000 and the legal costs might be £250,000”.

And to emphasise the point, Lord Lester added: “It was that abuse which led the European Court of Human Rights in the Mirror Group case to indicate that that had a serious and unnecessary chilling effect on the freedom of speech of publishers”.

So, the battle lines are being drawn.  This is an issue which is likely to be hotly debated in the coming months.  Will the Government stand firm and follow through on its promise to reform the way reputation cases are funded?

For the future of regional publishing and the protection of freedom of expression more generally, we must hope so.

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  • February 2, 2012 at 1:40 pm

    The utter greed of lawyers is behind all this. Everyone knows they only take on a ‘no win, no fee’ case if there is a 99.99 per cent chance of success, so there is actually virtually no risk involved to them and they can double up their already outrageous fees

    What would be fairer is if they were also made to take on cases with say a 75 per cent chance of success, and then got rewarded with an uplift of about 25 per cent

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