Legal costs reforms will virtually kill off CFAs

The government has just published its legal aid, sentencing, and punishment of offenders bill, including reforms to civil litigation costs – i.e. Conditional Fee Agreements or ‘No Win No Fee’.

As it stands this aspect of the bill is supposed to achieve two big things: reduce the cost of government civil litigation costs; and reduce the cost of the legal process generally.

The scale of government cost savings is yet to be seen. And the success of the second may, in many cases, only be achieved by cutting off lots of people’s access to justice. Many people have already written about how the reforms will limit access to legal help in areas like personal injury; this post will focus on media law and specifically defamation.

Conditional Fee Agreements (CFAs) were introduced to enable people who could not otherwise afford legal help to pay for it. Given that defamation cases are not covered by legal aid, this was not just for the so-called MINELAS (‘Middle Income Not Eligible for Legal Aid Support’) but for anyone who could not pay for a lawyer.

Conditional Fee Agreements have been abused. Since they were introduced they have been used by corporations and by wealthy individuals, and they have been used to line some lawyers’ pockets. This is partly because there is no eligibility test for getting a CFA.

But, at the same time, CFAs have given people the opportunity to take legal action to clear their name or, sometimes, to defend themselves when otherwise they would have had little or no redress.

Parameswaran Subramanyam, a Tamil protestor in London ostracised from his community after the Daily Mail and The Sun reported that he had secretly broken his hunger strike, was entirely vindicated after he took legal action with help from a CFA. Given his circumstances, it is difficult to see how Subramanyam would have been able to take on the Mail and The Sun without a CFA. Robert Murat, who was grossly defamed after the disappearance of Madeleine McCann and won significant damages from almost a dozen news outlets, benefitted from a CFA.

Christopher Jefferies, who was ‘monstered’ by the press after he was arrested for questioning by the police in the Joanna Yeates murder trial, is fighting for legal redress with the help of a CFA. Under the new government bill he would have to put all his assets at risk if he wanted to take legal action.

Others recent cases include: Sylvia Henry, a social worker wrongly accused of being negligent in the Baby P case; Reza Pankhurst, wrongly accused of being involved in a criminal conspiracy to train a suicide bomber; Arunas Raulynaitis, a bus driver wrongly accused of being a Muslim fanatic who stopped his bus and ordered his passengers off so he could pray. There are many more.

Reform is needed to prevent abuse of CFAs. This could be done by introducing eligibility criteria for CFAs, for example by excluding corporations from access.

This is not what the government has done. The government has, instead, introduced reforms that will make CFAs virtually inaccessible. As a result, all but the wealthiest claimants and defendants will be excluded from taking legal action.

It has done this chiefly by abolishing the recoverability of success fees and ATE insurance from the losing party. (ATE – After The Event – insurance insures someone against some of the costs of legal action.)

What does this mean in practice?

But what does this actually mean in practice? Let’s say a national newspaper has just published something that you believe is entirely untrue and causes you to lose your job and your chances of getting a job in the near future. You contact a lawyer and ask what you can do about it.

“Well, you could sue” says the lawyer, “but if you pay for it yourself it will be expensive whether you win or lose”

“Oh, how expensive?” you ask

“Hmmm… maybe £200-300,000” the lawyer replies. “But it could be over a million if it’s an extended trial, or it could be as little as £10-20,000 if it’s an open and shut case and you settle quickly”.

“Yikes!” you say. “I haven’t got £20,000 handy, let alone £200,000. Can’t I get a no win no fee?”

“Well,” says the lawyer, “you could but you’ll have to take out ATE insurance and you won’t get that back”.

“OK,” you say, “and how much is ATE insurance going to cost me?”

“That depends” the lawyer replies, “on how far the case goes and how much cover you need. You could, for example, take out a premium of 50-60% of whatever your opponent’s costs are at any given time. In the case of a newspaper these costs could add up to about a quarter of a million pounds. Or you could take out a fixed premium that increases in stages but rises to over 50% by the time we go to trial.”

“Hang on” you say, “wouldn’t that mean I could be liable for tens of thousands of pounds in ATE payments?”.

“You could”, the lawyer says, “And even if you won, given that damages in defamation cases are usually about £10-20,000 then that won’t nearly cover your costs.”

“Plus”, the helpful lawyer continues, “I’m not that keen on CFAs because if I lose I get no fee, and if I win I only get my fee plus one to two thousand in success fees. If I take the case I could find myself working for free for the next 6 months”.

So, the lawyer doesn’t want to take the case on a CFA and, even if s/he does, then you’ll have to stump up a minimum of a few thousand pounds but potentially £100,000 plus.

How many people – not including the wealthy and powerful – do you think will take legal action given these options? Not many.

Of course the rich and powerful will still take action and newspapers will still publish inaccurate and defamatory stories. Trouble is, the rich and powerful will be able to do something about it. Everyone else won’t, without putting all their worldly goods on the line.