The ink is barely dry on the Jackson report and moves are already afoot to cut lawyers’ fees.
Jack Straw, the Justice Secretary, announced this week that he is taking the axe to the huge success fees charged in no-win, no-fee libel cases, slashing them from 100 to 10 per cent.
In a swift response to the landmark report published last week on the costs in civil litigation, the Justice Secretary says that he wants to cap the mark-up charged by lawyers in libel cases. “Freedom of expression and investigative journalism are fundamental protections to the democracy of this country.”
Libel is very much in the Justice Secretary’s sights. He has already announced a review of libel laws in England and Wales, including the law on libel tourism. And when combined with what he will see as rip-off fees, it is an irresistible target.
“I am, however, aware of the growing concern about the high legal costs in defamation and some other publication cases, brought under conditional fee agreements [no-win, no-fee],” he says.
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“Lawyers need to recover their costs and be rewarded for their efforts and the risks they have undertaken when providing people with access to justice in no-win, no-fee cases.
“But evidence suggests that the regular doubling of fees that currently takes place is simply not justified and the balance of costs between claimant and defendant needs to be reconsidered.”
His proposals have now gone out for a four-week consultation. The news is welcome to newspapers and their lawyers who have long argued that the doubling of legal fees in libel cases has a chilling effect on investigative journalism.
Alastair Brett, legal manager of The Times, says the proposal is “extraordinarly good news for freedom of speech”.
The fees in defamation cases can be as high as £550 an hour, he says. “With claimant solicitors able to claim more than £1,000 per hour if they have entered into a no-win, no-fee agreement with their client - even though that client may be extremely wealthy - is a total nonsense.
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“With the media traditionally being the eyes and ears of the public to which it reports, the current situation could not continue. As Lord Justice Jackson has said, success fees have ‘massively increased the costs burden upon defendants’.
“Claimants can now litigate at no cost and at no personal risk. If successful, they retain the entirety of the damages awarded or agreed. If unsuccessful, they walk away with no liability.”
But as with the rest of Jackson’s proposals, where defendant lawyers are celebrating, claimant lawyers are dismayed and warn that the impact will be on people who want to bring claims because lawyers will be deterred from doing the work.
Secondly, Straw has done what Lord Justice Jackson urged ministers should not; namely, cherry pick. In his report, Jackson described the present system of costs as “the most bizarre and expensive system that it is possible to devise”. He proposed far-reaching reforms but it was a carefully constructed package, to be taken as one.
One proposal was that the mark-up, or success fee in no-win, no-fee litigation, should be capped. At present lawyers can charge double their normal rate. This mark-up is paid by the losing side, which also has to stump up the insurance premium taken out by the claimant to protect against paying costs if they lose.
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The justification for success fees is that they cover the costs of cases that lawyers take on and then lose. But the Ministry of Justice said this week - and Jackson agrees - that “the success rate of defamation actions does not justify such a generous success fee��.
No commitment has been forthcoming from Straw, however, on other Jackson proposals - such as that the success fees should be paid by claimaints from the damages they win, and not by defendants.
The Law Society is clearly unimpressed. A spokesperson says that after Lord Justice Jackson’s careful review, the Straw announcement on libel fees has come as a “surprise”; and warns that it will damage access to justice.
“The maximum success fee was set at 100 per cent so that clients whose chances of success were around 50:50 could find lawyers to represent them. Reducing maximum success fees to 10 per cent would be tantamount to abolishing conditional fees and would thus leave people who have been libelled with no effective access to justice.
“This is a matter that needs to be discussed very carefully . . . we should not be diverted by a few high profile cases into damaging changes to the system as a whole.”
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Clearly the battle over legal costs is set for a fresh round. Claimant lawyers must worry that Straw’s proposals will not just be confined to libel, but sound a death knell for all no-win, no-fee work. If so, they can blame the libel lawyers for killing the golden goose.