The land of the fee

No-win, no-fee libel cases have become a gravy train for celebrity lawyers - and a gag on the press. Now all that could change, reports Alex Wade

Towards the end of last year, Peter Carter-Ruck, the grand old man of libel, died. Although he started life as a defendant libel lawyer, Carter-Ruck ended up being synonymous with exorbitant legal fees and ruthless tactics. His critics claim that, more than anyone, he was responsible for what Lord Keith, in a 1993 Court of Appeal judgment, described as the "chilling effect" engendered by the fear of a claim for libel.

If the cynics on Fleet Street raised a discreet glass in celebration at Carter-Ruck's demise, last week it seemed that they had cause to crack open the champagne. The legal grapevine was alive with speculation that the death knell had sounded on the chilling effect, and, into the bargain, Carter-Ruck's eponymous firm came in for a blast of cold air from the Court of Appeal. Those on the receiving end of the firm's characteristically confrontational letters would have felt the tingle of schadenfreude.

The court handed down an interim judgment in a libel claim brought by Adam Musa King against the Sunday Telegraph. The claimant had sued over two articles which he claims falsely described him as an accomplice of al-Qa'ida. The Sunday Telegraph appealed against a ruling by Mr Justice Eady last summer, in which the judge rejected the newspaper's attempts to get the case thrown out, and expanded its arguments to ask the Court of Appeal to look at the issue of conditional fee arrangements, or "CFA"s - "no win, no fee" deals.

King's case had been taken on by Peter Carter-Ruck and Partners on a CFA. These were originally introduced for personal injury claims, and four years ago libel lawyers got in on the act when they were extended to defamation claims. CFAs in libel actions were heralded as creating a level playing field in the libel landscape. As Alasdair Pepper, a partner at the firm, says: "Since we introduced CFAs we've been able to help a number of people, from cab drivers and doctors to members of the armed forces and journalists, who otherwise would not have had access to justice."

Access to justice - or, at least, the libel lottery - was for long denied to all but the very wealthy. Peter Carter-Ruck himself often championed the introduction of legal aid to fund libel claims. But in a society of ever-diminishing public funding for legal actions, it seemed that libel would remain the preserve of the rich and famous. But then along came CFAs.

Under a CFA, if a claimant lawyer loses a claim, he does not get paid, but if he wins, he is paid a bonus, known as a "success fee", or "uplift", on his costs. Libel specialist Amber Melville-Brown, a consultant with David Price Solicitors, points out that success fees are tied in to the level of risk inherent in bringing the claim: "Libel is known as a lottery for the client, but is just as much so for the lawyer, who has to bet on his evaluation of the merits." The greater the risk, the bigger the success fee. The practical effect is that a London libel lawyer charging £400 an hour can double his money.

Other claimant firms soon picked up the baton, with CFAs becoming common even where clients had ample means to pay their way. Naomi Campbell's marathon journey to the House of Lords, in a privacy claim, was handled under a CFA; so, too, was a claim for infringement of privacy brought by the Radio 1 DJ Sara Cox. Criticism among defendant media lawyers mounted, with libel CFAs castigated as a "scandal."

A basic problem, according to the defendant lawyers, was insurance. A claimant can take out insurance to cover the payment of a defendant's costs if he loses, known as after-the-event (ATE) cover. The premium for ATE cover is recoverable by a winning claimant, but if that claimant does not take out insurance, and loses, a defendant may have trouble recovering their costs. The whole caboodle - a CFA with a probable success fee of 100 per cent, but without insurance - was described last summer in King's case as "the ransom factor". Media groups said they were forced to settle for fear of being hit with legal costs that were not only disproportionate but potentially irrecoverable.

In last week's ruling, the Court of Appeal gave the media cause for cheer. The court questioned the "appropriateness of arrangements" that could see the defendant pay up to twice the "reasonable and proportionate costs of the claimant if he loses". Lord Justice Brooke concluded that "the obvious unfairness of such a system is bound to have a chilling effect on a newspaper exercising its right to freedom of expression." Moreover, the court lambasted the conduct of the claim: "The claimant's lawyers appear to have advanced their client's claim from time to time in a manner that is wholly incompatible with the philosophy of the civil procedure rules." Criticising the firm's "extravagant" conduct Lord Justice Brooke went on: "I would expect a costs judge to take an axe to certain elements of their charges."

Keith Mathieson, a partner with Reynolds Porter Chamberlain, says that the Court of Appeal's judgment is "as strong as it gets. The judgment is clearly concerned with the way in which libel claims are conducted under CFAs, with or without ATE cover." Mathieson recently submitted a response on behalf of various media groups to the Department of Constitutional Affairs, which has begun a wholesale review of libel CFAs. Though noting that the King judgment can be interpreted "narrowly, so that it is confined to cases where a CFA is in place and there is no ATE insurance," Mathieson believes that the cost-capping regime proposed by Lord Justice Brooke in such cases could well be applied more widely.

Capping costs in advance - the "novel" solution mooted by the Court of Appeal - is greeted with equanimity by Alasdair Pepper. "Our costs recovery rate is very high," he says. "We have nothing to fear from cost-capping." Pepper points out that all the claims brought by the firm since the New Year have had insurance in place. Last year, one of his colleagues recovered £100,00 damages for a woman on income support, who was wrongly accused of attempted murder. Pepper roundly rejects the suggestion that the judgment augurs ill for libel CFAs: "The scheme is alive and well, and without it, a lot of people would never have seen justice."

The reality, from a media perspective, is that the champagne had better be put on ice. As defamation lawyer Caroline Kean, of Wiggin and Co, says: "The case does not change the law as such, and don't forget that the court upheld King's arguments on the merits." The case is, indeed, due for jury trial in a few weeks. But if the judgment does not radically alter things, it does perhaps continue what some observers see as the incremental decline in the use of libel - not to mention planting a nail in the coffin of the practice of the super-aggressive correspondence pioneered by Peter Carter-Ruck. "I look forward to being able to have an exchange of correspondence with my opponent which is temperate in its language and in which the real issues are dealt with succinctly," says Kean. The old man must be turning in his grave.