Examination of Witnesses (Question Numbers
19 MAY 2009
Q920 Mr Evans: So you are not looking,
at the moment, at the possibility of having legal aid for cases
Sir Rupert Jackson: Well, legal
aid has never been available for defamation, and one of the effects
of the reforms introduced by Parliament in 1999 was that legal
aid becomes available for an even narrower area of civil litigation.
All the indications which I have received are that there is no
realistic prospect of legal aid being expanded either to the boundaries
which it occupied up to 1999 or, and more expansively, as Mr Evans
posits, to include defamation as well. It seems to me that I have
got to conduct my present review upon the assumption that legal
aid is not going to be made more widely available and, given the
present state of the economy, that is probably a safe assumption.
Sir Anthony Clarke: If I could
just add a footnote to that in relation to your question, if there
are problems with CFAs, they are the problems or the question
of whether success fees should be recoverable from the defendant;
it is not the CFA itself which is the problem. The problem arises
when one asks whether it is just that a percentage of the success
fee, which may be 100% of the base costs which include profit
costs, should be recoverable from the defendants, and that is
a problem which arises starkly in a case like the Campbell
case which the House of Lords decided on.
Q921 Chairman: But you will appreciate
that this Committee is essentially concentrating on libel and
that is the topic of our inquiry, and I just wanted to clarify
something. You are suggesting that, by looking at the broader
range of all civil litigation, the problems which we have received
evidence about in relation to libel cases are actually not, by
any means, unique to libel cases, but they are problems that are
now occurring right across the range of civil litigation?
Sir Rupert Jackson: Yes.
Q922 Chairman: Therefore, with the
particular concern which we have, which is the potential "chilling"
effect on journalism, do you hear complaints that there are similar
adverse consequences affecting other areas of law?
Sir Rupert Jackson: Yes. I shall
make recommendations in my report later this year which, I hope,
will address these problems both in relation to defamation or
publication proceedings and also in relation to the entirety of
civil litigation. Perhaps I may just say a word about the task
which I am engaged in. I have been asked to review the rules and
principles governing the costs of civil litigation and to make
proposals to promote access to justice at proportionate costs.
My terms of reference require me to look at the procedural rules
where procedures might be changed to prevent such substantial
costs being incurred, to compare our regime with regimes overseas,
to review academic material, meet interest groups and so forth
and to look at the whole of this area from first principles. I
am conducting this inquiry in three stages. The first stage is
to identify the facts, identify what costs are being incurred
in different categories of litigation, identify the positions
of different interest groups, review the literature and so forth
and to look at overseas regimes. I have completed the first stage,
as planned, in the first four months of this year and, Mr Chairman,
I believe that you and your colleagues have received copies of
my preliminary report. This is not a report which comes to conclusions,
it is a report which sets out the evidence, the issues and the
competing arguments. I am not a politician, I am a judge and I
am conducting my inquiry, as best I can, in a judicial manner,
which is, first, to identify the facts and the evidence and then
I embark on a consultation period which begins this month. During
the consultation period, I hear what everyone has to say about
the matters raised in my preliminary report, I am holding public
seminars, meetings with many interest groups and so forth, and
then I shall make the final report with my recommendations in
the autumn. It is very important that I keep an open mind both
during phase one when collecting the evidence and during phase
two when I hear the arguments, so I am not, Mr Chairman, going
to propose any magic solutions today, but I can assure you that
I am very much alive to the issues which concern all areas of
litigation. In my preliminary report, I deal with the costs of
defamation proceedings in chapter 37 and I have an appendix, which
is appendix 17, which sets out the costs of claims resolved by
settlement or judgment in defamation or publication claims against
the media in 2008. This material was very kindly provided to me
by the Media Lawyers' Association and I hope that the members
of this Committee will find the data in appendix 17 to be helpful.
You can see that CFAs were entered into in about 17% of the cases,
you can see set out what the costs of each side were and what
the damages are, and I have put some notes at the top of the schedule
which explain the details of the figures, so I very much hope
that this Committee will find appendix 17 helpful. If it would
help the Committee to look at the problems of defamation costs
in the wider context, you will be able to look at costs in other
areas of litigation in the numerous other appendices to the report
and I have set out the issues, as best I can, in the surrounding
chapters, although chapter 37 is specifically focused on defamation.
Q923 Chairman: I note that, of the
154 cases in appendix 17, three went to trial.
Sir Rupert Jackson: Yes.
Q924 Chairman: And they were all
won by the claimant.
Sir Rupert Jackson: Yes.
Q925 Chairman: One of the things
which has been put to us in relation to CFAs is that, I think
it was, 98% of the cases which were CFAs were won by the claimant
and their solicitors who had the CFAs.
Sir Rupert Jackson: It appears,
from the evidence which I have received, that claimants are successful
in a very high percentage of defamation cases. The evidence which
has been supplied to me does not enable me to give you a precise
percentage; it is something I would have been delighted to receive,
but none of the parties on either side of this particular divide
has furnished me with evidence which enables me to confirm or
contradict the 98%. I would be surprised if it is that high, but
it is certainly a high percentage.
Q926 Janet Anderson: We have heard
some evidence about the level of charges in cases involving CFAs.
Do you think the level of charges in these cases is out of control?
Sir Rupert Jackson: Well, first
of all, the hourly rate charged by solicitors can be challenged
by the losing party on assessment and, if there is a detailed
assessment, that will be dealt with by a costs judge in the Supreme
Court Costs Office. I say that because the vast majority of defamation
claims are tried in London and, therefore, it will be one of the
costs judges here who deals with it. This Committee can have confidence
in the judgment of the costs judges in dealing with hourly rates.
There is a new committee set up, the Advisory Committee on Civil
Costs, chaired by Professor Stephen Nickell, an economist at Oxford,
who is currently looking into the guidelines rates and, no doubt,
the results of his work will be of assistance to the costs judges
who are doing detailed assessments. One firm of claimant solicitors
has provided to me, in confidence, details of the hourly rates
which they charge, and clearly I cannot furnish that information
to the Committee as it is confidential, but the material supplied
to me indicates hourly rates distinctly lower than figures which
have been bandied around in some of the documents.
Sir Anthony Clarke: I agree with
that. I still feel myself that the area of concern is the percentage
success fee aspect of the CFAs; that is my impression really across
the board. One of the things which is somewhat disappointing is
that there is not, so far as I know, any research which anybody
has conducted. The Government, for example, has never conducted
any research, so far as I am aware, into the underlying question
of whether it is necessary for solicitors to charge success fees
and, if so, at what level. The justification of it is said to
be that they need to do that in order, if you like, to pay for
the cases that are lost. Well, one might think there would be
a great deal to be said for some detailed research into the number
of cases that are lost and the whole profile, but, as far as I
know, and I am sure Rupert Jackson will tell me if this is wrong,
no one has ever conducted any public research into that which,
to my mind at least, is a great pity. That is right?
Sir Rupert Jackson: It is correct,
Q927 Janet Anderson: Do you think
that, if success fees and ATE insurance became irrecoverable,
damages would have to increase to compensate for that?
Sir Anthony Clarke: Well, it is
certainly something to be considered.
Sir Rupert Jackson: I am looking
at the question of whether success fees and ATE premiums should
be recoverable at all in any area of civil litigation, and that,
for your reference, is discussed in chapter 47 of my preliminary
report. If success fees and ATE premiums become irrecoverable,
then one has to look at the position of claimants. So far as the
ATE aspect is concerned, one issue which I must consider is whether
there should be a restriction on the claimant's liability for
costs because, if the claimant's liability for costs were substantially
curtailed, the need for ATE insurance in respect of adverse costs
would go, and I have done some calculations which are set out
in the report which show that defendants would be significantly
better off if there were one-way cost-shifting and they never
got costs at all when they won, so that is one issue. So far as
the success fee is concerned, if the success fee is irrecoverable,
then it would have to come out of the damages. Now, the deductions
from damages raise important policy issues which vary from one
part of litigation to another. If you take defamation proceedings,
the claimant's main concern is to have his or her reputation vindicated,
and this Committee may think that it would be no great hardship
to a claimant in defamation proceedings to lose a significant
portion of his or her damages by way of deduction for the success
fee because the claimant would still retain some damages and the
claimant's reputation would have been vindicated. When one comes
to the area of personal injuries, however, deductions from damages
become much more problematic because, very often, a large part
of the damages relates to future care, and I do not think anybody
would want a deduction from that. I hope the Committee will forgive
me if I say that the question of transferring the burden of the
success fee from defendant to claimant is one which raises difficult
issues in different parts of civil litigation, and these are issues
with which I am grappling, but those issues are less worrying
in defamation than in other areas. As to whether or not damages
should go up, it seems to me that damages for defamation ought
not to go up unless personal injury damages go up. The convention
has now been established that defamation damages should be kept
proportionate to personal injury damages because it is offensive
that an individual should receive greater compensation for hurt
to his reputation than for injury to his body. Now, there is a
related question of whether personal injury damages should go
up, as recommended by the Law Commission 10 years ago, but not
yet implemented, and there is a related question to that which
is whether it might be affordable if the costs of personal litigation
can be controlled or brought down. These are issues, all of which
I am looking at, which are a long way from defamation, but, if
I may respectfully say so, they illustrate the importance of looking
at these costs issues holistically and not introducing urgent
reform or immediate reform now when a comprehensive review is
due later this year.
Q928 Philip Davies: On this, I was
interested, Sir Anthony, in your point about the purpose of the
success fee which is, in effect, to cover the costs of the ones
that you lose. Now, I acknowledge that we have not got the exact
figures, but, if the figures are anywhere near to the suggestion
that 98% of these cases are being won by the claimant, would that
indicate that success fees are not justified?
Sir Anthony Clarke: Well, it would
certainly be a factor. I still think that more detailed research
is required, but it would certainly be an indicator to that. The
other thing to bear in mind, however, in relation to the notion
that claimants always win is that one way a defendant can protect
himself, whether a defamation or any other, is to make, what we
call, a Part 36 offer to settle the proceedings so that, if the
claimant does not beat the offer, then, from the moment of the
offer, the claimant will be expected to pay the defendant's costs,
which is quite an important factor, to my mind, in thinking about
Q929 Philip Davies: Because it seems
to me, from listening to what you have said, that success fees
may be justified if lawyers were taking on 50-50 cases under CFAs,
but I get the distinct impression from the evidence that we have
heard throughout this inquiry that, in effect, lawyers are only
taking on as CFAs those cases which they think are absolute racing
certainties and they are, in effect, therefore, getting paid double
for the simplest cases to prosecute, which, to a layman like me,
seems like an absolute racket. Would you not accept that, if they
are being used in the sense that they are only taking on the racing
certainties under CFAs, these exorbitant success fees are just
simply not justifiable in any shape or form?
Sir Anthony Clarke: On that hypothesis,
I can see that there is something to be said for that. The question
is whether the hypothesis is correct.
Sir Rupert Jackson: If I may just
come in on that point, there is a clear body of evidence which
suggests that, overall, success fees may be bringing too great
a benefit to the claimant side, but one has to approach this evidence
with caution because claimant solicitors have made the point to
me that, when a single case is lost, the costs, if that action
has gone all the way to trial, for example, may be enormous and
they may need the success fees on a substantial number of won
cases in order to cover all their outlay on the lost cases. Now,
I do not know, without the detailed research which, sadly, does
not exist, precisely how many won cases one needs in order to
cover one substantial lost case, but I do not think one should
adopt too simplistic an approach to this.
Q930 Philip Davies: Do you not acknowledge
that it is quite easy to envisage that there is a good number
in this firm of lawyers where they take on the easiest cases that
they are certain to win under CFAs and then they get paid double
for the easiest cases, which seems, to me, to be perverse as you
should get paid double for the hardest cases, not the easiest
Sir Rupert Jackson: Of course,
the easiest cases are the ones that are likely to settle early
and, with a staged success fee, it will be nothing like 100%.
The most difficult cases are the ones which go further and which
attract a success fee of 100%, and it must also be borne in mind
that, for every case which claimant solicitors take on on CFAs,
they will have spent time reviewing a significant number of other
cases before deciding that it is not practicable to take them
on on a conditional fee agreement because the merits are not strong
enough. Therefore, the success fees in the won cases not only
have to cover the costs of those relatively few cases which are
lost, but also the costs of reviewing a large number of cases
which are not taken on and giving advice to the litigants in those
other cases. I am not here to make out a case either for claimant
solicitors or for media defendants; the arguments on both sides
have been presented to me and I have summarised them, as best
I can, in the report. I am very much alive to the points which
Mr Davies puts to me and these are matters which I shall be addressing,
but, I am afraid, I am not prepared to come to a final conclusion
of the kind which is being put to me just four and a half months
into a 12-month inquiry; that is not how judges work, although
Philip Davies: You do not have to finish
Q931 Paul Farrelly: We are going
to come on to the issues of costs capping in a moment, but may
I ask a couple of questions about your very helpful table. First
of all, it would be quite right to say, in terms of the current
situation, that there is an economic incentive that might generally
lead you to conclude that "nearly always win, double the
fee" might be the outcome of the current arrangements, that
the economic incentives are there that might lead to that situation?
Sir Rupert Jackson: I am terribly
sorry, but I am not sure I have understood your question. Are
you saying that there is economic incentive to double the fee?
Q932 Paul Farrelly: You have said
that you will not pronounce on the evidence at the moment because
you said that is not what judges do, but economists look at incentives
and the current situation with CFAs, from an incentive point of
view, might reasonably lead you to conclude that the incentive
is there which might lead to a situation where lawyers pick and
choose and it really is almost the case that it is "nearly
always win, double the fee".
Sir Rupert Jackson: Well, first
of all, I agree that there is an economic incentive to pick cases
which, the lawyers think, are going to win. If they proceed on
any other basis, they would go out of business very quickly if
they are dealing with cases on a conditional fee agreement. There
is, of course, that incentive there and that incentive is very
important for defendants because it means that unmeritorious and
frivolous cases are less likely to be pursued. One of the strengths
of the conditional fee agreement regime is that a filter is created
which, generally, weeds out weak and frivolous cases and that,
from an economist's point of view, is, no doubt, very important.
Secondly, you say, the incentive is to double the fee in every
case because of the 100% success fee. There, I would question
what you say because the success fee only goes up to 100%, to
double the fee, in those cases which proceed some distance. In
the strong cases which are resolved quickly, there may be no success
fee or a low-staged success fee.
Q933 Paul Farrelly: The caveat then
to your argument with respect to claimants, clearly, is one of
motivation, this kind of chilling effect. If the claimant's motivation
is not pecuniary, the argument that you have advanced, that the
situation helps to protect the defendant, would be false, would
you not agree?
Sir Rupert Jackson: Well, one
has got to look at two different parties within the claimant camp;
there is the claimant and there are the claimant solicitors. The
claimant's concern, clearly, is to vindicate his reputation and
to recover a sum by way of damages. The concern of the claimant
solicitors is to avoid conducting cases which will be lost and
then they will have to bear the costs themselves.
Q934 Paul Farrelly: Can I come to
your table, which is very, very helpful to the Committee. I just
wondered whether you had any similar data, which will mean a lot
more work, from previous years so that we can establish whether
there is any trend.
Sir Rupert Jackson: No, I am afraid
I do not have data from previous years. Obviously, it would be
helpful if I did have. This report has been prepared in the space
of four months and defamation litigation is actually a very small
part of the total subject and there are a huge number of appendices
dealing with costs in all sorts of areas. I took the view that
the contemporaneous evidence is the most helpful, and my appendices
give a snapshot of costs being incurred at about the present time.
Q935 Paul Farrelly: One of the allegations
that has been really made most strongly by the media is that there
are two particular firms, Carter-Ruck and Schillings, who are
serial offenders, in their terms, to the extent that they now
tout for business, encouraging people to bring claims, particularly
where the internet is concerned, and there is a need for a modification
here. Would it be possible for you to break down just by number
of cases, not by sums or anything that could be held to be commercially
confidential, the cases where particular firms acted for claimants
and the number of cases where firms acted for defendants, just
to break it down by legal firm for us?
Sir Rupert Jackson: I cannot tell
you which solicitors firms acted either for the claimant or for
the defendant in any individual case in this schedule.
Q936 Paul Farrelly: You do not have
Sir Rupert Jackson: I do not have
Q937 Paul Farrelly: The third question
it would be very helpful if you could answer is: could you break
down these cases, not in terms of identity, but by number, where
it is foreign nationals who are the claimants or UK nationals?
That would be helpful to the Committee when it comes to the issue
Sir Rupert Jackson: No, I am afraid
I do not have that data.
Q938 Chairman: Can I just put one
other point to you, which is looking at the economic incentives.
One other claim which was put to us by the Media Lawyers' Association
was that one of the consequences is that the solicitors for the
claimant will deliberately prolong proceedings as much as possible
in order that they run up obviously as large a bill as possible.
Have you ever had any evidence of that or seen that happen?
Sir Rupert Jackson: I have not
seen any evidence which demonstrates to me that claimant solicitors
are deliberately prolonging proceedings in order to inflate costs.
One feature of defamation proceedings is that there is a tendency
for pleadings to become somewhat more complex than in some areas
and for technical points to be taken more often. I am not a libel
specialist, let me say, but my impression is that there are more
interim applications of a technical nature in libel proceedings
than elsewhere in civil litigation, but maybe the Master of the
Rolls would care to add to that.
Sir Anthony Clarke: Well, traditionally,
that was certainly the case and libel proceedings generally had
a very bad reputation for giving rise to all kinds of, what I
call, the very worst evil we have to deal with, namely satellite
litigation where money is spent on satellite issues which are
not really about resolving the merits of the case, and endless
technical points, historically, were made in defamation-type cases.
My impression is, and I am not a libel lawyer either, although
I do sometimes hear appeals in defamation of privacy cases, but
my impression is that, since the advent of the Woolf reforms 10
years or so ago, that evil has significantly improved and it is
certainly something which judges should, and I think probably
do, look out for because it is obviously very, very unsatisfactory
for any party of any litigation deliberately to string it out
in order to make money.
Q939 Chairman: It was an allegation
made directly to us by the Media Lawyers' Association that it
happened on a regular basis. I merely leave it at that.
Sir Anthony Clarke: Well, I do
not know whether the claimant lawyers accepted that and perhaps
they did not.