If the costs don't fit, cap them
Alberta Matadeen v Associated Newspapers Ltd


A libel claimant represented on a conditional fee agreement (CFA) without after-the-event (ATE) insurance has had a costs-capping order made against her to limit the costs that she may recover from the defendant in the event that she is successful (see [2005] Gazette, 24 March, 5).


This is the first time that the costs-capping procedure is to be used. It is available under the widely drafted section 51 of the Supreme Courts Act 1981, the enabling power of CPR 3.2(m) and the inherent jurisdiction of the court. Its use in such cases was forecast for the first time in Adam Musa King and Telegraph Group Ltd [2004] EWCA (Civ) 613, in the Court of Appeal (Civil Division), on appeal from the Queens Bench Division.


There has been considerable huffing and puffing in media defendant circles since the implementation of CFAs in the libel arena. Many argue that no-win-no-fee agreements put them in a no-win situation. They pay out huge costs and a success fee if they lose, and have no chance of recovering their own costs if they win. CFAs are an unnecessary fetter on free speech, some would argue, and no more than a 'get rich quick scheme' for greedy lawyers to obtain unearned income from massive success fees.


Those on the other side argue that CFAs are no such thing - to the contrary, they enable impecunious claimants to go some way towards levelling the playing field when battling against wealthy media giants. The success fee is fully justified to compensate the lawyers for time spent on meritorious cases that they ultimately do not win. And CFAs are just what Parliament intended them to be - a valuable tool to provide access to justice.


There is little chance that the two sides will reach agreement. But measures were taken by the Court of Appeal in Musa King last year to address the concerns of those defending cases brought by CFA claimants without ATE insurance (see [2004] Gazette, 20 May, 5). The Court of Appeal was asked to take 'a dynamic case management approach' to cap costs in advance rather than leaving them to assessment after the event. Agreeing that neither 'robust orders' made by a judge at trial, nor 'drastic surgery by a costs judge' after the event would necessarily avoid the evil the court perceived (as 'by then the defendants had already incurred the irrecoverable cost of having to respond'), the Court of Appeal held that 'it would be very much better', as Lord Justice Brooke put it, 'for the court to exercise control over costs in advance'. This is just what has been ordered in Matadeen.


The claimant brought libel proceedings through London-based law firm Charles Russell over what she says are false and defamatory allegations - published in the Evening Standard and on its Web site 'This is London' in October and November 2002 - of ill-treatment of patients at nursing homes she owned. The defendant, represented by City law firm Taylor Wessing, pleaded justification and fair comment.


By the time the allocation questionnaire was completed in May 2004, the claimant's costs to trial were estimated at £558,000, with the defendants' costs at £198,000. The maximum damages available to the claimant are £200,000. In June 2004, after an exchange of particulars, defence and reply, the defendant notified the claimant that if the action proceeded, it would seek a costs cap.


Mediation was tried, but failed, and with the proceedings back on foot by January 2005, the defendant made an application to cap the claimant's costs.


In Master Eyre's summary of the parties' position, the defendant argued that the disproportion between the likely costs and the damages 'forces the defendants to consider an immediate compromise amounting to surrender, rather than seeking to defend the action'. This, the defendant said, would be 'an unacceptable threat to [its] freedom of expression' while a costs cap for the claimant 'would impose a handicap ... no greater than that imposed on any ordinary, publicly-funded claimant'. The defendant confirmed that it would submit to any costs cap imposed on the claimant.


The claimant's solicitors argued that there was no evidence of extravagance in its conduct of the action, which was 'indispensable if orders of this kind are not to be made in every action involving a conditional fee agreement'. Vindication was in this case 'of the first importance' and, accordingly, the courts should 'be less likely to take a restrictive view of a claimant's need to incur costs'.


Master Eyre found that while evidence of extravagance was not necessary to make such an order, in this case 'the claimant's approach to costs is extravagant'. The defence, which the claimant argued threatened to make the case 'unwieldy', was only made in answer to the claimant's own particulars and, accordingly, 'the responsibility for their far-reaching character is the claimant's'. And while he accepted the client's need for vindication might induce a more liberal approach to any assessment of costs, he did not think that should amount to 'an approach so liberal as to ratify costs on this giant scale'.


Accordingly, he granted the application to cap the claimant's costs - and by consent the defendant's costs - and referred the matter to senior costs judge Peter Hurst to set that cap. There will now be a directions hearing to consider just what should be disclosed in order for that cap to be made. This case can be distinguished from Armstrong v Sunday Times ([2004] EWCH 2928 (QB)) late last year, in which the claimant successfully defended an application for a costs cap as the claimant was not represented under a CFA.


Harvey Kass, legal director of Associated Newspapers Ltd, which publishes the Evening Standard, is damning of the CFA scheme. 'The conditional fee regime is out of control, probably unlawful and needs to be modified urgently' he says. 'Lawyers are using the inadequate rules to attempt to pressurise publishers from defending claims which are sometimes unjust. When the costs of defending one article can equate to the costs of employing 100 journalists for a year, the consequences of freedom of expression are extreme'.


But Monica Bhogal at Charles Russell for the claimant raised a concern that may be shared by many claimant lawyers advising clients under CFAs, telling the Gazette that costs caps would undermine the whole CFA scheme. 'The system is set up as an alternative funding route, with the aim that, overall, cases that are won will compensate for those that are lost. It is supposed to give claimant lawyers the reassurance that when they win they are getting something back for having done the work on a CFA basis.'


If libel is not to return to being only a sport for the rich and famous, lawyers will have to continue to take risks for impecunious clients, offering them CFAs. And if those clients are unable to get ATE insurance, it is likely following this case that this same battle will be played out over and over again.


While in King, Lord Justice Brooke said costs caps were not intended to 'thwart the wish of Parliament that litigants should be able to vindicate their reputations under a CFA', he said they were necessary to balance the claimant's rights against the defendants article 10 rights under the Human Rights Act.


Certainly a balance has to be achieved. The courts should not ensure that the free speech of wealthy media organisations is not chilled if they can only do so by fixing claimants with such a cold stare that they are prevented from protecting their own rights to reputation.


No doubt both sides in this case will hope that the costs judge will warm to their arguments. While a slightly less chill wind meanders through the modern costs courts in Fetter Lane than blows down the ancient corridors of the court in the Strand, judges dealing with any such cases in future will want to ensure that justice is served by keeping the temperature just right.





By Amber Melville-Brown, David Price Solicitors & Advocates, London