“SOMETHING seems to have gone seriously wrong,” said Lord Justice Brooke.

The Court of Appeal judge was considering the “no win, no fee” regime in the libel case of Adam Musa King v The Sunday Telegraph. So why the fuss? Answer: lawyers claiming £750 an hour and papers being held to ransom because it is cheaper to pay up than to fight, whatever the merits of a complaint.

By the time a case reaches court, a claimant’s costs (including uplift) can easily top £1 million. But why should Lord Justice Brooke care? Answer: the media are the eyes and ears of the public. Nothing should unfairly deter them from responsible investigative journalism. As he said, this is of “especial importance in the war against terrorism, where in a free society fearless reporting has often exposed information which it has been in the public interest to expose”.

With a conditional fee agreement (CFA), the claimant puts away his chequebook when it comes to his own legal costs. If he loses his case, it is likely that the defendant’s solicitors will come after him for their costs but after-the-event (ATE) insurance should cover these. The expensive premiums can be deferred and a successful claimant recovers that cost from the defendant, too. But ATE insurance is not mandatory.

The Sunday Telegraph published two articles shortly after September 11, 2001, linking Mr King to police investigations into those suspected of assisting Osama bin Laden in Britain.

Last week, the paper publicly apologised to Mr King in court and accepted that there was no truth in suggestions that he was a suspected accomplice or a supporter of bin Laden and violent Islamic extremism.

The Telegraph’s concern, supported by the publishers of this newspaper, was that Mr King had neither taken out ATE insurance for the trial nor was he a man of means. However, this was no bar to pursuing his claim with the expensive London lawyers Peter Carter-Ruck. If the claim failed, how could the paper recover its own costs?

The paper originally applied to the court for Mr King’s case to be struck out as having no real prospect of success. It failed. The court would not assess the merits and would not interfere with the claimant pursuing his case. The worry for The Sunday Telegraph, and all newspapers, was that unmeritorious claims could be brought by indigent claimants, thus holding the media to ransom by economics that dictated settlement whatever the merits.

Before the Court of Appeal The Sunday Telegraph raised Carter-Ruck’s approach to the case. It highlighted occasions on which it said that the firm had acted disproportionately and run up unnecessary costs. The court criticised Carter-Ruck’s “vituperative” initial ten-page letter of complaint as “calculated to raise the temperature and to inflate the parties’ legal costs”. Other aspects of Carter-Ruck’s conduct came in for criticism. Mr King’s solicitors knew that the paper would be in “an awkward position”, stuck between defending itself and being unable to recoup its own costs and of meeting Carter-Ruck’s costs plus the likely 100 per cent uplift.

Costs of £60,000 from Carter-Ruck (at £750 an hour) had already been run up by the time the parties had set out their cases. Faced with such sums, the court viewed the CFA regime as a “genuine cause for concern” with “the potential for a chilling effect on investigative journalism and for significant injustice”.

Lord Justice Brooke described it as creating “an obvious unfairness” to those wishing to exercise their freedom of expression. He accepted The Sunday Telegraph’s submissions that the court should control costs as soon as possible, rather than waiting until after the case was over. The court imposed a new “cost-capping regime” where, early on, it could prescribe a total amount of recoverable costs to which the claimant might be entitled. This would include the uplift, thus clarifying the money at stake.

Last year The Sun mistakenly printed a photograph of a Yarmouth man above a story about a convicted paedophile who was living in the same street. As soon as the error was discovered The Sun published an apology and offered damages. Not content with this, the man instructed London solicitors under a CFA. The case was settled. The Sun acknowledged a genuine mistake but challenged the costs. The court agreed with The Sun in arguing that the man could have instructed local solicitors and that there was minimal risk to his London solicitors in acting for him. It reduced the final bill to be paid by The Sun from £91,779 to £32,633. The decision has been appealed.

Carter-Ruck describes the subsequent settlement of the King case as “a very considerable success for Mr King and for the CFA scheme”. Mr King has had his reputation vindicated and The Sunday Telegraph has apologised, paid damages and agreed to meet his costs. Along the way it has exposed a legislative framework with the potential to damage investigative journalism. Mr King’s solicitor was quoted as saying that his firm had nothing to fear from costs-capping. If so, CFA libel solicitors have nothing to fear from a new regime designed to put an end to disproportionate conduct and The Sunday Telegraph has begun to turn the tide.

The author is a solicitor at Farrer & Co, which acted for The Sunday Telegraph and The Sun in these cases.

NO WIN, NO FEE' AGREEMENTS

Conditional Fee Agreements (CFA) were designed to provide access to justice where legal aid was not available.

Defamation lawyers can act for their clients under a CFA. This means that if they lose they will not seek their costs from their client. If they win the lawyers apply an uplift (up to 100 per cent) to their costs, which reflects their client’s chances of success assessed at the outset. These costs are paid by the losing defendant.

Explore Law

• Columnists

• Law Panel

• Law Reports

• Student Law

Times Recommends

• BGC 'set aside £40m to lure Tullett brokers'
• Legal aid review to ensure value
• Fears as 21 magistrates' courts face closure