The Campbell case highlighted flaws in the CFA system. Marcus Partington calls on the Law Society to reform rules on costs and success fees

The House of Lords in Campbell v MGN Limited [2005] UKHL 61 - in which the House of Lords was asked to rule on whether the recovery of success fees in article 10 cases from the paying party was incompatible with that article - has missed a golden opportunity to reform a system that gives unfair advantage to claimants (see [2005] Gazette, 27 October, 5; 3 November, 20-21).


There is no doubt that there are inherent problems - certain of them were identified in the leading speech of Lord Hoffmann. Indeed, when was the last time you heard a Law Lord refer to (lawful) civil litigation as having a 'blackmailing effect'?


Although the Lords found that the existing scheme - in which success fees of up to 100% can be recovered from the losing defendant - was compatible with article 10 (freedom of expression) of the European Convention on Human Rights, they did so without any enthusiasm. After saying that such a scheme 'was a choice open to the legislature', Lord Hoffmann, with whom the four other judges agreed, then spent the second half of his speech detailing all the defects of the current system before concluding 'it may be that a legislative solution will be needed to comply with article 10'.


To date, the government has essentially tried to avoid reforming a system that everyone recognises is defective, but the Lords' decision means it now has little choice but to act. In the short term - before the legislature acts - steps need to be taken by the Law Society, which has been passed the baton of regulating conditional fee agreements (CFAs) by the government, to deal with two matters.


Firstly, solicitors should only be allowed to seek recovery of costs from the paying party that they certify to the court are reasonable and proportionate - with sanctions applied to those solicitors whose costs are then slashed (as opposed to simply reduced) by a costs judge. As you can only recover costs that are reasonable and proportionate - see rules 44.4 and 44.5 of the Civil Procedure Rules - there can surely be no objection to such a certificate being provided. In the specific case of Campbell, it is my view that the costs in the House of Lords alone - totalling as they did almost £600,000 including a 95% to 100% success fee - while not yet decided, could never be justified as being either reasonable or proportionate.


Secondly, solicitors should be prevented, with the threat of costs sanctions against them, from seeking extortionate success fees. At the moment, although the court can slash the success fee - which in reality is always paid by the losing defendant and never by the claimant - no sanctions are applied to solicitors who seek grossly excessive success fees. For example, in the case of Gazley v News Group Newspapers Limited [2004] EWHC 2675, the court allowed a success fee of only 20%, when the claimant solicitors, Carter-Ruck, had sought an uplift of 100%.


Surely, it cannot be right that specialist solicitors can get it so wrong in their own area of expertise that they seek a success fee that is five times greater than that awarded by the court - and yet no sanctions are applied to them.


It must be remembered that for every case like Gazley, which is fought on detailed assessment, others, with grossly excessive success fees, will be settled because of the ransom factor inherent in litigation funded by CFAs with success fees.


The overall impression is that certain solicitors have been simply chancing their arms in terms of both base costs and success fees. Indeed, the public could be forgiven for having the perception that certain solicitors have seized on CFAs with success fees as an opportunity to get their own noses in the trough. They could certainly be forgiven for having that perception because that is exactly what has happened.


Marcus Partington is head of legal at Mirror Group Newspapers; at his request, the fee for this article is being donated to the Pakistan Earthquake Appeal