Letter of the law

Naomi Campbell's recent victory in a libel case led The Daily Mirror to refer to the judgement as a black day for press freedom. Marcus Alcock assesses the constantly redrawn lines for libel and slander legal action

Libel: The glorious word that brings such pleasure to journalists up and down the land, bringing with it the prospect of allegations, confrontations, lengthy legal meetings and possibly huge payouts. It is not only journalists and their publishers who should be afraid of the word - in most instances libel and slander insurance will have been taken out and the insurance industry is often the ultimate victim of any action.

Things are looking up, however. According to those specialising in this field, damages awards are nowadays much lower than they were in the heady days of the 1980s, when six-figure awards were not uncommon. Alisdair Pepper, a partner at libel law firm Peter, Carter Ruck, says most damages awards are unlikely to exceed a couple of hundred thousand pounds, and the majority are considerably less than this.

"The dynamics have changed," he says. "Many cases now settle quickly, with newspapers offering an apology. When damages get large, they are much more likely to settle but it varies from newspaper to newspaper."

He adds that amendments to the Defamation Act 1996, which allow judges to settle cases below £10,000 and publishers to make early settlements where they admit liability, have not actually had a big impact. "What has had an impact is the offer of amends in the procedure. This means newspapers have an exit route and say they have got it wrong - this has had quite an effect," he says.

Mr Pepper agrees that in practical terms it is not so much the level of damages that is the important consideration in a libel action, but the amount of costs. To this end, his firm has entered into an agreement with Temple Legal Protection to offer a defamation package that works by utilising the principles of a conditional fee agreement. The policy is now offered to all CFA-funded defamation clients at the firm.

Robin Walsh, media manager at Hiscox, one of the few specialist insurers in this field, says that the advent of CFAs in the field of libel actions has been something of a godsend for publishers, as the legal fees for lengthy libel actions can be "astronomical".

"It's fairly good news for UK publishing - it's important as most newspapers have self-insured deductibles so a lost libel action impacts their own balance sheet."

Although Hiscox offers a specialist policy, not all libel and slander polices are offered as a stand-alone cover, with many wrapped up in a wider professional indemnity package. Jo Mountain, at broker SMG, says her firm offers libel and slander cover as part of its civil liabilities package, which is targeted at specific professions, such as psychologists.

The fact that cover is offered as part of a wider deal does not mean it is unimportant for the professions concerned, however, as she stresses it is "a core part of the package".

Ms Mountain acknowledges this is a field in which few underwriters specialise, with Hiscox and Royal & Sun Alliance two of the main players in what is a niche sector. "We use RSA and Axa, but it's not something Axa would underwrite as a stand-alone policy," she comments.

Although the insurance market has remained stable for this area in recent years, legal developments in the field of libel and slander have been hugely significant and have radically changed the landscape. The Reynolds case in 1999 (see box) extended the boundaries of qualified privilege and effectively said there are cases when a public interest defence requires that publication should be privileged.

"Prior to Reynolds, qualified privilege depended on the person making a statement as to who they were and why they were making it," explains Tim Smith, a partner in law firm Berrymans Lace Mawer. "For a long time, the press thought they were in a slightly difficult position, as it was hard to establish a direct interest defence if you didn't know who you were publishing to. Reynolds has led to a more US-style approach, so that if you're a public figure and you stand out in the limelight you have to take some flack."

Yet Mr Smith points out that despite Reynolds looking good on paper, the decision has not been so helpful in practice, and that since this case there has been another as important - Kearns & Co v The Bar Council in 2002. In his view, this has been of much greater practical use.

"Kearns was a bit of going back to basics. In the case, the claimants were complaining about a circular that was sent to heads of chambers and senior clerks by the Bar Council regarding a firm of solicitors that was operating an agency. The Bar Council said the firm wasn't a firm of solicitors and it was, so mistakes were made."

He continues: "Kearns established that the correspondence would attract an old-style qualified privilege test in that both parties had corresponding interests. Where there is a pre-existing relationship, the communication is much more likely to be privileged. Kearns is important because it reaffirmed that old-style qualified privilege is alive and kicking - perhaps with Reynolds people had taken their eye off traditional qualified privilege."

Tried and tested

This is not to say Reynolds is not still an important case - especially for newspapers. As Mr Walsh says, the 10 tests set out in the case continue to be tried and tested in libel actions, "and we're seeing this defence more often".

He adds that in his company's experience, the amendments to the Defamation Act 1996 have not impacted it that much, as many awards are below the £10,000 threshold it allows. He echoes the experience of others in the sector by pointing out that it is not the damages that count: "It's the legal costs that matter. They're usually a lot more than the awards, with eight out of 10 cases weighted in favour of legal costs rather than awards."

However, Mr Walsh adds that the offer of amends has made litigants more cautious in terms of where they set their targets, pointing to the example of actor and singer Jimmy Nail, who sued publisher Harper Collins after it published a biography of him entitled Nailed, which contained a series of defamatory allegations.

In May 2002, the News of the World published an article making allegations about Mr Nail's sex life. The News of the World article was, to a large extent, based on the contents of the book. Mr Nail then issued proceedings concerning both publications and in both actions an offer of amends was made and accepted. Apologies were published and all that remained for Mr Justice Eady to determine was the appropriate compensation to be paid under section 3(5) of the 1996 Act. Applying these principles to the action against Harper Collins, the judge awarded £7500 by way of damages. But, as was widely reported, since there had been an offer of settlement of £37,500, the award had the effect of leaving Mr Nail with a substantial net liability in costs.

According to Mr Smith, the overall claims experience for insurers has improved significantly in recent years. Whereas three years ago there were 400 libel cases, this figure dropped to 280 in 2002 and was only 180 last year. Much of the drop in claims is not so much a result of favourable judgements such as Reynolds or Kearns, as better procedures. "The pre-action protocol for defamation is extremely good and really does address claimants' and defendants' needs," says Mr Smith. "Besides, libel lawyers have always been practical and pragmatic, and not many cases end up in court."

Yet underwriters should not pop the champagne corks just yet. Only this year The Daily Mirror lost a landmark case against supermodel Naomi Campbell regarding the invasion of her privacy (see box). As Mr Walsh says of the verdict: "There was a sharp intake of breath in the publishing world, and it will urge newspapers to err on the side of caution." However, last weekend Sebastian Coe failed to secure an injunction regarding revelations about his private life. The battle continues.

Campbell v Mirror Group Newspapers

2004: The House of Lords upheld Naomi Campbell's appeal against Mirror Group Newspapers by a majority of three to two in her claim for breach of confidence for publication of the story about her addiction treatment.

It was common ground that by its nature all this information was "both private and confidential because it related to an important aspect of Miss Campbell's physical and mental health and the treatment she was receiving for it." According to law firm Herbert Smith, the ruling has not unleashed a rampant privacy right on an unsuspecting public and media. "Fascinating as both the characters and the issues involved in this dispute are, sight should not be lost of the fact that the original damages award reinstated by the House of Lords was for a mere £3500, albeit that the Mirror's costs are estimated at £1m," says partner Joel Smith. "The Daily Mirror has decried the judgement as marking a black day for press freedom in the UK. It will undeniably cause newspaper editors more sleepless nights, as it demonstrates that - where private information is involved - the margins of journalistic manoeuvre are clearly no longer as wide as hitherto thought."

Reynolds v Times Newspapers

1999: If journalists genuinely - but mistakenly - believe a public figure to be dishonest and say so, they could at last have a defence following this landmark judgement. This was the core of the House of Lords' decision in the action by Albert Reynolds, the former Irish Prime Minister, against The Sunday Times. Essentially, the law lords' rules underpinned the extension of the law of qualified privilege. The rules were elaborated in the leading opinion by Lord Nicholls of Birkenhead, who heard the appeal with four other law lords. They set out 10 principles governing the application of the qualified privilege defence, which may be loosely summarised as an obligation to show the journalist's decision to publish was "properly informed" in proportion to the seriousness of their allegation.

Loutchansky v Times Newspapers

2001: The Court of Appeal upheld Mr Justice Gray's decision holding that a defendant who pleads qualified privilege could not rely on the support of an alleged entitlement to privilege, the facts of which it had been unaware at the time of publication. This judgement brought qualified privilege into line with the defence of fair comment and distinguishes it from that of justification.

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