In the Courts: Lawyers warn tobacco action could wreck plans for no win, no fee system

The "no win, no fee system" - a key plank of the Government's legal reforms - could be wrecked by a case at the Court of Appeal. Michael Streeter, Legal Affairs Correspondent, looks at the implications of an action against tobacco companies.

Lawyers for the multi-party legal action against British tobacco manufacturers said conditional fee agreementscould be "destroyed" if they are held personally liable for the companies' legal costs.

Estimates put the costs of the negligence action by 43 lung cancer sufferers at up to pounds 20m. Their lawyers have made it clear that if they are at risk of paying the costs they will withdraw from the case.

Yesterday Dan Brennan QC, for the plaintiffs, said it could have wide implications for conditional fee agreements (CFAs). He said a ruling making lawyers liable for the costs would "destroy the efficacy of such claims" by dissuading lawyers from taking such risks.

Such a ruling would be against a public policy, he said.

The Government has put CFAs at the core of its plan to reform to the civil justice system by aiming to remove legal aid for all monied civil claims and replacing it with no win, no fee agreements.

A Court of Appeal judgement that lawyers could be liable for defence costs if the plaintiffs has no funds or insurance to pay them could cause ministers to rethink their proposals.

The plaintiffs are seeking to overturn a refusal by Mr Justice Popplewell last year to make a declaration that the tobacco firms involved, Imperial Tobacco and Gallagher, cannot seek to claim costs from lawyers if they successfully defend the case. Mr Brennan said the only reason for doing this would be the normal one of claiming that lawyers in the case had acted improperly or negligently.

The plaintiffs were seeking a declaration now - even though the cigarette manufacturers have made no formal application - to prevent lawyers being under the "intolerable" burden of not knowing whether they are liable.

For Gallagher, who with Imperial have 80 per cent of the UK cigarette market, Justin Fenwick QC told the Court of Appeal any such declaration would be "premature" and would fetter the discretion of the trial judge. They were not attempting to run a coach and horses through the system of no win, no fee agreement.

The cancer sufferers are also trying to overturn a "gagging order" imposed by Mr Justice Popplewell stopping lawyers from discussing the case in public.

However Mr Jonathan Playford QC, for Imperial, accused the plaintiffs' lawyer, Martin Day of Leigh Day, of conducting "litigation by media" and media warfare against his clients.

He said Mr Day's comments in the media on the case had raised the temperature of the already complex action and had affected his client's commercial status. "Their share prices go up and down like yo-yos," he said.

The media had a bias towards tobacco firms and were unwilling to listen to their arguments and the publicity could be damaging to the course of justice. He hinted they may be forced to take legal action against Mr Day - possibly a libel suit - if the court overturned the gagging order.

The Court of Appeal, including the Master of the Rolls Lord Woolf, reserved judgement.