A Flood of CFAs? Looking ahead to the UKSC’s additional liabilities judgment and its implications for media lawyers – Aidan Wills

From 24 to 26 January 2017, the Supreme Court heard three joined appeals raising the issue as to whether the recovery of conditional fee agreement (“CFA”) success fees and after the event insurance (“ATE”) premiums (collectively known as “additional liabilities”) in publication and privacy cases is incompatible with Article 10 of the Convention. Inforrm published a case preview here.

Judgment was reserved but there has been little discussion about what the consequences of the court’s decision might be for media lawyers. This post considers this issue.

There are at least three possible orders that the Supreme Court could make on this appeal:

1. Appeal dismissed.

2. Appeal allowed with an order declaring the payment of “additional liabilities” to be unlawful.

3. Appeal allowed with an order declaring the current CFA regime unlawful prospectively.

It is worth considering the consequences for media lawyers of each of these orders.

The first option would leave the current position unchanged.  It is, however, possible that the Court will make comments that will spur the government into action to change the current ‘temporary’ arrangements which have been in place since 1 April 2013 under the LASPO (Commencement No.5 and Saving Provision Order 2013 (SI 2013 No.77).  This may involve the introduction of a “qualified  one way costs shifting” regime, recommended by Lord Justice Jackson in his 2009 Review of Civil Litigation Costs, and on which the government consulted in September 2013 (the results have never been made public).

As to the second option, this is the approach that the appellant news organisations have urged the Court to take.  It would mean that no success fees and ATE premiums would be payable under current CFAs, regardless of when they were entered into.

The position in relation to additional liabilities already paid is less clear.  While it seems unlikely that these could be recouped, restitutionary claims for unjust enrichment cannot be ruled out. In theory, such a claim might be mounted on the grounds that additional liabilities were paid on the basis of a mistake of law. The argument would run that paying parties’ understanding of law, at the time they paid additional liabilities, would be falsified by such a decision of the Supreme Court, meaning that they ought to be treated as having made a mistake (see e.g., Kleinwort Benson v Lincoln CC [1998] UKHL 38). Recipients of payments for additional liabilities may, however, have a robust change-of-position defence.

The third option poses the most difficulty as the courts do not usually make “prospective orders” (although they have power to do so; see the discussion in National Westminster Bank plc v Spectrum Plus Limited (in liquidation) [2005] UKHL 41, [4]-[10] [39]-[42] and [71]-[74]). Arguments in favour of this option were addressed to the Supreme Court. This was on the basis that the respondents had a legitimate expectation that additional liabilities would be recoverable: all past reforms of the system have been “prospective,” leaving existing agreements untouched, and that it could reasonably be expected that the same approach would be taken in relation to “publication” CFAs. The most straightforward order for the Court to make under this option would be an order that no additional liabilities would be recoverable under any CFA entered into after the date of the handing down of the judgment.

If the Supreme Court were to adopt the third option, any CFAs entered into between now and the date on which the judgment is handed down would presumably remain valid (subject to parliament amending the law retroactively), permitting the recovery of success fees and ATE premiums in ongoing claims.

The possibility of such an order might be an incentive for anyone contemplating libel and privacy proceedings to enter into their CFAs as soon as possible. There is, however, reason to remain cautious because, were the Court to adopt the second option, media lawyers may be left acting on CFAs which have no prospect of generating success fees.

Aidan Wills is a barrister at Matrix Chambers. He specialises in media and information law, public law and employment law.