There is an old saying that when a woman is forced to choose between two men, she opts for the third, and so it is with the Supreme Court’s decision in Times Newspapers Ltd v Flood, Miller v Associated Newspapers Ltd, and Frost and others v MGN Ltd  UKSC 33.
The Court declined to decide between its decision in Campbell v MGN (No. 2)  UKHL 61 (upholding CFAs in media cases) and MGN v UK 39401/04  ECHR 919 (holding that the recovery of additional liabilities was incompatible with the right to freedom of expression in Article 10) and moved the bastion for CFA clients and their lawyers to Article 1 of the First Protocol of the European Convention (“A1P1”).
In his piece on Wednesday, Keith Mathieson complained that CFAs, and their attendant higher costs, effectively allowed claimants to bulldoze the media into submission (although the facts of Flood, Miller and Frost and others tell a very different story). As any claimant lawyer knows, the media have to bulldozed into publishing an apology for false and defamatory allegations. The previous bulldozer, the threat of a high jury award, has effectively been replaced by CFAs. However, his complaint about lawyers riding a gravy train is to my mind unfounded. Winners pay for the losers and very few claimant lawyers (unlike their defendant counterparts) recover the difference between standard and indemnity basis costs and further, the recovery of standard basis costs has been further eroded due to the new test of proportionality in the CPR. Also, the Costs Office hardly ever awards a 100% success fee in any media case these days.
While the Supreme Court dismissed the three conjoined appeals, it did not rule that the recoverability of conditional fee agreement (CFA) success fees/uplifts and after the event (ATE) insurance premiums (“additional liabilities”) in libel and privacy claims was compatible with the Article 10 Convention rights. This has led the RPC blog to characterise CFAs and ATE premiums as being “out of the running” in freedom of expression cases, and to predict that the continued recoverability of additional liabilities will be short lived. I suggest that this puts more of a spin on a bad result for the media than Emperor Hirohito telling the Japanese people that World War II had “not necessarily” turned out to their advantage.
There are two major caveats to the Supreme Court’s decision, which suggest that it may be given a less radical interpretation.
First, the Supreme Court only proceeded on the “assumption” that the rule in MGN v UK, according to which the recoverability of additional liabilities is incompatible with Article 10, would apply. The Supreme Court therefore declined to rule on the first – and, arguably, the most important – issue in this case. The question as to whether, as matter of principle, the recoverability of additional liabilities was a proportionate interference with the Article 10 right to freedom of expression was not conclusively addressed by the Court.
The Supreme Court’s justification for this was that:
“the party who would be, at least potentially, most detrimentally affected by the decision is not before us. That party is of course the United Kingdom government. If we were to conclude that the Rule is part of domestic law, it would not technically bind the government, but it would make it difficult for the government to re-open the question in this country, and it could make it more difficult for the government to challenge the conclusion and reasoning in MGN v UK in Strasbourg.”
This appears to be a clear sign that the Court does not intend to interfere with the current CFA regime and will not do so without hearing from the Government on the position, or perhaps at all.
However, the Government’s view on this subject is far from settled. As was noted in the judgment itself, it previously failed to persuade the House of Commons to include in the Defamation Act 2013 a provision which reduced the potential exposure of defendants to costs in defamation and privacy actions. The Government has also been advised against any changes to the current regime by the Joint Committee on Human Rights and Sir Brian Leveson’s Inquiry unless a satisfactory replacement to the present system can be found. As Sir Brian observed, simply removing recoverability of success fees and ATE premiums would risk “turning the clock back to the time when, in reality, only the very wealthy could pursue claims [for defamation or breach of privacy]”. Thus, the current status quo has time and again been considered to be “the least bad option to enable access to justice in relation to defamation and privacy claims”.
Since the Defamation Act 2013 failed to address any costs related issues, the only alternative to secure access to justice for impecunious claimants if the current CFA regime were to be declared incompatible with Article 10 would be section 40 of the Crime and Courts Act 2013 (“CCA”). Section 40 – if and when it is introduced – would enable every claimant to benefit from a cost-effective access to justice through the approved press regulators’ arbitration schemes. However, section 40 is hotly contested by the press and its coming into force has been put on hold. In this, I find myself in agreement with the press lobby. The idea that after a newspaper has successfully defended a case against, say, a corrupt politician, who sued them for libel, the newspaper might be ordered to pay the politician’s costs because it has not joined an approved regulator, strikes me as being as daft as a brush.
At present, there is no viable alternative should the recoverability of additional liabilities be declared incompatible with Article 10 rights.
The second caveat to the Supreme Court’s ruling is that it interpreted the effect of the MGN v UK case as being that:
“where a claim involves restricting a defendant’s freedom of expression, it would normally be a breach of its article 10 rights to require it to reimburse the claimant any success fee or ATE premium which he would be liable to pay” (emphasis added).
This wording leaves open a number of interpretations. It suggests that there may be situations in which the recoverability of additional liabilities will not breach Article 10. This would be the case, for instance, in relation to phone hacking activities. The Supreme Court itself noted this point in relation to the claim in Frost v MGN:
“bearing in mind the persistence, pervasiveness and flagrancy of the hacking and blagging, and the lack of any public significance of the information which it would be expected to and did reveal, it appears to me that this is not a case where the Rule [in MGN v UK] can properly be invoked by MGN.”
The chosen wording also leaves open the possibility that the current CFA regime could be given effect in a way that would be compatible with Article 10 rights. This may be the case, for instance, where success fees lower than 95% or 100% would be recoverable. Lower success fees, proportionate to the importance of the case, would arguably not be disproportionate to the legitimate aim sought to be achieved by CFAs (which, as was accepted by the European Court of Human Rights in MGN v UK, is to promote access to justice).
Finally, the chosen wording suggests that there may be situations in which Article 10 will be outweighed by other rights. This situation appears to have been envisaged by the Supreme Court at various points in its judgment. In relation to both Miller v Associated Newspapers and Flood v Times Newspapers the Court considered that the Respondents’ right to property under A1P1 outweighed the Appellants’ right to freedom of expression under Article 10. In relation to the latter right, the Supreme Court considered that it was “of course, another fundamental principle, [but one that was] not so centrally engaged by the issue in this [Mr Miller’s] case”.
The Supreme Court’s decision was based on A1P1 because “no argument based on article 6 or article 8 was raised at all on behalf of Mr Miller (or Mr Flood)”. However, given the purpose of the CFA regime, arguments could be raised to the effect that not to be able to recover the success fee and the ATE premium could infringe a party’s right to fair trial under Article 6. Likewise, in circumstances in which proceedings are brought for the purpose of restoring or vindicating one’s dignity or reputation, such a decision may also infringe a party’s Article 8 rights. Should these rights be held to outweigh the media organisation’s Article 10 rights in the balancing process, the recoverability of additional liabilities would not necessarily be incompatible with Article 10.
In light of the two caveats outlined above, it appears that while the Supreme Court’s judgment left the door open to further challenges to the CFA regime in publication proceedings, there is a great deal of uncertainty regarding the future existence, source, content and timing of any such changes.
For the time being, and until the CFA regime is amended (if at all), the situation therefore appears to remain unchanged despite the Supreme Court’s ruling. Success fees and ATE premiums should still be recoverable in ongoing CFAs (although nothing is certain). They should also be recoverable under any CFAs concluded before the date on which a potential change to the current regime occurs.
It is true, as was noted in a previous post, that Parliament could amend the law retrospectively. However, this appears to be unlikely given that the substantial changes brought to the CFA regime by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 were (in their great majority) not retrospective. Generally speaking, these changes only apply to proceedings begun after 1 April 2013. The Supreme Court itself noted that a retrospective change would undermine the rule of law, and recognised that “citizens are entitled to act on the assumption that the law is as set out in legislation […], secure in the further assumption that the law will not be changed retroactively”.
Thus, despite the Supreme Court’s judgment, the current situation appears to have been preserved. It remains to be seen how it will evolve over the next few months, particularly in light of the debate surrounding section 40 of the CCA and of the publication of Jackson’s review of fixed recoverable costs, which may also impact publication proceedings. There is also the warning from Keith Mathieson that:
“The Supreme Court’s judgment will not be the final word on the matter. Apart from whatever challenges to the Government may flow from the judgment, we can safely predict that challenges to additional liabilities sought under existing and future CFAs have not gone away.”
In the meantime, the next challenge to the recovery of additional liabilities will likely be in the appeal against the judgment in BNM v MGM  EWHC B13 (Costs). In this case, the Senior Costs Judge held that in determining what costs were proportionate, he should include success fees and ATE premiums as well as base costs, thus effectively bringing the present system to an end despite the intention of Parliament to keep it in existence.
Nigel Tait is the Managing Partner of Carter-Ruck