On 11 April 2017 the Supreme Court unanimously dismissed three appeals brought by media organisations challenging the article 10 ECHR compliance of the recovery of additional liabilities (CFA success fees and ATE insurance premiums) from defendants in ‘publication cases.’ ( UKSC 33).
The Court held that, even assuming that orders to pay additional liabilities infringed the article 10 rights of two of the appellants, denying these sums to the respondents would entail a greater interference with their rights and may undermine the rule of law. This judgment has not definitively settled this vexed issue and uncertainty is likely to remain until the government and parliament intervene.
Success fees are a percentage uplift (up to 100%) on base costs provided for under a conditional fee agreement (“CFA”) and payable to a litigant’s lawyers in the event that s/he is successful. After-the-event insurance premiums are sums paid by a litigant to insure him inter alia against potential costs liability.
The regime providing for the recovery of these additional liabilities from losing parties has a complex history. In summary, the Access to Justice Act 1999 (“the 1999 Act”) introduced provisions permitting the recovery additional liabilities; the CPR and a Costs Practice Direction contained detailed provisions governing the award of such sums by the courts. While Part 2 of the Legal Aid, Punishment and Sentencing of Offenders Act (“LASPO”) 2012 ended the recovery of these sums from opponents, a transitional order preserved the pre-LASPO position in specific categories of litigation, including publication cases (primarily privacy and defamation cases). This was done pending the introduction of a new costs regime for publication cases – this has not occurred.
The appeals were against costs orders made in two libel cases (Miller and Flood) and a privacy case (Frost – the substantive claims were known as Gulati – a case with 23 claimants arising from the MGN phone-hacking litigation) under which publishers were required to pay successful claimants’ additional liabilities. The appellants contended that these orders amounted to a disproportionate interference with their rights under article 10 of the Convention, primarily on the basis that the regime permitting the recovery of additional liabilities has a chilling effect on journalism. The Flood appeal also challenged the judge’s exercise of discretion in the award of base costs.
Delivering the judgment on behalf of all members of the Court, Lord Neuberger addressed three issues in relation to the article 10 argument:
- Whether domestic law should reflect the Strasbourg Court’s decision in MGN v UK (2011) 53 EHRR 5 such as to lay down a general rule that: “where a claim involves restricting the defendant’s freedom of expression, then at least where the defendant is a newspaper or broadcaster, it would … normally infringe the defendant’s article 10 rights to require it to reimburse [a claimant’s additional liabilities].” (The rule in MGN v UK in domestic law) If so:
- Whether the effect of this should be that the costs orders made in the appeals must be amended to exclude the defendant in each case from paying the success fee and the ATE premium for which the claimant is liable (The application of the rule in MGN v UK to the appeals).
- Whether the Court should make a declaration of incompatibility under 4 of the HRA 1998 in relation to the 1999 Act regime, or even in respect of the costs regime which applies following LASPO and the Defamation Act 2013 (Declaration of incompatibility).
(1) The rule in MGN v UK in domestic law
Lord Neuberger made the following points about Strasbourg’s decision in MGN v UK:
- The ECtHR’s decision was “full and careful” and its reasons “largely sound,” and, significantly, it was based largely on Sir Rupert Jackson’s Review of Civil Litigation Costs (in which he criticised the 1999 Act regime)  and . Strasbourg reached its decision notwithstanding the wide margin of appreciation granted to the UK.
- The decision of the ECtHR was based on the 1999 Act regime in principle and was not confined to the facts of that case .
- Its effect is that although “article 10 is [not] automatically infringed in every case,” “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”  and .
The Court doubted whether the arguments advanced by the respondents would be sufficient to justify a domestic court refusing to follow the reasoning and conclusion of MGN v UK . Nevertheless, Lord Neuberger declined to express “a concluded view” on its application in domestic law and left the point open  and . This was on the basis that the government was not a (interested) party to the proceedings and that, by reaching such a finding, the Court would make it difficult for the government to “re-open” this question and/or to challenge the reasoning in MGN v UK in a future case in Strasbourg .
(2a) Application of the rule in MGN v UK: Miller and Flood
Proceeding on the basis that it would normally breach a publisher’s article 10 rights to require it to reimburse any success fee or ATE premium, the starting point was that, in the absence of a good reason to the contrary, the appellant in Miller and (by implication) Flood would be entitled to have the costs orders amended to remove the additional liabilities  and .
The Court held that there was a good reason not to amend the cost orders because to do so would:
- Infringe the rights of Miller and Flood under Article 1 of First Protocol to the Convention (“A1P1”): the right to property. This right extends to situations in which financial obligations are incurred in reliance on a legal act giving rise to a legitimate expectation that the legal act/right will not be retrospectively invalidated (i.e. accrued rights). Considerable weight was placed upon parliament’s decision that, post-LASPO, the 1999 Act would not be dis-applied retroactively (in cases in which additional liabilities are no longer recoverable)  – .
- Undermine the rule of law as:
“It is a fundamental principle of any civilised system of government that citizens are entitled to act on the assumption that the law is as set out in legislation (especially when its lawfulness has been confirmed by the highest court in the land), secure in the further assumption that the law will not be changed retroactively – ie in such a way as to undo retrospectively the law upon which they committed themselves” .
Lord Neuberger accepted that regardless of the decision that the Court reached, one side’s Convention rights would be infringed. He reasoned that allowing the appeal would involve a graver infringement of the rights of Miller and Flood than the infringement of the appellant publishers’ article 10 rights that would result from permitting the cost orders to stand  and . The respondents stood to suffer substantially more injustice – the just and appropriate order was therefore to dismiss the appeal.
(2b) Application of the rule in MGN v UK: Frost
The Court dealt separately with the Frost appeal. Lord Neuberger held “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 can properly be invoked” . MGN’s article 10 rights carried very limited weight, making this an exceptional case which fell outside the rule .
(3) Declaration of incompatibility
None of the appellants sought a declaration of incompatibility in regard to the 1999 Act (let alone LASPO). This was not a situation to which s.4 of the HRA applied because, they argued (and the Court accepted ), there is nothing in the 1999 Act requiring that additional liabilities be recoverable in any particular case. Accordingly, it could not be said that the primary legislation was incapable of being read compatibly or that the 1999 Act prevented secondary legislation from being interpreted in a manner compatible with Convention rights.
Notwithstanding this position, Lord Neuberger said that a conclusive determination that the rule in MGN v UK applied domestically (while not assisting the appellants on the facts of these cases) could have consequences similar to making a declaration of incompatibility . His Lordship was concerned that dis-applying the relevant parts of the CPR and practice directions would undermine the 1999 Act regime more broadly . He said that it would be inappropriate to grant a declaration of incompatibility .
The Times’ additional ground of appeal
The Court dismissed an argument that, in the Flood case, Nicola Davies J had erred when awarding costs to Mr Flood. Amongst the The Times’ contentions rejected by Lord Neuberger was the assertion that Mr Flood should not be regarded as the overall winner because the newspaper succeeded with its Reynolds defence in respect of claims until a given date – Mr Flood had only prevailed in relation to articles remaining online after he had been exonerated in respect to the allegations.
Eagerly awaited by media lawyers, this decision does not provide the clarity on the recoverability of additional liabilities which might have been hoped. Although the Court declined to express “a concluded view” on the application in English law of the rule in MGN v UK, it is apparent that it strongly inclined to the view that requiring defendant media organisations to pay additional liabilities in publication cases would ordinarily violate their Article 10 rights. This position does not sit comfortably with the continuing application (by operation of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 5 and Saving Provision) Order 2013) of the 1999 Act regime, permitting the recovery of additional liabilities, in publication cases.
Policy considerations are a strong undercurrent in this decision. Alive to the ongoing challenge of promoting access to justice for both claimants and defendants in publication claims, the Court was acutely aware of the polarised debate surrounding section 40 of the Crime and Courts Act 2013 (and costs in publication cases more broadly).
While the Court did not strike down the relevant costs provisions, it is might be more difficult for litigants incurring additional liabilities after this judgment to rely on the same A1P1/legitimate expectation reasoning.
The failure of the appeals in Flood and Miller was the result of concerns about the retroactive alteration of accrued rights. It is doubtful that such considerations would carry the same the weight in any future challenges to orders permitting the recovery of additional liabilities. Of relevance in this regard is the Court’s observation that the respondents in Frost had a weaker argument in respect of their A1P1 rights because they entered their CFAs after the decision in MGN v UK . Such reasoning may apply with greater force in future challenges to the recovery of success fees for CFAs and ATE insurance entered into after this judgment
Equally, it may be argued that, because the Supreme Court stopped short of striking down the additional liability provisions, litigants entering into CFAs after this decision continue to have a legitimate expectation they will be recoverable.
Although A1P1 arguments may carry less weight in future, Lord Neuberger indicated that claimants may place greater reliance on Article 6 rights (not relied on by the appellants) when asserting the Convention compliance of the 1999 Act regime  – . Further, while submissions were made on the issue, the Court did not see it necessary to address the relevance of the (non)recoverability of additional liabilities for claimants’ Article 8 rights.
This judgment makes it less likely that claimants entering into new CFAs will be able to recover additional liabilities from losing defendant publishers. For the time being, however, the recoverability of such sums remains possible and will depend on the strength of the competing rights in any given case.
Aidan Wills is a barrister at Matrix specialising in media, public and employment law.