Lords' fee ruling blow to press freedom

Last week’s
landmark House of Lords ruling in MGN’s failed challenge to the rights
of lawyers to demand massive fee uplifts in cases where they have acted
on a no win-no fee basis – known as a conditional fee agreement (CFA) –
and have won is dire news for the media generally. The only ray of hope
is a suggestion that new legislation may be necessary to regulate use
of CFAs.

However, as things stand the ruling must result in some
stories, which probably should be published, never seeing the light of
day, purely from an economic standpoint, because the ruling vastly
increases the potential legal cost burden papers could face in
defending actions.

From the point of view of the national media it may be that papers will have the resources to take the chance.

But for smaller provincial papers, the ruling must be a deterrent.

MGN
had challenged top media lawyer, Schillings, in the House of Lords over
a 100 per cent uplift to the profit element of its fees for fighting on
a CFA basis when it represented supermodel Naomi Campbell in her battle
over Daily Mirror revelations about her visiting Narcotics Anonymous.

After
the case went through the High Court, the Appeal Court and ended up in
the House of Lords, Campbell won a total of £3,500 damages, but MGN was
left facing the prospect of paying her legal bill – £1,086,295 is being
claimed.

Lord Hoffmann said in the House of Lords ruling that MGN
was “mortified” when it found out these potential costs compared with
the level of damages.

Hoffmann and four other law lords went on
to reject claims by MGN that if the costs bill, which does not take
into account the group’s own legal costs, is allowed it will amount to
a breach of the media’s rights to freedom of expression.

When
Schillings won the case in the House of Lords, it argued that it was
entitled to a 100 per cent uplift on its fees as compensation for
taking the risk of losing.

This resulted in a £280,000 success
fee, bringing the figure claimed by Schillings to £594,470 – more than
twice the costs run up by MGN.

MGN claimed it should not be
liable to pay any part of the success fee as it would be so
disproportionate as to infringe its right to freedom of expression
under article 10 of the Convention of Human Rights.

Lord Hoffmann
accepted there was a human right to freedom of expression “with which
the imposition of an excessive cost burden may interfere”.

But he
said costs were awarded only against defendants that were found to have
wrongfully published matter which was defamatory or in breach of a
claimant’s right to confidentiality of personal information.

He said: “So it may be said, and Ms Campbell’s counsel does say, that there is no harm in inhibiting such publications.”

But
he accepted “the effect which the threat of heavy liability may have
upon the conduct of a newspaper in deciding whether to publish
information which ought to be published, but which carries a risk of
legal proceedings against it”.

In addition to the question of
freedom of information breaches, the case also focused on the ability
of Campbell to pay her legal costs without the need for a CFA.

On
this matter Lord Hoffmann said: “There is, in my opinion, nothing in
the relevant legislation which suggests that a solicitor, before
entering into a CFA, must enquire into his client’s means and satisfy
himself that he could not fund the litigation himself.”

The only
slight hope held out by Lord Hoffmann was his final comment that CFAs
were causing problems with defamation litigation and had given rise to
concerns that freedom of expression may be seriously inhibited.

He
said it could be that legislation would need to be introduced to deal
with the problem, though he added that one of the reasons for extending
CFAs to defamation and breach of confidence claims was to enable people
of modest means to protect their reputations and privacy from powerful
publishers who previously did not have to fear litigation even if their
publications were totally unjustified in running certain stories.

Last
week’s decision has drawn various reactions from media lawyers. Chris
Hutchings, partner in M Law, said: “The Lords are indicating their
discomfort at the present system for the application of CFA’s in
defamation and privacy cases. While they consider that the CFA entered
into by Campbell was legitimate, they do make it clear that there are
potential dangers with the current system, which should be dealt with
by legislation.

“They do refer to the earlier hope on the part of
the Government that a negotiated arrangement could be reached between
the media and claimant lawyers to regulate CFAs, commenting that
publishers do not have an equal bargaining position.

They have, effectively, therefore thrown the ball back into the Government’s court.”

Michael
Frisby, a partner in the litigation and dispute resolution department
at Stevens Bolton, said: “CFAs were originally promoted as a way of
providing access to justice to those individuals and businesses that
could otherwise not afford to litigate.

“This judgment,
therefore, gives the green light to the apparently wealthy to use CFAs
that were originally designed to provide access to justice to those
that could not afford to litigate.”

Rod Dadak, a partner and head
of defamation at Lewis Silkin, said: “The Lords made it clear that only
Parliament can change the position, although they did acknowledge the
apparent unfairness of the situation.

The media owners have no remedy to stop rich or poor people from entering into CFAs and then doubling up on costs.”

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