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MGN LOSES NO WIN – NO FEE TEST CASE
21 October 2005
MGN has failed in its test case House of Lords challenge to the way no win, no fee, agreements should be approached in defamation and breach of confidence cases.
The challenge was mounted in the wake of MGN's defeat in its battle with supermodel, Naomi Campbell, over Daily Mirror revelations about her attending Narcotics Anonymous.
In the end Campbell won a total of £3,500 damages, but MGN has been left facing the prospect of paying her potential legal costs bill of £1,086,295.
Today as the House of Lords rejected MGN's challenge to the principles under which it could be ordered to pay this much, Lord Hoffmann said that MGN was "mortified" when it discovered the potential amount costs – a final figure has not been decided yet – when balanced against the level of damages and the fact that five out of nine judges who dealt with the case had ruled that they should not be held liable.
However, he 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.
MGN's complaint centred on the costs in respect of Campbell's representation in the final House of Lords round of her legal battle. For that she did a deal with top media lawyers, Shillings, under which they would act on a no win – no fee basis.
When they won, however, they claimed they were entitled to a 100 per cent uplift in their costs. This is regarded as compensation for the risk they would have taken had they lost. It was this that MGN challenged.
Lord Hoffmann said : "The basic profit costs claimed by the solicitors and fees claimed by counsel came to £288,468.
"Disbursements were £26,020.65. This basic total was more than twice the costs incurred by MGN but these figures remain. It was the £279,981.35 success fees which brought the figure up to £594,470."
During the hearing in the House of Lords Richard Spearman QC for the Mirror argued before the law lords that the situation over claims for costs in actions which are funded in this was now "totally out of control."
MGN had sought a ruling that they should not be liable to pay any part of the success fee on the ground that, in the circumstances of this case, such a liability would so disproportionate as to infringe their right to freedom of expression under article 10 of the Convention.
Lord Hoffmann in the main judgment today said : "There is 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 who had been found to have wrongfully published matter which is defamatory or in breach of a claimant's right to the confidentiality of personal information.
"So it may be said, and Ms Campbell's counsel does say, that there is no harm in inhibiting such publications," he said, though he accepted what he described as "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 focussed on the ability of Campbell to pay her legal costs without the need for a no win – no fee agreement.
However, on that Lord Hoffmann said : "There is in my opinion nothing in the relevant legislation which suggests that a solicitor, before entering into a CFA, must inquire into his client's means and satisfy himself that he could not fund the litigation himself.
"By what criteria should such an inquiry be conducted? An application for legal aid requires a disclosure of means and sets out elaborate criteria for eligibility. But there is no such machinery for a conditional fee arrangement (CFA).
"And if the solicitor is not expected to make such inquiries in advance, it would be most unfair for the success fee to be afterwards disallowed on the ground that his client had sufficient means."
He added that Campbell denied she was so wealthy that she could view with equanimity the risk of having to pay both her own and MGN's costs.
"She says, probably with justification, that there can be few such individuals," said Lord Hoffmann.
Nevertheless he said he could not leave the case without recognising that CFAs were causing problems with defamation litigation which had given rise to concern that freedom of expression may be seriously inhibited. He said it could be that ultimately new legislation would have to be introduced to deal with the problem.
"One object of 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," he said.
"Henceforward they would be able to vindicate their rights, which are also Convention rights, in the way that the rich and powerful have always been able to do. There may well be more of these cases in future.
"Finding ways of moderating the costs of defamation cases would then be in the best interests of all concerned. But the rich and powerful have also had to pay the price of failure. Finding ways of ensuring that the impecunious claimant can also do this may be more of a challenge. In the end, therefore, it may be that a legislative solution will be needed to comply with article 10."
