England and Wales High Court (Senior Courts Costs Office) Decisions

IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE

		Royal Courts of Justice, Strand, London, WC2A 2LL
		11/01/2016

Master Gordon-Saker :

1. This judgment is concerned only with the submission made by the Defendant and articulated in paragraphs 2 and 3 of Mr Millar's skeleton argument:

MGN contends that a costs order in favour of the receiving party ("C") in these proceedings cannot include provision requiring it to pay either a success fee provided for under the conditional fee agreements ("CFAs") with C's lawyers or costs in respect of the premium of an insurance policy against the risk of incurring a liability in these proceedings, being "after the event insurance" ("ATE").

If it were to make any such costs order, the court would be acting incompatibly with MGN's right to freedom of expression as a publisher under Article 10 of the European Convention on Human Rights ("ECHR"). The court would therefore be acting unlawfully within the meaning of s.6 of the Human Rights Act 1998 ("the HRA" …).

The background

2. The Claimant is a primary school teacher and has no public or media profile. Between 2008 and 2011 she had a relationship with a successful premiership footballer; which relationship was known only to a small circle of friends and family.
3. In March 2011 the Claimant lost her mobile phone, which contained private and personal information.
4. The Defendant publishes a number of newspapers, including the Sunday People. An assistant editor of the Sunday People was approached by a source who was in contact with another person who claimed to have the Claimant's phone and who revealed the relationship between the Claimant and the footballer.
5. On 23^rd March 2011 Ms Tracey Kandolah, a freelance journalist who undertook work for the Defendant, was sent by the Assistant Editor to the Claimant's home to enquire about the relationship between the Claimant and the footballer.
6. This led to a complaint to the Defendant by the Claimant's father and, subsequently on 3^rd May 2011, the return of the phone to the Claimant. The Claimant contended that all data had been deleted from the phone before it was returned.
7. In March 2013 the Claimant instructed Atkins Thomson, a firm of solicitors then based in Covent Garden, in relation to a proposed claim against the Defendant. Atkins Thomson had acted for other claimants with similar claims. On 18^th April 2013 the Claimant entered into a conditional fee agreement with Atkins Thomson which provided for a success fee of 100 per cent of their normal fees but a discounted success fee if the claim concluded before trial. On 7^th May 2013 Atkins Thomson entered into a conditional fee agreement with counsel, Mr David Sherborne, which provided for a success fee of 100 per cent but a discounted success fee if the claim concluded before exchange of witness statements. On 25^th July 2013 the Claimant purchased an after the event insurance policy from Temple Legal Protection Limited. That provided indemnity of up to £165,000 against liability for the Defendant's costs and the Claimant's own disbursements. On 30^th July 2013 Atkins Thomson entered into a conditional fee agreement with another counsel, Mr William Bennett, which similarly provided for a success fee of 100 per cent but a discounted success fee if the claim concluded before exchange of witness statements.
8. The Claimant commenced proceedings against the Defendant on 31^st July 2013, having obtained an anonymity order the day before. She claimed an injunction to restrain the Defendant from using or publishing confidential information taken from her phone, damages and an order for delivery up of any confidential information.
9. The Defendant made substantial admissions in the Defence and the claim was concluded by a consent order dated 14^th July 2014, under the terms of which the Defendant undertook not to use or disclose the confidential information, agreed to pay damages of £20,000 and agreed to pay the Claimant's costs of the action.
10. The costs claimed are in the sum of £241,817. That includes a success fee in respect of the solicitors' costs of 60 per cent, success fees in respect of the costs of both counsel of 75 per cent and an after the event insurance premium of £58,000 plus insurance premium tax of £3,480.
11. At the outset of the detailed assessment leading counsel made submissions on general point 5 in the Defendant's points of dispute, the Article 10 point. I decided to reserve judgment on that point so that the remainder of the detailed assessment could be completed within the 2 days for which it was listed. Subject to my decision on the Article 10 point, I allowed the success fees of the solicitors and both counsel at 33 per cent and the after the event insurance premium in the sum claimed.
12. General point 5 was expressed in the points of dispute in these terms (emphasis added):

The Defendant's primary contention, which it will seek to advance to the Supreme Court after its determination at first instance, is that the recovery of additional liabilities is unlawful, and would place the United Kingdom in breach of its obligations under the ECHR and (with respect) the Court in breach of its own obligations under the Human Rights Act 1988 to uphold the Convention.

The huge additional expense caused by additional liabilities unlawfully interferes with the Defendant's right to free expression under article 10 of the ECHR and its right of effective access to the Court under article 6 of the ECHR.

The ECtHR has already ruled that regime is incompatible with the Convention: MGN v United Kingdom [2011] ECHR 66. The United Kingdom was and remains in breach of its treaty obligations by failing to repeal the recovery of additional liabilities in respect of this and similar cases. The Court, as a public body, would be in breach of its own Convention obligations to allow the recovery of additional liabilities in this case.

The Court should therefore (i) declare any relevant primary legislation to be incompatible with the Convention; (ii) nullify all relevant secondary legislation; and (iii) in any event refuse to award any additional liabilities as a matter of discretion.

The Defendant acknowledges that in non-Article 10 cases the lower courts have considered themselves bound by Campbell v MGN [2004] 2 AC 457 wherein challenges to the additional liabilities regime have been rejected. The Supreme Court is however bound to revisit that decision in the light of MGN v UK, and with respect the lower courts, with their own obligation to have regard to decisions of the ECtHR, are bound to assist the Defendant in using all available procedural devices to advance the issue for reconsideration by the Supreme Court at the earliest possible juncture.

13. Clearly I do not have the jurisdiction either to make a declaration of incompatibility or to nullify any secondary legislation. However I do have jurisdiction to refuse to allow the additional liabilities claimed.

The ECHR

14. Insofar as is relevant, Article 6 provides:

(1) In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. …

15. Article 10 provides:

(1) Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers. This Article shall not prevent States from requiring the licensing of broadcasting, television or cinema enterprises.

(2) The exercise of these freedoms, since it carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society, in the interests of national security, territorial integrity or public safety, for the prevention of disorder or crime, for the protection of health or morals, for the protection of the reputation or rights of others, for preventing the disclosure of information received in confidence, or for maintaining the authority and impartiality of the judiciary.

HRA

16. The relevant parts of ss 2 to 6 of the HRA are:

2. Interpretation of Convention rights

(1) A court or tribunal determining a question which has arisen in connection with a Convention right must take into account any –

(a) judgment, decision, declaration or advisory opinion of the European Court of Human Rights, …

3. Interpretation of legislation

(1) So far as it is possible to do so, primary legislation and subordinate legislation must be read and given effect in a way which is compatible with the Convention rights. …

6. Acts of public authorities

(1) It is unlawful for a public authority to act in a way which is incompatible with a Convention right.

(2) Subsection (1) does not apply to an act if –

(a) as the result of one or more provisions of primary legislation, the authority could not have acted differently; or

(b) in the case of one or more provisions of, or made under, primary legislation which cannot be read or given effect in a way which is compatible with the Convention rights, the authority was acting so as to give effect to or enforce those provisions.

(3) In this section "public authority" includes –

(a) a court or tribunal …

The Courts and Legal Services Act 1990

17. s.58A(6), which was inserted by s.27 of the Access to Justice Act 1999, provided that:

A costs order made in any proceedings may, subject in the case of court proceedings to rules of court, include provision requiring the payment of any fees payable under a conditional fee agreement which provides for a success fee.

18. A new s.58A(6), to the opposite effect, was substituted by s.44(4) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, but that amendment does not prevent a costs order including provision in relation to a success fee payable by a person under a conditional fee agreement entered into before the day on which that subsection comes into force if (a) the agreement was entered into specifically for the purposes of the provision of advocacy or litigation services in connection with the matter that is the subject of the proceedings in which the costs order is made, or (b) advocacy or litigation services were provided under the agreement in connection with that matter before the commencement day. While s.44(4) came into force on 1^st April 2013 in respect of most proceedings, it has not yet been brought into force for publication and privacy proceedings^[1].
19. It is not in issue that the present case falls within the definition of publication and privacy proceedings^[2]. Accordingly, subject to the Article 10 point, a costs order in the present case may make provision for the payment of a success fee.

The Access to Justice Act 1999

20. s.29 provided:

Where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in these proceedings, the costs payable to him may, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy.

21. s.29 was revoked by s.46(2) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012. s.46(1) of the 2012 Act inserted s.58C of the Courts and Legal Services Act 1990:

Recovery of insurance premiums by way of costs

(1) A costs order made in favour of a party to proceedings who has taken out a costs insurance policy may not include provision requiring the payment of an amount in respect of all or part of the premium of the policy, unless such provision is permitted by regulations under subsection (2).

22. The regulations which have been made relate only to clinical negligence cases. However the amendments made by s.46 of the 2012 Act do not apply in relation to a costs order made in favour of a party to proceedings who took out a costs insurance policy in relation to the proceedings before the day on which this section comes into force. While s.46 came into force on 1^st April 2013 in respect of most proceedings, it has not yet been brought into force for publication and privacy proceedings^[3].
23. Accordingly, subject to the Article 10 point, the costs payable to the Claimant may include costs in respect of the premium of an after the event insurance policy.

The Civil Procedure Rules 1998

24. The rules of court anticipated by ss.27 and 29 of the Access to Justice Act 1999 were set out in Parts 43 and 44 of the Civil Procedure Rules 1998, as they stood before 1^st April 2013, and in sections 9, 10, 11, 14, 19 and 20 of the Costs Practice Direction (which supplemented Parts 43 to 48). Those provisions continue to apply to funding arrangements in relation to publication and privacy proceedings by virtue of the transitional provisions contained in CPR 48.1.

Campbell v MGN Limited (No 2)

25. In respect of the recovery of additional liabilities, the regime which applies to this case is therefore the same as that considered by the House of Lords in Campbell v MGN (No 2) [2005] 1 WLR 3394. At first instance the claimant had been awarded damages of £3,500 for breach of confidentiality, the defendant having published photographs and details relating to treatment that the claimant was receiving for addiction. That decision was reversed by the Court of Appeal but restored on petition to the House of Lords. The claimant's solicitors served bills which in total were in excess of £1m, over half of which related to the appeal to the House of Lords. The claimant had retained solicitors under a conventional retainer for trial and in the Court of Appeal but then entered into a conditional fee agreement. The success fees claimed were £279,981. MGN sought a ruling that the success fees should be disallowed as its right to freedom of expression had been infringed.
26. As is apparent from the speech of Lord Hoffmann (at paragraph 23) "MGN [did] not really deny that in principle it is open to the legislature to choose to fund access to justice in this way". Their lordships concluded that the recoverability of success fees under s.58A(6) was not inconsistent with MGN's rights under Article 10. Per Lord Hoffmann:

26.   Ms Campbell denies that she is so wealthy as to be able to view with equanimity the risk of having to pay both her own and MGN's costs of an appeal to the House of Lords. She says, probably with justification, that there can be few such individuals. But I think that it would not matter even if she demonstrably had ample means to pay. It is true that when one has to balance rights such as freedom of expression against other rights such as privacy or access to a court, there has to be, as Lord Steyn said in In re S (FC)(A Child) (Identification: Restrictions on Publication) [2005] 1 AC 593, 603, para 17, "an intense focus on the comparative importance of the specific rights being claimed in the individual case". So MGN says that in this case, Ms Campbell did not need a CFA and the balance therefore comes down in favour of freedom of expression. But concentration on the individual case does not exclude recognising the desirability, in appropriate cases, of having a general rule in order to enable the scheme to work in a practical and effective way. …

27.   Thus, notwithstanding the need to examine the balance on the facts of the individual case, I think that the impracticality of requiring a means test and the small number of individuals who could be said to have sufficient resources to provide them with access to legal services entitled Parliament to lay down a general rule that CFAs are open to everyone.

28.   It follows that in my opinion the success fee as such cannot be disallowed simply on the ground that MGN's liability would be inconsistent with its rights under article 10. The scheme under which such liability is imposed was a choice open to the legislature.

MGN v United Kingdom

27. The judicial taxing officers of the House of Lords found that the success fees payable in Campbell were appropriate. MGN was refused leave to appeal from that decision to the Judicial Committee and it applied to the European Court of Human Rights contending, again, that there had been a violation of Article 10.
28. The ECtHR concluded^[4] that the requirement to pay a success fee, as an unsuccessful defendant in breach of confidence proceedings, did constitute an interference with MGN's right to freedom of expression under Article 10. While the scheme of conditional fee agreements with recoverable success fees sought to achieve the legitimate aim of the protection of the rights of others, the flaws in that scheme were such as to exceed the broad margin of appreciation to be accorded to the state in respect of general measures pursuing social and economic interests. The requirement that MGN pay success fees to the claimant was therefore disproportionate.

Coventry v Lawrence

29. The validity of the scheme which permitted the recoverability of additional liabilities was considered by the Supreme Court in Coventry v Lawrence [2015] 1 WLR 3485. The claimants succeeded at first instance in recovering damages for nuisance in the sum of £20,850 and an injunction. That decision was reversed by the Court of Appeal but restored by the Supreme Court. The claimants' lawyers had acted throughout under a conditional fee agreement and the claimants had purchased an after the event insurance policy for a premium of £305,000. The defendants were ordered to pay 60 per cent of the claimants' costs; and 60 per cent of the additional liabilities claimed was about £312,000. The defendants sought a variation of the costs order made at trial so as to exclude the success fees and ATE premiums on the ground that their liability to pay such would be an infringement of their rights to a fair trial under Article 6 of the ECHR and to the protection of their property under Article 1 of the First Protocol to the Convention. The Supreme Court concluded that the defendants' rights had not been infringed.
30. No Article 10 point arose in Coventry and Lord Neuberger PSC and Lord Dyson MR explained the difference between that case and MGN v United Kingdom at paragraph 52:

The right of freedom of expression is always given particular weight by the ECtHR. As the court said [in MGN] at para 201, the most careful scrutiny is called for when measures are capable of discouraging the participation of the press in debates over matters of legitimate public concern. It concluded that a fair balance had not been struck between the article 10 rights of defendant publishers and the article 6 rights of appellants who allege defamation or breach of privacy. But in our judgment the balancing of the article 6 rights of appellants against those of respondents is an exercise of a wholly different character. There is no basis for concluding that it was implicit in the reasoning of the court that it would have held that the scheme violated the article 6 rights of the respondents in that case. We reject the submission that the decision in MGN v United Kingdom requires us to hold that the 1999 Act scheme is incompatible with article 6. Essentially for the same reasons, we do not consider that MGN v United Kingdom assists the respondents in relation to their case under A1P1.

31. I would not however view the majority judgments in Coventry v Lawrence as a ringing endorsement of the judgment of the ECtHR in MGN v United Kingdom. Having identified the central issue in MGN v United Kingdom as whether the government had struck a fair balance between freedom of expression under Article 10 and the right of access to a court under Article 6 (see paragraph 50), at paragraph 61 Lord Neuberger and Lord Dyson explained that while the ECtHR had rejected the Government's submission that the disproportionality caused by the recoverable additional liabilities regime was justified by the need to adopt provisions of general application when pursuing broad social and economic policy objectives, it had subsequently recognised that a legislative or regulatory scheme may in some circumstances be compatible with the Convention even if it operates harshly in individual cases^[5]. That was followed, in paragraphs 64 to 84, by an explanation of why the regime might be justified, which began:

64. In our judgment, there is a powerful argument that the 1999 Act scheme is compatible with the Convention for the simple reason that it is a general measure which was (i) justified by the need to widen access to justice to litigants following the withdrawal of legal aid; (ii) made following wide consultation and (iii) fell within the wide area of discretionary judgment of the legislature and rule-makers to make.

32. At paragraph 107 Lord Mance JSC (with whom Lord Carnwath JSC agreed) said:

In the above circumstances, I reject the respondents' challenge to the system of costs whereby they are potentially liable in respect of success fees agreed and ATE premia incurred by the appellants. The position must, as Lord Neuberger and Lord Dyson have said, be considered as a whole. The system had a legitimate aim, the present is on its face an extreme and unusual case. It is difficult to conceive of any solution which would cater for such cases, without imperilling the whole system. The system has been repeatedly endorsed by domestic courts over a decade. Litigants and their lawyers have justifiably relied upon its validity. Legal certainty, consistency and the legitimate expectations which have so been generated all militate in favour of the Supreme Court upholding the system (though it can of course still be challenged as against the United Kingdom in proceedings in Strasbourg); and I would uphold it and refuse any relief accordingly.

The doctrine of precedent

33. Decisions of the Judicial Committee of the House of Lords (and of the Supreme Court) are binding on every court inferior to it: A-G v Dean and Canons of Windsor (1860) 8 HL Cas 369. The decision in Campbell v MGN is therefore binding on this court.
34. This court should follow decisions of the ECtHR on questions of the interpretation of the ECHR. In Kay v London Borough of Lambeth [2006] UKHL 10 Lord Bingham said (at para 28):

It is ordinarily the clear duty of our domestic courts, save where and so far as constrained by primary domestic legislation, to give practical recognition to the principles laid down by the Strasbourg court as governing the Convention rights ... That court is the highest judicial authority on the interpretation of those rights, and the effectiveness of the Convention as an international instrument depends on the loyal acceptance by member states of the principles it lays down.

35. However decisions of the ECtHR are not binding on domestic courts. Rather, s.2 of the HRA provides that domestic courts "must take [them] into account".

The recoverability of the success fees

36. In the circumstances it seems to me that, following Campbell v MGN, I have to conclude that an order permitting the Claimant to recover from MGN a reasonable success fee would not be a violation of MGN's right to freedom of expression as a publisher under Article 10.
37. As, for the reasons set out in Campbell v MGN, the making of such an order would not be incompatible with MGN's Convention rights, s.6(1) of the HRA does not prevent me from making that order.

The recoverability of the After the Event insurance premium

38. No separate submissions were made by either party in relation to the recovery of the ATE premium. No ATE premium was paid by Ms Campbell and so the issue of whether a requirement to pay an ATE premium would be an interference with a publisher's Article 10 rights was not considered either by the House of Lords or by the ECtHR. The question did arise in relation to Article 6 rights in Coventry v Lawrence. At paragraphs 68 and 69 Lord Neuberger and Lord Dyson explained:

68. Nor should it be overlooked that respondents could themselves enter into CFAs and take out ATE insurance.

69. There was, and indeed there is, no perfect solution to the problem of how best to enhance access to justice following the withdrawal of legal aid for most civil cases. A successful defendant was often better off under the 1999 Act scheme than he had been when legal aid was generally available to appellants. At that time, a successful defendant usually had to bear his own costs of defending a claim. The appellant did not have the means to meet the defendant's costs and it was a rare case in which a successful defendant would be able to obtain its costs from the legal aid fund. Under the 1999 Act regime, the successful defendant would usually obtain its costs from the ATE insurer. On the other hand, the unsuccessful defendant was unquestionably better off under the previous regime because it was only liable for the claimant's base costs. This was the policy choice that was made by Parliament.

39. It seems to me the recoverability of premiums under s.29 of the 1999 Act is part of the same regime as the recoverability of success fees. Indeed in Coventry v Lawrence the Justices refer to "the 1999 Act scheme" or "system". It seems to me that, for the reasons given by the House of Lords in Campbell v MGN in relation to success fees, an order requiring MGN to pay costs in respect of the Claimant's after the event insurance policy would not be an infringement of its right to freedom of expression as a publisher under Article 10.
40. Accordingly the success fees are allowed at 33 per cent and the after the event insurance premium is allowed as claimed.

Postscript

41. If, as the points of dispute predict, this issue is considered further, I would mention that in April 2013, at the request of the Government, a working group of the Civil Justice Council suggested a scheme which could replace the regime of recoverable additional liabilities in publication and privacy proceedings. As yet the Government would appear not to have acted on that recommendation.

Note 1   The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 5 and Saving Provision) Order 2013, arts 3 and 4    [Back]

Note 2   As provided by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 5 and Saving Provision) Order 2013, art 1(2)    [Back]

Note 3   The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 5 and Saving Provision) Order 2013, arts 3 and 4    [Back]

Note 4   (2011) 53 EHHR 5    [Back]

Note 5   Animal Defenders International v United Kingdom (2013) 57 EHRR 607    [Back]