The House of Lords has ruled that success fees payable by the losing party where the claimant is funded under a conditional fee arrangement (CFA) are compatible with the defendant’s rights to freedom of expression under Article 10 of the European Convention on Human Rights.
Naomi Campbell successfully sued MGN for breach of confidence in an action which went to the House of Lords. She was funded under a CFA for the hearing in the House of Lords. MGN were required to pay a success fee of £279,981.35, which brought their liability for Ms Campbell’s legal costs to £1,086,295.47.
MGN sought a ruling that they should not be liable to pay any part of the success fee because such a liability was so disproportionate as to infringe their right to freedom of expression. MGN argued that a costs award increased by a success fee was disproportionate because it is more than and up to twice as much as the amount which under the ordinary assessment rules a costs judge would consider reasonable and proportionate. It was also not necessary to give Ms Campbell access to justice because she could have afforded to fund her own litigation as she did in the lower courts. MGN also complained that the threat of liability to pay such a large sum of costs was just as likely to inhibit freedom of expression as was the threat of liability for large sums of damages.
The House of Lords held that MGN’s arguments were flawed. The concept of proportionality in relation to costs under the Civil Procedure Rules (CPR) was concerned with whether expenditure on litigation was proportionate to the amount at stake, the interests of the parties and complexity of issues. Article 10 was concerned with whether requiring unsuccessful defendants to pay the claimant’s reasonable and proportionate costs and to contribute to the funding of other litigation was proportionate in order to provide access to justice. The question in relation to Article 10 was whether this requirement was a proportionate measure to provide access to justice while considering the effect on Article 10 rights. It was held that it was open to the legislature to fund access to justice in this way.
It was held that the CFA regulations do not contemplate an investigation into the litigant’s means and this would be impractical. Parliament was entitled to lay down a general rule that CFAs were open to everyone. Although Lord Carswell was far from convinced about the wisdom or justice of the present CFA system, it was a scheme under which liability for success fees was imposed as a matter of legislative policy and the scheme was compatible with Article 10 rights.
Lord Hoffmann took the opportunity to comment on the problems caused by defamation actions funded under CFAs which have given rise to the concern that freedom of expression is being seriously inhibited. Lord Hoffmann cited Turcu v NGN and King v Telegraph Group in commenting that the blackmailing and “chilling effect” of such litigation arises from impecunious claimants with no “after the event” insurance and the conduct of cases by claimants’ solicitors in a way which runs up substantial costs for both parties. The solution was for the court to cap costs at an early stage by fixing a maximum amount which the recoverable costs could not exceed. However, this was for the Court of Appeal to deal with and the House of Lords would be slow to interfere.