Conditional fees in publication proceedings after Times Newspapers v Flood
The Supreme Court's decision in Flood has not provided the clarity hoped for in relation to future recovery of success fees and ATE premiums, says Steven Heffer
Last month the Supreme Court heard three appeals involving a challenge to orders for costs made in the High Court against three newspapers after a trial (two libel cases, one for misuse of private information). The newspapers (The Times, the Daily Mail, and the Daily Mirror) argued that their European Convention on Human Rights article 10 rights (freedom of expression) were infringed by the orders requiring them to reimburse the success fees and after the event insurance premiums incurred by the claimants, under the Access to Justice Act 1999 regime.
The judgment in Times Newspapers Ltd v Flood, Miller v Associated Newspapers, and Frost v MGN  UKSC 33 held unanimously (dismissing the appeals) that the claimants had incurred financial obligations in reliance on the 1999 Act and had a legitimate expectation that it would not be retrospectively appealed or invalidated – to do so would infringe their article 1 to protocol 1 rights.
Even if upholding the costs orders would infringe a newspaper’s article 10 rights, the fundamental principle that citizens were entitled to assume that the law would not change retroactively would be directly infringed by the order sought. Freedom of expression was less centrally engaged in this case: the infringement of the newspapers’ rights was based on an indirect chilling effect caused by the impact of the substantial additional costs recoverable in conditional fee arrangement cases.
Lord Neuberger gave the lead judgment, with the other justices agreeing. Neuberger said it would be inappropriate to express a concluded view as to whether there is a general rule of domestic law that it would normally infringe a newspaper publisher’s rights under article 10 to require it to reimburse the claimants’ success fee and ATE premium in a defamation or privacy case, unless it is was necessary so to decide, and it was not necessary in these cases. It would be similarly inappropriate to grant a declaration of incompatibility of the legislation containing the 1999 Act regime or the statutes which supersede it.
The just and appropriate order was therefore to dismiss the appeals, as to allow them would be a graver infringement of the claimants’ rights than the infringement which the newspaper publishers would suffer if the appeals were dismissed.
In the appeal in Frost, the private information was illegally obtained (phone hacking) and there could have been no real expectation that its publication would be in the public interest. So, the newspapers were unsuccessful in their attempt to prevent the recovery of the success fees and ATE premiums of the successful claimants. It is worth considering some of the background to this decision.
The CFA structure was initially set up in 1990 but did not take off until the Access to Justice Act 1999 made success fees recoverable from the losing party. Presumably, government policy was at the time largely guided by a desire to reduce legal aid expenditure. Most legal proceedings could instead be funded by a CFA with ATE insurance to cover the claimant’s risk of adverse costs.
The success fee (up to 100 per cent) was intended initially to act as compensation for lawyers taking on cases some of which would be successful and some which would be unsuccessful. However, not surprisingly this approach was unpopular with paying parties, in particular insurance companies and newspaper groups who often ended up on the receiving end of the substantial costs incurred and were unhappy to pay the additional liabilities they were exposed to when contesting these claims.
Years of campaigning by insurance companies and other corporates led to changes to the CFA regime in 2013, implemented by sections 44 and 46 of the Legal Aid Sentencing and Punishment of Offenders Act 2012 (LASPO) which amended the relevant sections of the Courts and Legal Services Act 1990.
The reason for the changes was identified by Lord Justice Jackson who expressed the view that the regime placed an ‘excessive costs burden on opposing parties, whose cost liability could become grossly disproportionate if they contested the case to trial and lost’. Jackson recommended that the recoverability of CFA success fees and ATE premiums should be abolished.
The government adopted this recommendation citing the need to ‘reduce the unfair costs suffered by the many business, individuals, and other organisations (including the NHS) that have been faced with CFA actions’ and restore greater proportionality to the costs of civil cases.
Inevitably the decision was controversial with claimant lawyers who opposed the LASPO changes because of the impact on access to justice. The proposals had little regard to the rights of ordinary people seeking to enforce their legal rights through the courts against large corporates.
Although recovery from the defendants was removed in most cases the previous CFA rules continued to apply to CFAs entered into and ATE policies taken out before 1 April 2013, and to certain excluded categories.
Exclusions from LASPO
Initially CFA success fees and ATE insurance premiums were excepted and continued to be recoverable in insolvency proceedings, on the basis that such cases ‘bring substantial revenue to the taxpayer, as well as other creditors, and encourage good business practice’. The government exception remained in place until 2016 but has now gone.
Publication and privacy proceedings
This is the remaining exception. These claims include defamation, malicious falsehood, breach of confidence involving publication to the general public, misuse of private information, or (where the defendant is a news publisher) harassment. Newspaper lobbying and costs litigation has so far not managed to bring it to an end.
The exception for such claims was intended to be an interim measure pending the implementation of Lord Justice Leveson’s recommendations that costs protection should be extended to such claims. So the ‘old style’ CFA would continue in full force and effect for publication and privacy claims until a new system of low cost arbitration was set up and implemented as recommended by Leveson. Success fees and ATE would still be recoverable from the losing defendant.
It is now five years since Leveson’s recommendations and there is still no sign of any such properly regulated new system being put in place. The newspapers are not keen to be regulated by the only officially recognised regulator (IMPRESS) and have largely opted instead to sign up to a complaints body (IPSO) which does not have formal recognition and is not compliant with Leveson. Pilot arbitration schemes have been outlined by both organisations.
The newspapers who brought the appeals to the Supreme Court had hoped to deal a fatal blow to the remaining CFA regime by stopping recovery of success fees and ATE premiums even in the excepted categories of cases but this attempt failed.
This is obviously considered a good outcome by claimant media lawyers. CFAs have been the main route to justice for the individual against newspapers. There is a strong argument that CFAs have led to the exposure of media abuse through many CFA funded cases. Those who have benefited from using CFAs include the parents of murdered school girl Millie Dowler, Kate and Gerry McCann, and most of the claimants in the phone hacking litigation against News UK and Mirror Group.
The Flood decision does not, however, provide the clarity hoped for in relation to future recovery of success fees and ATE. The decision seems to point to the view that requiring media organisations to pay additional liabilities in publication cases would ordinarily violate their article 10 rights. However, this conflicts with the express provisions of the LASPO Commencement Order made in 2013 which continues to apply the 1999 Act regime, permitting the recovery of additional liabilities in publication and privacy cases. There are arguments for and against the recoverability of the additional liabilities in future cases (post the Flood judgment) and it is highly likely that there will be further costs litigation seeking to challenge success fees and ATE premiums.
At least one commentator has suggested that in view of the uncertainty the government should now act to implement measures to protect the citizens’ right to reputation. The basis for that contention is that the effect of the Flood judgment, unless the government intervenes, will be to make it harder for ordinary people to bring actions for libel or privacy using CFA arrangements.
Steven Heffer is head of the media and privacy team at Collyer Bristow