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Jean-Yves Gilg

Editor, Solicitors Journal

Not so clear cut on costs

Not so clear cut on costs


Steven Davies considers the Supreme Court's dismissal of appeals against recoverability of ATE and success fees

Amid the focus on budgeting and proportionality, the Supreme Court has returned us to the ‘old’ days of recoverability of additional liabilities, specifically in defamation cases.

In three linked cases, Times Newspaper Ltd v Flood, Miller v Associated Newspapers Limited, and Frost and others v MGN Limited [2017] UKSC 33, the Supreme Court dismissed publishers’ appeals that the recoverability of success fees and after-the-event insurance (together, additional liabilities) infringed their right to freedom of expression and that as a result they should not have '¨to pay them.

The three appeals involved a challenge to an order for costs against a newspaper publisher following trial. Flood and Miller each involved an allegation that the newspaper had libelled the claimant, and Frost involved allegations that the newspaper had unlawfully gathered private information about the claimants by hacking their phone messages. In each case, the newspaper publisher lost at trial and was ordered to pay the claimants’ costs.

The 2011 decision of the European Court of Human Rights in MGN v UK was the key ruling and was referred to within the case. Here it was judged that payment of additional liabilities infringed the right to freedom of expression. This followed the 2005 ruling of the House of Lords in Campbell v MGN [2004] UKHL 22, in which it was held that additional liabilities did not breach the article 10 right.

Addressing this tension, Lord Neuberger said: ‘I believe that it would not be appropriate to express a concluded view on [this], because the party who would be, at least potentially, most detrimentally affected by the decision is not before us. That party is of course the United Kingdom government.

‘If we were to conclude that the rule [established by the ECtHR] is part of domestic law, it would not technically bind the government, but it would make it difficult for the government to re-open the question in this country, and it could make it more difficult for the government to challenge the conclusion and reasoning in MGN v UK in Strasbourg.

‘Although we are not being asked to make a declaration of incompatibility, a decision that the rule applies but cannot assist the appellants in the three appeals could have very similar consequences, and section 5 of the Human Rights Act 1998 requires the government to be notified if a declaration of incompatibility is sought in any proceedings.’

As such, the fundamental issue of whether there is a general rule as a matter of domestic law that recoverability would infringe publishers’ article 10 right was not addressed. However, Lord Neuberger accepted the publishers’ article 10 rights were engaged but did not attach the same weight they were given in MGN v UK.

The key factor in this decision, therefore, was the legitimate expectation of the claimants that they would recover additional liabilities, as this was the funding arrangement from the outset and nothing during the litigation would have led the claimants to believe that they would not have recovered these additional liabilities.

The nature of the claims themselves may also have influenced the court, as reference was made to ‘the persistence, pervasiveness, and flagrancy of the hacking and blagging, and the lack of any public significance of the information which it would be expected to and did reveal’, which was clearly a key consideration when weighing up the effects in the Frost case.

The ruling went on: ‘This was not a case where there can be any suggestion of MGN or its agents even hoping, let alone intending or expecting, that the end would justify the means, as might be the case where unlawful means are used in the expectation, or even the reasonable hope, that it may yield information which it would be in the public interest to reveal.’

What this means, from a practical perspective, is that the decision has only determined the issue in application to cases of a similar nature where information has been obtained illegally and published, and this decision will apply to those types of cases for the reasons given within this judgment.

However, in other privacy and defamation cases this may not be as clear cut and there may well be scope for another case to be taken to the Supreme Court (where the government is represented) to determine the wider issue of incompatibility. '¨In the meantime, Campbell is the law of the land.

Steven Davies is a council member of the Association of Costs Lawyers and head of costs at the Medical Protection Society