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Judgments - Campbell (Appellant) v. MGN Limited (Respondents)

HOUSE OF LORDS

SESSION 2005-06

[2005] UKHL 61

on appeal from: [2002] EWCA Civ 1373

 

OPINIONS

OF THE LORDS OF APPEAL

for judgment IN THE CAUSE

 

 

Campbell (Appellant)

v.

MGN Limited (Respondents)

 

 

 

 

Appeal Committee

 

Lord Nicholls of Birkenhead

Lord Hoffmann

Lord Hope of Craighead

Baroness Hale of Richmond

Lord Carswell

 

 

Counsel

Appellants:

James Price QC

Martin Farber

(Instructed by Schillings)

 

Respondents:

Richard Spearman QC

Jeremy Morgan QC

Andrew Sharland

(Instructed by Davenport Lyons)

 

Hearing date:

26 May 2005

 

 

on

Thursday 20 OCTOBER 2005

 

HOUSE OF LORDS

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

Campbell (Appellant) v. MGN Limited (Respondents)

[2005] UKHL 61

LORD NICHOLLS OF BIRKENHEAD

My Lords,

    1.  I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Hoffmann, Lord Hope of Craighead and Lord Carswell. For the reasons they give, with which I agree, I would dismiss this petition.

LORD HOFFMANN

My Lords,

    2.  Naomi Campbell sued the publishers of the Daily Mirror ("MGN") for breach of confidence. She alleged that they had published information in respect of which she was entitled to privacy. After a trial lasting five days in February 2002, Morland J found the case proved and awarded her £3,500 damages and costs. This modest award reflected the fact that Ms Campbell conceded that her own conduct prevented her from objecting to the newspaper's most serious allegation, namely, that she had been addicted to drugs. Her complaint concerned the publication of additional details and photographs concerning the treatment she was receiving. In October 2002 the Court of Appeal unanimously reversed the decision of Morland J and dismissed the action, ordering Ms Campbell to pay the costs of the trial and 80% of the costs of the appeal: [2003] QB 633. In May 2004 this House, by a majority of 3 to 2, reversed the decision of the Court of Appeal, restored the order of Morland J. and ordered the respondents to pay Ms Campbell's costs in the Court of Appeal and in this House: [2004] 2 AC 457.

    3.  Pursuant to the order of this House, Ms Campbell's solicitors served three bills of costs: £377,070.07 for the trial, £114,755.40 for the appeal to the Court of Appeal and £594,470.00 for the appeal to the House of Lords. MGN were mortified to find that although the award of damages had been only £3,500 (and five of the nine judges who considered the matter had thought that they should not be liable at all), they were being asked to pay legal costs (in addition to their own) in the sum of £1,086,295.47. This may be compared with the £1.5m damages which the European Court of Human Rights in Tolstoy Miloslavsky v United Kingdom (1995) 20 EHRR 442 thought so disproportionate even for a foul and persistent libel upon a respected public figure that it infringed the right to freedom of expression guaranteed by article 10 of the Convention.

    4.  MGN likewise complain that their right to freedom of expression has been infringed. They say that the threat of liability to pay a large sum by way of costs is just as likely to inhibit freedom of expression as the threat of liability to pay a large sum by way of damages. But the complaint is not, at any rate for the moment, concerned with the global figure for the costs of the whole proceedings. One reason is that the three bills have not yet been assessed. Costs awarded by the High Court and Court of Appeal are assessed in accordance with principles stated in Part 44 of the Civil Procedure Rules. Only costs which have been proportionately and reasonably incurred and which are proportionate and reasonable in amount will be recoverable against the paying party: see rules 44.4 and 5 of the CPR. Costs in the House of Lords are taxed on similar principles by the Taxing Officers of the House: see Practice Directions Applicable to Judicial Taxations, para 15.1. So the amount which turns out to be actually payable by MGN may be a good deal lower than the sum demanded.

    5.  In the meanwhile, in advance of assessment, MGN raise a point of principle about their liability to the costs of the proceedings in the House of Lords. A special feature of this stage of the proceedings was that Ms Campbell retained solicitors and counsel pursuant to a conditional fee agreement ("CFA"). At the trial and in the Court of Appeal they had acted under an ordinary retainer. But the appeal to the House of Lords was conducted pursuant to a CFA which provided that if the appeal succeeded, solicitors and counsel should be entitled to success fees of 95% and 100% respectively. Thus 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, as I have said, subject to taxation. It was the £279,981.35 success fees which brought the figure up to £594,470.

    6.  By a petition presented to the House on 21 February 2005, MGN seek a ruling of the Appeal Committee 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 is so disproportionate as to infringe their right to freedom of expression under article 10 of the Convention. In view of the importance of this question, it has been argued before an enlarged Appeal Committee consisting of those members of the House who heard the substantive appeal.

    7.  Although CFAs first made an appearance in the Courts and Legal Services Act 1990, the legislation giving rise to this dispute is largely to be found in the Access to Justice Act 1999 and subsequent subordinate legislation. (A full account of the earlier history will be found in the judgments of the Court of Appeal in Callery v Gray [2001] 1 WLR 2112 and Hollins v Russell [2003] 1 WLR 2487). Section 58 of the 1990 Act, which was substituted by section 27 of the 1999 Act, provides that a CFA which satisfies all the specified statutory conditions shall not be unenforceable by reason only of its being a CFA. This reverses the common law rule that it is unlawful for lawyers to charge fees which depend upon the outcome of the case. A CFA may provide that fees and expenses are to be payable "only in specified circumstances" and may provide for a "success fee" by which, in specified circumstances, fees are increased above the amount which would be payable if they were not payable only in specified circumstances.

    8.  The conditions laid down for an enforceable CFA are, inter alia, that it must relate to proceedings of a description specified by the Lord Chancellor, it must state the percentage by which the amount of fees which would be payable if it were not a CFA is to be increased and the percentage must not exceed the percentage specified by the Lord Chancellor. The Conditional Fee Agreements Order 2000 (SI 2000/823) allowed the use of CFAs in all litigation except criminal and certain family and environmental proceedings and fixed the maximum success fee at 100%.

    9.  Until the 1999 Act came into force, a successful litigant who used a CFA had to pay the success fee himself. It could not be included in the costs recoverable from the losing party. But this was changed when subsections (6) and (7) of the new section 58A were inserted into the 1990 Act:

    "(6)  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.

    (7)  Rules of court may make provision with respect to the assessment of any costs which include fees payable under a conditional fee agreement (including one which provides for a success fee)."

    10.  Under the Civil Procedure Rules and its accompanying Practice Directions, success fees are now (subject to assessment) normally recoverable from the losing party. Section 9.1 of the Practice Direction accompanying Part 44 of the CPR says that under an order for payment of 'costs' the costs payable will include an "additional liability" incurred under a "funding arrangement". A funding arrangement means a CFA or a policy taken out to insure against liability to pay the other side's costs ("after the event" or "ATE" insurance) and an "additional liability" is the success fee or the ATE premium. Part 11.8 of the Practice Directions deals with the assessment of the success fee:

    "(1)  In deciding whether a percentage increase is reasonable relevant factors to be taken into account may include:

    (a)  the risk that the circumstances in which the costs, fees and expenses would be payable might or might not occur;

    (b)  the legal representative's liability for any disbursements;

    (c)  what other methods of financing the costs were available to the receiving party.

    (2)  The court has the power, when considering whether a percentage increase is reasonable, to allow different percentages for different items of costs or for different periods during which the costs were incurred."

    11.  It is important to notice the impact of the recoverability of success fees upon the principle that recoverable costs should have been proportionately and reasonably incurred. The overriding objective set out in CPR 1.1 includes—

    "Dealing with the case in ways which are proportionate

    (i)  to the amount of money involved;

    (ii)  to the importance of the case

    (iii)  to the complexity of the issues; and

    (iv)  to the financial position of each party.".

    12.  As Lord Woolf CJ said in Lownds v Home Office (Practice Note) [2002] 1 WLR 2450, 2451, the policy is that "litigation should be conducted in a proportionate manner and, where possible, at a proportionate cost." But the test of proportionality and reasonableness is applied only to the basic costs. It is not applied to the total sum for which the losing party may be liable after the addition of the success fee. This is explicitly recognised in the Practice Direction. Section 11.5 says:

    "In deciding whether the costs are reasonable and (on a standard basis assessment) proportionate, the court will consider the amount of any additional liability separately from the base costs."

    13.  The consequence is spelled out in section 11.9:

    "A percentage increase will not be reduced simply on the ground that, when added to the base costs which are reasonable and (where relevant) proportionate, the total appears disproportionate."

    14.  These principles have been accepted as equally applicable to a taxation of costs in the House of Lords: see Designer Guild Ltd v Russell Williams (Textiles) Ltd (No 2) [2003] 2 Costs LR 204 at para 20 and para 26 of the House's Practice Directions Applicable to Judicial Taxations.

    15.  Keith Ashby and Professor Cyril Glasser, in a recent article in the Civil Justice Quarterly (The Legality of Conditional Fee Uplifts (2005) 24 CJQ 130, 134) say that the success fee—

    "is added as a percentage bonus to the cost of work actually done, based not on any conduct or attribute of paying parties, but as a penalty for having lost in litigation against opponents who have entered into a particular type of contract with their own lawyers."

    16.  I am not sure that "penalty" is quite the right word, but there is no doubt that a deliberate policy of the 1999 Act was to impose the cost of all CFA litigation, successful or unsuccessful, upon unsuccessful defendants as a class. Losing defendants were to be required to contribute to the funds which would enable lawyers to take on other cases which might not be successful but would provide access to justice for people who could not otherwise have afforded to sue. In some kinds of litigation, such as personal injury actions, the funds provided by losing defendants were intended to be in substitution for funds previously provided by the state in the form of legal aid.

    17.  The consequences of this policy in relation to personal injury claims arising out of motor vehicle accidents were discussed by the Court of Appeal and this House in Callery v Gray [2001] 1 WLR 2112 (CA) [2002] 1 WLR 2000 (HL). The legality of the policy of shifting the burden of funding that type of litigation from the state to unsuccessful defendants was not in dispute. I myself described it as a rational social and economic policy. The effect was to internalise the cost of road accident litigation within the class of road users, because the liability insurers called upon to pay these costs passed it on to road users through increased premiums. The problem in Callery v Gray arose out of the removal of any market forces restraining the levels of success fees and ATE insurance premiums when they became payable only by the losing party. As the client who agreed the success fee and the ATE premium has no financial interest in the matter, the only line of defence against excessive charges is the costs judges, who are handicapped by the lack of market-driven comparators on which to base their assessments.

    18.  This is not however a problem which arises in the present case. There has, as I have said, been no assessment in which the level of the success fees might be contested. The challenge is to the allowance of any success fee at all.

    19.  That challenge is based upon the special position of the media as defendants to actions for defamation and wrongful publication of personal information such as that brought by Ms Campbell against the Daily Mirror. There is no human right to drive a vehicle upon the road free of the cost of litigation arising from road accidents. But there is a human right to freedom of expression with which the imposition of an excessive cost burden may interfere. It is true that costs are awarded only against defendants who have 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. But that, it seems to me, is not the point. It is 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. When the European Court of Human Rights in Tolstoy Miloslavsky v United Kingdom (1995) 20 EHRR 442 said that damages of £1.5m in that case were an excessive and disproportionate restriction on freedom of expression, I am sure that they did not mean that people should be free to publish gross and deliberate libels at an affordable price, like the ancient Roman in the story of Aulus Gellius (Noctes Atticae 20.1.13) who was followed by a slave carrying a bag of coins to pay the depreciated statutory penalty to the people whom his master insulted. The court was concerned with the indirect effect of a high level of damages awards upon the ordinary bona fide work of the media.

    20.  MGN nevertheless accept that freedom of expression under article 10 (1) may be restricted, as article 10(2) says, on grounds prescribed by law and necessary in a democratic society to protect the rights of others. The speeches in the substantive proceedings in this case discuss the relationship between the rights of the Daily Mirror under article 10 and Ms Campbell's right to preserve the confidentiality of personal information. This right is one of the means by which our law protects the right to respect for private life guaranteed by article 8 of the Convention. The availability of legal services under a CFA is necessary to provide the access to a court required by article 6 and thereby give litigants an effective means of enforcing their rights.

    21.  Until the 1999 Act, legal aid was not available in defamation actions (see the Legal Aid Act 1988, Schedule 2, Part II, para 1), which were therefore the almost exclusive preserve of the rich. The Strasbourg court was fairly undemanding about this state of affairs, usually holding that it was not inconsistent with article 6 to expect both claimants and defendants in defamation proceedings to act in person: see McVicar v United Kingdom (2002) 35 EHRR 22 and a number of earlier Commission rulings cited in para 34 of that judgment. But the court had said in an early decision (Airey v Ireland (1979-80) 2 EHRR 305) that in complex cases article 6 might require some provision for legal assistance, the precise form being a matter for the member state. And most recently in Steel and Morris v United Kingdom (2005) Application No 68416/01, 15 February 2005 it held that such assistance should have been provided to defendants in a lengthy and complex defamation action which had been brought against them by a multi-national company.

    22.  It is however not necessary to decide that article 6 positively requires legal assistance in actions for defamation and the like in order to come to the conclusion that the provision of such assistance is a legitimate objective which, unless it amounts to a disproportionate burden, a member state is entitled to consider necessary in a democratic society. In principle, MGN accept this argument. But they say that in the circumstances of this case, an award of costs increased by a success fee is for two reasons disproportionate. First, they say that it is necessarily 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. Secondly, they say that it was not necessary to give Ms Campbell access to a court because she could have afforded to fund her own costs, as she did at the trial and in the Court of Appeal.

 
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