Communicated on 13 November 2020 Published on 30 November 2020

FOURTH SECTION

Application no. 72497/17 MGN LIMITED against the United Kingdom lodged on 29 September 2017

STATEMENT OF FACTS

The applicant, MGN Limited, is a newspaper publisher. It is represented before the Court by Mr K. Mathieson of RPC LLP, a lawyer practising in London.

The facts of the case, as submitted by the applicant, may be summarised as follows.

A large number of cases were brought against the applicant by persons in the public eye (such as actors, sportsmen, or associates of such people) alleging that they were the victims of an invasion of privacy in the form of phone hacking, illicit information gathering and the publication in the applicant ’ s newspapers of information obtained by these methods. Twelve such cases settled before trial with agreed orders for costs. Eight cases were taken to trial and on 21 May 2015 judgment was delivered in favour of the claimants ( Gulati and Others v. MGN Limited [2015] EWHC 1482 (Ch)), with orders for costs also being made in their favour.

Each of the twenty claimants had the benefit of a conditional fee arrangement (“CFA”), and all but one had taken out “after the event” (“ATE”) insurance to underwrite their liability to pay the costs of another party. At the time of the domestic proceedings the assessment of costs was still ongoing. However, in the twelve settled cases the success fees were said to total in excess of GBP 600,000 and the ATE insurance premiums in excess of GBP 200,000. In the eight cases that went to trial, the success fees exceeded GBP 1.4 million, and the ATE premiums exceeded GBP 632,000.

In the course of the privacy proceedings, in an apparent attempt to pre-empt the decision in the costs assessment in light of the Court ’ s judgment in MGN Limited v. the United Kingdom (no. 39401/04, 18 January 2011), the claimants sought declarations that their claims for misuse of private information did not engage Article 10 of the Convention and as a result they were entitled to payment of additional liabilities; and that on the facts of their cases the payment to them of additional liabilities would be compatible with the applicant ’ s rights under Article 10. However, the parties subsequently agreed that the real issue to be decided was whether the CFA scheme, insofar as it allowed for the recovery of the success fees and ATE premiums, was incompatible with Article 10 of the Convention.

The court declined to follow MGN Limited . It determined that, on the basis of binding English authority (namely, Campbell v. MGN Limited [2004] UKHL 22) the English legislative regime which permitted the recovery of the additional liabilities was not incompatible with Article 10 of the Convention. The claimants ’ had further argued that in any event there was no question of an infringement of the applicant ’ s Article 10 rights because in these cases it actions had fallen outside the realm of responsible journalism. The court rejected that argument, since in its view this was not a case in which a party resisted the enforcement of a particular right because of its apparent contravention of Article 10. Rather, it was an example of a situation in which a body of legislation as a whole was said to contravene Article 10. Therefore, it stated that:

“It does not matter for these purposes that MGN has (at least in the eight decided cases) been found guilty of conduct which, at least in some instances, can be characterised as criminal and which, generally, it might be difficult to regard as responsible journalism. All that means at the end of the day is that its rights of freedom of expression were trumped by the privacy rights of the claimants (on the facts of the cases).”

Finally, the court found that the applicant was estopped from challenging the recoverability of the success fees, but not the ATE premiums, of the eight claimants whose cases went to trial, since it had relied on the existence of those fees to challenge their claim for a ten percent uplift in damages.

The applicant was given permission to appeal to the Supreme Court, where its appeal was heard together with two other cases ( Flood v. Times Newspapers Ltd (No. 2), Miller v. Associated Newspapers Ltd and Frost and others v. MGN Ltd (No. 2) [2017] UKSC 33).

The Supreme Court handed down its judgment on 11 April 2017. In the leading judgment, Lord Neuberger of Abbotsbury PSC, with whom Lord Mance , Lord Sumption , Lord Hughes and Lord Hodge JJSC agreed, did not consider it appropriate to determine whether MGN Limited laid down a general rule that where a defendant was a newspaper or broadcaster, the recoverability of the success fee would normally infringe its Article 10 rights. In his view, even if such a general rule existed, in the present case the orders for costs should not be varied as it would be wrong to deprive the claimants of the ability to recover the success fees and ATE premiums for which they were liable to their legal advisors and ATE insurers respectively. Not only would this amount to a plain injustice, but it would also risk infringing the claimants ’ rights under Article 1 of Protocol No. 1 to the Convention as they had a legitimate expectation of a legal right. In addition, it could infringe their rights under Article 6 of the Convention. It was a fundamental principle of any civilised system of government that citizens are entitled to act on the assumption that the law is set out in legislation and will not be changed retroactively. While freedom of expression was also a fundamental principle, it was not centrally engaged in these cases as the decision in MGN Limited was based on the indirect chilling effect on freedom of expression of a very substantial costs order.

Although the claimants in the Frost case (the case against the applicant) had all entered into CFAs and taken out ATE insurance after publication of MGN Limited , Lord Neuberger indicated that he would reach the same conclusion since the 1999 Act regime had been lawful under domestic law at the relevant time. However, he considered there to be another, more fundamental, reason why it was not open to the applicant to rely on any general rule laid down in MGN Limited ; namely, the rule could have no application where information was obtained illegally by or on behalf of a media organisation. He accepted that the applicant ’ s Article 10 rights were engaged, in the sense that an aspect of most of the claimants ’ complaints was that private information was published in its newspapers, but considered that it would be “quite unrealistic” to give those rights anything like the sort of weight they were given in MGN Limited . He continued:

“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. The claimants were generally celebrities, footballers, television personalities and the like; people whose private lives may be of interest to the public, but the revelation of whose private lives is not normally in the public interest.

I accept that the courts must be careful before deciding that a particular case of this sort involves newsgathering whose nature is so extreme as to lie outside the territory which should be subject to the Rule. However, bearing in mind 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 , it appears to me that this is not a case where the Rule can properly be invoked by MGN. As the Strasbourg court explained at para 201, its decision that the liability for costs in MGN v UK offended article 10 was based on the proposition that ‘ the most careful scrutiny on the part of the Court is called for when measures taken by a national authority are capable of discouraging the participation of the press in debates over matters of legitimate public concern ’ . I cannot accept that such a proposition applies in relation to claims based on a defendant ’ s unlawful hacking and blagging of the phone records of individuals such as the 23 claimants in Frost v MGN .”

The relevant domestic law and practice concerning costs, conditional fee arrangements and success fees is, for the most part, set out in the judgment of MGN Limited v. the United Kingdom , no. 39401/04, §§ 89-120, 18 January 2011.

Following the Court ’ s judgment in MGN Limited , section 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”) precluded, as a general rule, the recoverability of success fees and ATE premiums by successful claimants from the losing party. However, although section 44 was, for the most part, brought into force in April 2013, by virtue of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No. 5 and Saving Provision) Order 2013, the Government opted not to bring it into force in respect of “publication and privacy proceedings”.

Article 1(2) of the 2013 Order defined “publication and privacy proceedings” as encompassing proceedings for (a) defamation; (b) malicious falsehood; (c) breach of confidence involving publication to the general public; (d) misuse of private information; or (e) harassment, where the defendant is a news publisher.

On 29 November 2018 the Government, in a consultation response on Costs Protection in Defamation and Privacy Proceedings, announced that section 44 of LASPO would now be commenced in relation to defamation proceedings so that success fees would not be recoverable. ATE insurance premiums would remain recoverable.

In this case the plaintiffs, who were funded by a conditional fee arrangement and who had taken out ATE insurance, had brought proceedings for noise nuisance against six defendants. The plaintiffs ’ base costs at first instance amounted to GBP 307,642; the 100 percent success fee amounted to GBP 215,007; and the ATE premium was in the region of GBP 305,000. Furthermore, the plaintiffs ’ base costs in the Court of Appeal and Supreme Court were GBP 103,457 and GBP 204,226, respectively; their success fees were GBP 71,770 in the Court of Appeal and GBP 92,115 in the Supreme Court; and their ATE premiums were GBP 70,141 in the Court of Appeal and GBP 126,588 in the Supreme Court.

The unsuccessful defendants contended that the 1999 Act scheme was incompatible with both Article 6 and Article 1 of Protocol No. 1 to the Convention. By a majority of five to two, the Supreme Court rejected their submissions. The leading judgment was handed down by Lord Neuberger and Lord Dyson (with whom Lord Sumption and Lord Carnwath agreed). Lord Neuberger and Lord Dyson distinguished MGN Limited , since in that case the Court ’ s criticisms of the system had been made in the Article 10 context, and it had always given particular weight to freedom of expression. The complaint in that case was therefore of a “wholly different character”. They further noted that of the four “flaws” identified in the Jackson review (a fundamental review of the rules and principles governing the costs of civil litigation which was published in January 2010).and referred to by the Court in MGN Limited , only the third – that is, the “blackmail” or “chilling” effect of the scheme which could drive parties to settle early despite good prospects of a defence, which was also identified by Lord Neuberger in the Supreme Court judgment of 23 July 2014 as one of the scheme ’ s “unique and regrettable features” – could have adversely affected the Article 6 or Article 1 of Protocol No. 1 rights of opposing parties.

Lord Neuberger and Lord Dyson accepted that under the 1999 Act costs awarded to successful claimants who had the benefit of CFAs could be very high indeed, and therefore had the potential to place opposing parties under considerable pressure to settle. However, having regard to the approach adopted towards general measures in cases such as Animal Defenders International v. the United Kingdom ([GC], no. 48876/08, ECHR 2013 (extracts)), they noted that the system as a whole was a rational and coherent scheme for providing access to justice to those to whom it would probably otherwise have been denied, it had been made following wide consultation, and it fell within the area of discretionary judgment afforded to legislators and rule-makers.

Nevertheless, given that the Court had rejected such an argument in MGN Limited , albeit in the Article 10 context, Lord Neuberger and Lord Dyson proceeded to examine the position more critically. They observed that in creating the scheme the Government had been trying to find a solution to the problem created by the constraining of civil legal aid in 1999, but it proved impossible to come up with a solution that would meet with universal approval. However, the potential unfairness of the 1999 Act scheme was mitigated by the fact that district judges and costs judges would perform the role of “watchdog” to check any practices which might undermine its fairness. Thus, base costs were to be assessed by the court, having regard to their proportionality and reasonableness. As to any additional liability, a successful litigant was only entitled to a reasonable success fee and ATE premium. In an appropriate case, the court could make a cost-capping order, and defendants could themselves enter into CFAs and take out ATE insurance.

Lord Neuberger and Lord Dyson considered whether, in assessing costs under the 1999 Act scheme, courts should be required to take into account all the circumstances, including the proportionality of the total of base costs, uplifts and premiums, and all of the payer ’ s circumstances. However, they found that such a requirement would have imperiled the whole scheme, since lawyers would have been unwilling to enter into CFAs for fear that, even if successful, the agreed uplift could be reduced or disallowed on assessment. Furthermore, since ATE insurance was integral to the provision of access to justice, if a premium was necessarily incurred it had to be regarded as proportionate. Finally, any requirement that the assessment of total costs take into account the financial position of the paying party would likely lead to satellite litigation, with the expenses, delays and uncertainties which such litigation normally involves.

For these reasons, the Lord Neuberger and Lord Dyson were satisfied that the 1999 Act scheme struck a fair balance between the interests of different litigants.

Lord Mance , with whom Lord Carnwath also agreed, similarly rejected the defendants ’ challenge. He agreed with Lord Neuberger and Lord Dyson that the scheme had to be considered as a whole. He observed that the case at hand was an extreme and unusual one, and that it would be difficult to conceive of any solution that would cater for such cases without imperiling the whole scheme. Furthermore, the scheme had been endorsed by domestic courts for over a decade, and litigants and lawyers had justifiably relied on its validity. Therefore, legal certainty, consistency and the legitimate expectations generated all militated in favour of the Supreme Court upholding the scheme.

Lord Clarke of Stone-Cum-Ebony (with whom Baroness Hale of Richmond agreed) disagreed with the majority, finding that the principles identified by the Court in MGN Limited in the context of Article 10 applied also to this case, where the defendants were relying on their right of access to justice and a fair trial under Article 6 and/or their right to protection of property under Article 1 of Protocol No.1. For him, it was discriminatory and disproportionate to burden uninsured defendants with costs which vastly exceeded the fair and reasonable costs incurred by the claimant in order to encourage solicitors to act for other claimants in cases where the claim might fail. In particular, he noted that the way in which the success fee was calculated compounded the inequality and unfairness because the magnitude of the reasonable success fee was in inverse proportion to the strength of the claimant ’ s case: the riskier the claimant ’ s case, the greater the success fee his lawyer could legitimately charge. It therefore followed that the stronger the defendant ’ s prospect of success, the more he would have to pay the claimant in the event that the claimant won.

In addition, Lord Clarke considered it “a striking feature of a CFA” that it was available to rich as well as poor applicants. Thus, it was not only a means of providing access to justice for those who could not otherwise afford it, but also a “risk free means of providing access to lawyers for those who could fund it in other ways”. Whereas the claimant had a choice about whether to go to court, once that choice was made, the defendant had no choice not to take part. Moreover, since ATE insurance was usually only available to litigants whose chances were “better than evens”, if the claimant had ATE insurance, the defendant would have little or no chance of obtaining it.

COMPLAINT

The applicant complains under Article 10 of the Convention about its liability to pay the success fees and ATE premiums of the successful claimants in the privacy proceedings.

QUESTIONS TO THE PARTIES

1. Did the recoverability of the claimants ’ success fees and ATE premiums violate Article 10 of the Convention (see, mutatis mutandis , MGN Limited v. the United Kingdom (no. 39401/04, 18 January 2011)?

2. To what extent is the applicant ’ s conduct relevant to the aforementioned assessment?