Published on 16 May 2022

FOURTH SECTION

Application no. 72458/17 ASSOCIATED NEWSPAPERS LIMITED against the United Kingdom lodged on 29 September 2017 communicated on 28 April 2022

STATEMENT OF FACTS

The applicant, Associated Newspapers Limited, is the publisher of the Daily Mail and the Mail on Sunday. It is represented before the Court by Mr K. Mathieson, a lawyer practising in London with RPC LLP.

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

On 2 October 2008 the Daily Mail published an article suggesting that the Metropolitan Police Commissioner, who was a longstanding friend and skiing partner of a Mr M., had paid Mr M.’s management consultancy over three million pounds of public money as a result of “improper conduct and cronyism”. An enquiry was established, which exonerated the Commissioner and Mr M. of wrongdoing.

In September 2009 Mr M. issued proceedings for libel against the applicant. He instructed solicitors and counsel, all of whom entered into conditional fee arrangements (“CFAs”), and he took out After the Event (“ATE”) insurance to underwrite his liability to pay the applicant’s costs.

The claim was met by the applicant with a formal defence of justification, which was served in July 2010. In the course of further discussions Mr M. warned the applicant that he would have to increase his ATE cover unless it agreed to limit its recoverable costs if it was to win. The applicant did not agree and, accordingly, Mr M. increased his ATE cover in June 2011. In May 2012 the applicant agreed to limit its costs to GBP 360,000 in the event that it succeeded. As a consequence, Mr M. entered into a further agreement with his insurers to increase his ATE cover to GBP 360,000.

Despite the fact that both parties made settlement offers, the case did not settle and instead went to full trial. In a judgment given on 21 December 2012, the judge found that the evidence did not support any suspicion of wrongdoing or that the contracts were improperly awarded to Mr M.’s company. It did, however, establish that his company had done a good and valuable job for which it was appropriately paid. She awarded damages of GBP 65,000, including aggravated damages, to Mr M. Judgment was formally entered on 15 March 2013 in that sum and for costs to be paid by the applicant on the standard basis until 11 January 2012 and on the indemnity basis, thereafter. On 24 January 2014 an appeal to the Court of Appeal was dismissed with costs on the standard basis. A petition for permission to appeal to the Supreme Court was refused on 13 February 2014.

Mr M.’s base costs were agreed at GBP 633,006.08. However, he claimed in addition GBP 587,000 in respect of success fees and GBP 248,000 in respect of his ATE premium. While not challenging the reasonableness of these figures as such, the applicant contended that, following the reasoning in MGN Limited v. the United Kingdom , no. 39401/04, 18 January 2011, it would infringe its Article 10 rights if it were to be required to reimburse these sums. That question was referred to a judge of the Queen’s Bench Division.

The judge noted that there was a stark conflict between part of the ratio of the House of Lords in Campbell v MGN Limited (No.2) [2005] UKHL 61 and the clear ruling of the Court in MGN Limited (cited above). He considered himself bound to follow the judgment of the House of Lords and to hold that the scheme for success fees was compatible with the applicant’s rights under Article 10 of the Convention. However, he granted a certificate to permit the Supreme Court to resolve the issue, should it choose to do so.

The judge then considered the ATE premium separately, as this had not formed part of MGN Limited’s complaint before either the House of Lords or the Court. The judge observed that the ATE premium and success fees had a different statutory source and while the social considerations underpinning them overlapped they were not identical. As it was possible to envisage an outcome in Strasbourg under which the success fee regime remained condemned but the ATE insurance scheme was not, it was necessary to consider it on its own merits. The judge continued:

“[Counsel for Associated Newspapers Limited’s] challenge is not to the application of the ATE scheme on the facts of this case or to the reasonableness of the premium paid but to its compatibility as a scheme with Article 10. This, I can deal with on the basis of adequate material. The rationale for the scheme overlaps that of the provision for success fees. It included enhancing access to justice by removing a powerful disincentive to claimants who consider that they have been defamed, namely their potential liability for the defendant’s costs. There is a close similarity between that and the removal of another powerful disincentive, the liability for a claimant’s own costs in the event of failure. To that extent, the rationale for the two schemes is similar but the rationale for the ATE scheme differs in one very significant respect from that advanced by the United Kingdom in MGN v UK to justify success fees, namely enhancing access to justice by persons other than the claimant in the litigation under consideration by encouraging lawyers to fund the risk of taking on doubtful cases out of the profits made on successful ones. Further, the controls on ATE premiums are greater than on success fees, and the need for and the size of the premiums payable can be influenced by the defendants. CPR 44.3(b), (c) and (e) and the practice direction require claimants to notify defendants about an ATE insurance policy within a specified time. The defendants can then, in effect, dictate the maximum level of the premium by agreeing not to claim costs above a fixed amount, as happened in this case, or to remove the need for insurance at all by agreeing to make no claim for costs. [Counsel for Associated Newspapers Limited ] suggests that this unfairly interferes with the defendants’ Article 10 rights and that a scheme which has that effect is outwith the margin of appreciation available to the United Kingdom. That submission, is, in my judgment, ill founded. Publishing allegedly defamatory material about an individual carries with it an unavoidable risk as to costs. Giving the option to a publisher to bear its own costs, even if successful, is not so disproportionate a disincentive to freedom of expression as to be without the margin of appreciation allowed to the United Kingdom. Further, by the practice direction, paragraphs 11.7 and 11.10, the court retains control over the reasonableness of the costs of insurance. That control is unaffected by the prohibition in paragraph 11.9 on reducing ‘a percentage increase’, simply on the ground that the total appears disproportionate for the simple reason that an insurance premium is not ‘a percentage increase’ but a cost not calculated by reference to a percentage of base costs.

Applying the three tests required by Article 10, it is not in dispute that the scheme for recovery of an ATE premium is prescribed by law and that it serves a legitimate social purpose. I am satisfied, that it is necessary in a democratic society that a scheme such as this should exist. It is necessary to permit a claimant who contends that he has been defamed by a newspaper article to vindicate his rights under Article 8, because his reputation is a feature of his private life, by litigation where the risks of the litigation for him are not unacceptably high. I am satisfied that the burden imposed by the ATE premium scheme on defendant publishers is not so large and not so lacking in appropriate controls as to amount to a disproportionate interference in their right to freedom of expression. I do not, on the material which I have considered, believe that the Strasbourg Court, when faced with this as a discrete issue, would conclude that the UK scheme was outwith the margin of appreciation allowed to the United Kingdom. For those reasons, my answer to the question referred to me is that the award of additional liabilities to the claimant would not be incompatible with the defendant’s right of expression as a publisher under Article 10 .”

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 domestic law should reflect MGN Limited to the extent of laying 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 applied at the domestic level, 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. In particular, he noted that Mr M. had embarked on legal proceedings and incurred liabilities to his lawyers in 2009, at a time when the CFA scheme had been held by the House of Lords to be compatible with Article 10 of the Convention. Depriving the claimants of the ability to recover the success fees and ATE premiums would not only amount to a plain injustice, but it would also risk infringing their 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 and even Article 8, given that the purpose of his bringing the proceedings was for the purpose of restoring or maintaining personal dignity.

According to Lord Neuberger, it was a fundamental principle of any civilised system of government that citizens were entitled to act on the assumption that the law was set out in legislation and would 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.

In conclusion, he stated that:

“It is right to record that we were pressed with the argument that Mr [M.] would not in fact suffer if the costs order did not entitle him to recover the success fee or ATE premium, because his lawyers and insurance company would not in practice press for payment of, respectively, the success fee or ATE premium, if they knew that he could not recover them from ANL. That was an argument which was also raised in Lawrence (No 3) , and it was rejected ... . In any event, it must be at least arguable that lawyers who conducted their professional practices on the basis that the 1999 Act regime was lawful, could claim that their A1P1 rights were infringed if they were, in practice, deprived of their success fees by a determination that the CFAs into which they had entered into with their clients were not fully enforceable.

In summary, then, in the present case either ANL or Mr [M.] has to suffer an injustice (including infringement of Convention rights), and it is clear to me that it should be ANL that suffers, as the injustice on Mr [M.] would be significantly more substantial. Accordingly, I would dismiss the appeal in Miller v ANL ...”

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. As a consequence, success fees due under CFAs entered into after 6 April 2019 are no longer recoverable from media defendants in privacy and publication proceedings. ATE insurance premiums 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 imperilled 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 imperilling 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 in the present case to pay both the claimant’s success fees and ATE premiums.

QUESTIONS TO THE PARTIES

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

2. Does the recoverability of the ATE premiums raise any separate issues under Article 10 of the Convention from the recoverability of the success fees?