CFAs with success fees
Campbell v MGN Limited (No 2) [2005] UKHL 61


The latest battle in the war over the use of conditional fee agreements (CFAs) has been heard in the House of Lords. In the aftermath of model Naomi Campbell's successful privacy claim - in which she was represented under a CFA in the substantive appeal to the Lords - Mirror Group Newspapers argued that her costs for that hearing with success fees of up to 100% breached their rights to freedom of expression. It also claimed that the recovery of such success fees generally from the media is unlawful.


In August, the Department for Constitutional Affairs published its response to a consultation on regulation of CFAs, declining to make any changes in media cases despite representations from the press. But it said it would consider the decision in Campbell and ensure that any guidance given was taken forward.


The Lords have found that CFAs with success fees in media cases are lawful. While Ms Campbell's camp and claimant lawyers celebrated this - as the future of CFAs in media cases might have been at risk - MGN lamented its loss because it argued that for the media in general the right to free speech itself was at risk.


MGN claimed that the system allowing recovery of success fees from defendants in media cases violates article 10(1) of the European Convention on Human Rights (ECHR), given that its interference with their rights is not 'necessary in a democratic society'. Ms Campbell's team countered that the existing legislative scheme clearly does not draw any distinction between 'media' cases and other proceedings.


MGN said there was no pressing social need for a rich claimant such as Ms Campbell (although her means were in dispute) to have access to a CFA with a success fee; the uplift was simply a bonus to the claimant's lawyers and a penalty to the defendant for having lost the case. Ms Campbell's lawyers argued that post Steel and Morris v The United Kingdom [2005] ECHR 103 in the European Court of Human Rights - in which it was held that the lack of legal aid prevented the applicants from presenting their case effectively - the UK had to provide a statutory funding scheme to be ECHR compliant. CFAs are an integral part of this scheme and success fees - intended to be revenue neutral - an integral part of CFAs.


While MGN argued the system had a wide-ranging chilling effect on media organisations generally, Ms Campbell's team retorted that the costs in dispute would not impact on the future participation by publishers in debates of legitimate public interest, beyond deterring intrusions of privacy of the kind at issue in this case.


Lord Hoffmann accepted that the system could give rise generally to a 'blackmailing effect' when used by impecunious claimants without after-the-event insurance, and he supported the principle of costs-capping suggested in the Musa King ruling last year (King v Telegraph Group Ltd [2004] EWCA Civ 613). But the system was provided for by legislature; there was no requirement for means testing; and issues of proportionality of costs or success fees would be dealt with by the costs judges. Thus CFAs with success fees in media cases were lawful.


Both sides expressed their view to the Gazette. Ms Campbell's lawyer, Keith Schilling, senior partner of London firm Schillings, said: 'Traditionally, libel defendants had an enormous economic advantage in litigation and took full advantage of it by waging "cheque-book litigation" designed to out-price a claimant.


'It was common practice, and still is, for media defendants not to settle many cases early on, despite recognition that the prospects of success were poor, in the knowledge that some claimants may give up. The availability of CFAs to anyone, irrespective of their financial position, has created a more level playing field.'


He stressed he was not an apologist for all aspects of the current system, which is 'far from perfect', but suggested that 'it would be wrong to think there are no checks and balances. There is some deterrent or downward pressure effect on a claimant, since in many cases they will remain liable for the defendant's costs if they lose. If a claimant's lawyers overspend, assessment of costs under the Civil Procedure Rules 1998 by a costs judge seems a reasonable and proportionate means of curbing it'.


Not surprisingly, the head of the legal department at MGN takes another view. Marcus Partington told the Gazette: 'The judgment of the Lords is, effectively, a cop-out. They recognise that there is a problem but are unwilling to do anything about it. Instead they have pushed the problem back to the government, which needs to stop the system of giving people access to justice through CFAs being hijacked by firms which have enriched themselves to the tune of almost £1,000 per hour. The government should stop success fees being recovered from the losing party, as is the case in Scotland - a fact Lord Hope recognised in his judgment.'


As for any court powers intended to ensure that costs are reasonable and proportionate, Mr Partington's view is that they were 'not being used properly to reduce costs and do not prevent demands, such as the costs demand in the Campbell case, which could never be defended as either reasonable or proportionate; how can one explain a demand for nearly £594,000 for the costs of a two-day hearing?'


Mr Schilling said the appeal had nothing to do with whether their fees were reasonable and proportionate, which he said was evidenced from the judgment. On the contrary, 'the assumption was we would only recover on assessment costs that were reasonable and proportionate', he explained, adding: 'Allegations that they are not are misplaced and premature (as well as lacking in proof). The costs assessment will take place before a costs judge in the usual way some time next year.'


It seems unlikely that the two sides will reach any agreement on the costs question. Accordingly, it will be a matter for the costs judges to consider those costs within the process of assessment in the normal way, and determine their reasonableness and proportionality.


See law report




By Amber Melville-Brown, David Price Solicitors and Advocates, London