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Supreme Court upholds award of success fees and ATE premiums

20/04/2017
The Supreme Court has upheld the award of success fees and after-the-event ("ATE") insurance premiums to three successful defamation claimants whose lawyers acted on a "no-win no-fee" basis. However, the decision might not be the victory for claimants that it first appears.

With thanks to David Hill, Trainee Solicitor, for assistance with this article.

Times Newspapers Limited (Appellant) v Flood (Respondent) Miller (Respondent) v Associated Newspapers Limited (Appellant) Frost and others (Respondents) v MGN Limited (Appellant)

[2017] UKSC 33

On appeals from [2014] EWCA Civ 1574, [2016] EWHC 397 (QB) and [2016] EWHC 855 (Ch)

The Supreme Court has upheld the award of success fees and after-the-event ("ATE") insurance premiums to three successful defamation claimants whose lawyers acted on a "no-win no-fee" basis. However, the decision might not be the victory for claimants that it first appears.

Background

The three claimants – Flood, Miller and Frost – had each brought successful defamation claims against three newspaper publishers – Times Newspapers, Associated Newspapers and MGN. Each of the claimants' lawyers had acted in the main proceedings under a conditional fee agreement ("CFA"); more commonly known as a "no-win no-fee" arrangement.  Under these arrangements, the claimants' lawyers were to receive nothing if the claimant was unsuccessful, but up to twice their normal fee if successful. The claimants had also taken out ATE insurance against the risk of having to pay the defendants' costs if the claims failed. As a result, the defendant publishers were each liable for both the success fees and the ATE insurance premiums.

Owing to widespread criticism of no-win no-fee arrangements in general, CFAs have largely been replaced for claims brought after 1st April 2013. Controversially, however, defamation and privacy claims remain excluded from these changes. This is notwithstanding that critics claim that CFAs have a "chilling effect" on the freedom of the press, a view endorsed by the European Court of Human Rights in MGN v United Kingdom [2011].

Against the background of this criticism and in reliance on this authority, the three newspaper publishers appealed to the Supreme Court in respect of the order to pay the success fees and ATE premiums.

Judgment

The Supreme Court unanimously dismissed the appeals.

Lord Neuberger (giving the lead judgment) acknowledged that MGN v UK reflected widespread criticism of the CFA regime and had led to significant changes. He considered it inappropriate and unnecessary, however, to decide whether there was accordingly a general rule of domestic law that it would normally infringe a newspaper's freedom of expression rights (under Article 10 of the European Convention on Human Rights) to require it to reimburse the claimant's success fees in defamation or privacy cases.  

Instead, the key issue was that denying the claimants the ability to recover the success fee and ATE premium – which they had incurred in reliance on a statute then validly in force – would infringe their rights under Article 1 of the First Protocol to the Convention. The claimants rightly had a "legitimate expectation of a legal right".

To allow the appeals "would be a graver infringement" of the individuals' rights than the infringement which the newspaper publishers would suffer in the event the court dismissed the appeals. This was particularly true in the case of Frost, where the information obtained by the newspaper had been obtained through phone-hacking.

Comment

Significantly, the determinative point for Lord Neuberger was not whether an award of CFA-related costs constituted an infringement of Article 10 rights, but rather that citizens ought to be able to assume that the law will not change retroactively.

The judgment endorsed MGN v UK as being a "full and careful" decision and acknowledged that the award of additional costs in cases involving freedom of expression may infringe a newspaper publisher's rights. However, it also highlighted that the need to preserve those rights was outweighed by the need to give assurance to individuals seeking to rely on the law at it stood at the relevant time.

Ironically, this endorsement by the Supreme Court will be viewed as encouragement for those who wish to see an end to the CFA regime in defamation and privacy cases. The government has indicated previously that the recoverability of success fees and insurance premiums in these cases will run only until new costs protection measures for claimants have been introduced. This decision of the highest court might just be the catalyst the Government needs to introduce legislative reform – and thus, in what many see as an inevitable move, bring an end to the CFA regime's application in privacy and defamation cases.

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