MGN Limited v The United Kingdom - (Application no. 39401/04) Read judgment / press release / our analysis
The European Court of Human Rights has ruled that the UK’s controversial no-win-no-fee costs system violated the Daily Mirror’s freedom of expression rights after it was forced to pay model Naomi Campbell’s legal fees after a 2004 House of Lords judgment.
The European Court attacked the present costs system, and in particular success fees, using the findings of the recent review by Lord Justice Jackson, which the government intends to mostly implement. It held that the costs system often amounted to the “blackmail” of defendants, and has had an unjustified chilling effect on the press.
In 2004 the House of Lords (now the Supreme Court) held by a 3 to 2 majority that the publication of photographs of Campbell outside a rehabilitation clinic was a disproportionate interference with her right to privacy, even though the fact that she was receiving treatment was in the public domain. The background to the House of Lords judgment can be found here.
The European Court of Human Rights case concerned two complaints brought by MGN Limited, the publisher of The Daily Mirror (see the court’s press release).
In the first, MGN Limited contested the national courts’ finding against it that it breached the privacy of Naomi Campbell, following articles published in February 2001 in which it divulged details about her drug addiction therapy.
In the second, MGN Limited complains that, following that decision, it was obliged to pay unreasonably high court fees on account of a “conditional fee arrangement” and, notably, “success fee” for which domestic law allowed. MGN relied on Article 10 (freedom of expression).
First ground – breach of confidence
MGN lost on the first ground, effectively agreeing with the House of Lords Majority, which may had predicted:
the Court considers convincing the reasons for the decision of the majority of the House of Lords. The majority underlined, inter alia, the intimate and private nature of the additional information about Ms Campbell’s physical and mental health and treatment and concluded that the publication of the additional material about that treatment had been harmful to Ms Campbell’s continued treatment with NA in the United Kingdom and risked causing a significant setback to her recovery as well as being considerably distressing for her. The photographs had been taken covertly with a long range lens outside her place of treatment for drug addiction and would have been clearly distressing for a person of ordinary sensitivity in her position and faced with the same publicity; the photographs had been taken deliberately with a view to inclusion in the article and were accompanied with captions which made it clear she was coming from her NA meeting thereby connecting those photographs to the private information in the articles; and those photographs allowed the location of her NA meetings to be identified. (para 151)
Second ground – freedom of expression and litigation costs
MGN it won on the second ground, with the court finding that the UK no-win-no-fee costs system, where unsuccessful parties sometimes have to pay double what they otherwise would have because of a “success fee”, breached the Daily Mirror’s freedom of expression rights under Article 10 of the European Convention on Human Rights.
Article 10 provides that in order for the state to interfere with freedom of expression rights, the interference must be (1) prescribed by law, (2) pursue a legitimate aim and (3) be necessary in a democratic society.
As to (2), the court found that success fees:
sought to achieve the legitimate aim of the widest public access to legal services for civil litigation funded by the private sector and thus the protection of the rights of others within the meaning of Article 10 § 2 of the Convention (para 197)
However, as to (3), the court held that the success fees were not necessary in a democratic society. It relied upon the flaws highlighted by the recent Jackson review, which has recommended that success fees be reduced:
one of the particularities of the present case is that this general scheme and its objectives have themselves been the subject of detailed and lengthy public consultation notably by the Ministry of Justice since 2003. While most of this process transpired after the House of Lords judgment in the second appeal in the present case (2005), it highlighted fundamental flaws underlying the recoverable success fee scheme, particularly in cases such as the present.
The three main flaws in the system which Jackson highlighted were that first, there were no qualifying requirements for claimants to enter into a conditional fee agreement (CFA), secondly that there was no incentive on the part of the claimant to control legal fees as they would not incur them even if they lost, and third that recoverable success fees had a “blackmail” or “chilling” effect on parties who were often driven to settle cases early.
The Inforrm Blog, written by media law experts, has posted its summary of the case. Its conclusion is:
The decision on recoverable success fees is, potentially, of much greater significance. Although the Government is already proposiing to remove such fees, this judgment finds that their imposition under the present CFA regime in media cases is a breach of Article 10. Although the decision has no immediate domestic impact – it is binding on the Government, not directly on the courts – it nevertheless means that, in practice, the current CFA regime is dead. If (contrary to its present view) the Government were to decide not to reform the CFA regime, that decision would be a breach of Article 10.
It should, however, be noted that the decision is not that all success fees are incompatible with Article 10 – only fees at the rate of 100%. The decision does not, of itself, suggest that all success fees are, inevitably, inconsistent with Convention rights.
Rosalind English’s analysis of the decision is here. Given that the present government has proposed to implement most of Lord Justice Jackson’s proposals, it may escape future censure from the European Court.
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I always did like the idea of contingency fees.
Thank God.
No-win-no-fee makes sense considered in isolation. Awarding costs to the winner also makes sense, when considered in isolation.
However, when combined these two concepts become a nonsense. As the judgement states, we end up with “costs” that will only ever be paid, if at all, by the opposing party in the litigation. There is thus every incentive to inflate costs, and no incentive at all to keep costs down. It should be no surprise that we now have “reputation management” law firms whose entire business model is based on racking up costs as much as possible and then terrifying the defendant with the possibility of financial ruin.
“Blackmail” describes it perfectly.
The English court system has two choices. It should either go to the United States’ system, where there is no-win-no-fee but costs are not usually awarded. Or it should revert to the old English system where costs could be awarded but there was no possibility of contingency fees.