The end of inter partes recoverability for success fees? Really?.....
Posted on 30th Aug, 2011
MGN Limited v United Kingdom [2011] ECHR 66
Everyone will recall the original litigation between these parties when Naomi Campbell successfully sued MGN for breach of confidence. She was awarded damages of £3,500.00. During the latter part of the litigation, she had been represented pursuant to a CFA with a 95% uplift.
Judgment was given in the House of Lords in 2004. Before the House of Lords, MGN had argued that recovery of a success fee was incompatible with MGN’s rights under Article 10 of the European Convention of Human Rights (“the ECHR”). The House of Lords did not agree. It concluded that whilst Article 10 guaranteed freedom of expression, this was subject to the restrictions or penalties which were necessary in a democratic society for the protection of the reputation or rights of others and that the recovery of the success fee by a winning claimant in a privacy action was “necessary” in a democratic society.
MGN then took its case to Europe on two grounds. First, it challenged the finding that MGN had acted in breach of confidence. It lost on this ground. Secondly, it argued that the recovery of a success fee violated the newspaper’s right to freedom of expression under Article 10 of the ECHR. Two articles of the ECHR are central to this case, Articles 6 and 10.
The European Court of Human Rights (“ECtHR”) was being asked to consider two issues:-
- In publication cases, were success fees necessary to ensure access to justice?
- Had a fair balance been struck between the newspaper’s right to freedom of expression (Article 10) and the individual’s right to access to justice (Article 6)?
The UK Government‘s argument was that the newspaper’s Article 10 rights had been interfered with and that this interference was prescribed by law i.e. Ms Campbell was entitled to recover additional liabilities from the newspaper. Further, that this interference with Article 10 rights was the product of the Government’s legitimate aim of ensuring the widest possible public access to legal services.
The details of the argument and reasoning of the decision are being pondered daily by far greater legal minds than the writer’s. Suffice to say that the ECtHR held that the current system of allowing for inter partes recovery of success fees amounted to an unacceptable interference with the newspaper’s fundamental right to freedom of expression (Article 10).
The ECtHR concluded that success fees were not necessary in a democratic society to ensure access to justice.
The Court highlighted the fact that if even claimants with “ample” means could enter into a CFA, there was no incentive for claimants to control costs. This in turn “chilled the right” to free speech, drove settlements in cases where there were good prospects of a successful defence and failed to provide any safeguard against lawyers “cherry picking” cases.
It is up to the UK Government to decide how to dealwith this judgment. Of more importance to the legal profession is what, if anything, the courts will choose to do with the sentiments expressed in this judgment. The rules of precedent mean that we are only likely to see a successful challenge to success fees in publication cases in certain specified circumstances.
Any decisions as to wider application are likely to follow a defendant’s challenge to a success fee on the basis that payment is in breach of the paying party’s right to a fair hearing (Article 6). Article 6 includes an implied right of “effective” access to the Court. It is not difficult to see paying parties referring to similar points as have been made in this case to support just such an argument – lack of qualifying requirements, lack of incentive to control costs and the “ransom effect”.
There has even been a suggestion that any attempt at retrospective application of any changes to the system to reflect the ECtHR judgment may, in itself, interfere with a receiving party’s rights under Article 1 of the first protocol of the ECHR. The argument would be that as a client had entered into a CFA with the expectation that the success fee would be recoverable inter partes, the subsequent damages claim was a “possession” and that interfering with inter partes recoverability of additional liabilities would amount to an interference of the receiving party’s rights under Article 1.
The writer’s view is that it is far too early to come to any definitive conclusions on the practical implications of this judgment, not least because there are also at least two cases currently in the pipeline where the courts may take an early opportunity to indicate how the judiciary intend to reflect this judgment. We shall be looking at the case again in detail when the position becomes more clear. One thing is certain, interest in this judgment is going to continue to grow.
The writer has “borrowed” heavily from Mark Friston’s comprehensive briefing note. Please click on this link to see a copy of his briefing note which is reproduced by kind permission.