Campbell v MGN Ltd (No. 2) (Costs)
| Jurisdiction | England & Wales |
| Judge | LORD NICHOLLS OF BIRKENHEAD,LORD HOFFMANN,LORD HOPE OF CRAIGHEAD,BARONESS HALE OF RICHMOND,LORD CARSWELL |
| Judgment Date | 20 October 2005 |
| Neutral Citation | [2005] UKHL 61 |
| Date | 20 October 2005 |
| Court | House of Lords |
[2005] UKHL 61
HOUSE OF LORDS
Appeal Committee
Lord Nicholls of Birkenhead
Lord Hoffmann
Lord Hope of Craighead
Baroness Hale of Richmond
Lord Carswell
Appellants:
James Price QC
Martin Farber
(Instructed by Schillings)
Respondents:
Richard Spearman QC
Jeremy Morgan QC
Andrew Sharland
(Instructed by Davenport Lyons)
My Lords,
I have had the advantage of reading in draft the speeches of my noble and learned friends Lord Hoffmann, Lord Hope of Craighead and Lord Carswell. For the reasons they give, with which I agree, I would dismiss this petition.
My Lords,
Naomi Campbell sued the publishers of the Daily Mirror ("MGN") for breach of confidence. She alleged that they had published information in respect of which she was entitled to privacy. After a trial lasting five days in February 2002, Morland J found the case proved and awarded her £3,500 damages and costs. This modest award reflected the fact that Ms Campbell conceded that her own conduct prevented her from objecting to the newspaper's most serious allegation, namely, that she had been addicted to drugs. Her complaint concerned the publication of additional details and photographs concerning the treatment she was receiving. In October 2002 the Court of Appeal unanimously reversed the decision of Morland J and dismissed the action, ordering Ms Campbell to pay the costs of the trial and 80% of the costs of the appeal: [2003] QB 633. In May 2004 this House, by a majority of 3 to 2, reversed the decision of the Court of Appeal, restored the order of Morland J. and ordered the respondents to pay Ms Campbell's costs in the Court of Appeal and in this House: [2004] 2 AC 457.
Pursuant to the order of this House, Ms Campbell's solicitors served three bills of costs: £377,070.07 for the trial, £114,755.40 for the appeal to the Court of Appeal and £594,470.00 for the appeal to the House of Lords. MGN were mortified to find that although the award of damages had been only £3,500 (and five of the nine judges who considered the matter had thought that they should not be liable at all), they were being asked to pay legal costs (in addition to their own) in the sum of £1,086,295.47. This may be compared with the £1.5m damages which the European Court of Human Rights in Tolstoy Miloslavsky v United Kingdom (1995) 20 EHRR 442 thought so disproportionate even for a foul and persistent libel upon a respected public figure that it infringed the right to freedom of expression guaranteed by article 10 of the Convention.
MGN likewise complain that their right to freedom of expression has been infringed. They say that the threat of liability to pay a large sum by way of costs is just as likely to inhibit freedom of expression as the threat of liability to pay a large sum by way of damages. But the complaint is not, at any rate for the moment, concerned with the global figure for the costs of the whole proceedings. One reason is that the three bills have not yet been assessed. Costs awarded by the High Court and Court of Appeal are assessed in accordance with principles stated in Part 44 of the Civil Procedure Rules. Only costs which have been proportionately and reasonably incurred and which are proportionate and reasonable in amount will be recoverable against the paying party: see rules 44.4 and 5 of the CPR. Costs in the House of Lords are taxed on similar principles by the Taxing Officers of the House: see Practice Directions Applicable to Judicial Taxations, para 15.1. So the amount which turns out to be actually payable by MGN may be a good deal lower than the sum demanded.
In the meanwhile, in advance of assessment, MGN raise a point of principle about their liability to the costs of the proceedings in the House of Lords. A special feature of this stage of the proceedings was that Ms Campbell retained solicitors and counsel pursuant to a conditional fee agreement ("CFA"). At the trial and in the Court of Appeal they had acted under an ordinary retainer. But the appeal to the House of Lords was conducted pursuant to a CFA which provided that if the appeal succeeded, solicitors and counsel should be entitled to success fees of 95% and 100% respectively. Thus the basic profit costs claimed by the solicitors and fees claimed by counsel came to £288,468. Disbursements were £26,020.65. This basic total was more than twice the costs incurred by MGN but these figures remain, as I have said, subject to taxation. It was the £279,981.35 success fees which brought the figure up to £594,470.
By a petition presented to the House on 21 February 2005, MGN seek a ruling of the Appeal Committee that they should not be liable to pay any part of the success fee on the ground that, in the circumstances of this case, such a liability is so disproportionate as to infringe their right to freedom of expression under article 10 of the Convention. In view of the importance of this question, it has been argued before an enlarged Appeal Committee consisting of those members of the House who heard the substantive appeal.
Although CFAs first made an appearance in the Courts and Legal Services Act 1990, the legislation giving rise to this dispute is largely to be found in the Access to Justice Act 1999 and subsequent subordinate legislation. (A full account of the earlier history will be found in the judgments of the Court of Appeal in Callery v Gray [2001] 1 WLR 2112 and Hollins v Russell [2003] 1 WLR 2487). Section 58 of the 1990 Act, which was substituted by section 27 of the 1999 Act, provides that a CFA which satisfies all the specified statutory conditions shall not be unenforceable by reason only of its being a CFA. This reverses the common law rule that it is unlawful for lawyers to charge fees which depend upon the outcome of the case. A CFA may provide that fees and expenses are to be payable "only in specified circumstances" and may provide for a "success fee" by which, in specified circumstances, fees are increased above the amount which would be payable if they were not payable only in specified circumstances.
The conditions laid down for an enforceable CFA are, inter alia, that it must relate to proceedings of a description specified by the Lord Chancellor, it must state the percentage by which the amount of fees which would be payable if it were not a CFA is to be increased and the percentage must not exceed the percentage specified by the Lord Chancellor. The Conditional Fee Agreements Order 2000 (SI 2000/823) allowed the use of CFAs in all litigation except criminal and certain family and environmental proceedings and fixed the maximum success fee at 100%.
Until the 1999 Act came into force, a successful litigant who used a CFA had to pay the success fee himself. It could not be included in the costs recoverable from the losing party. But this was changed when subsections (6) and (7) of the new section 58A were inserted into the 1990 Act:
"(6) A costs order made in any proceedings may, subject in the case of court proceedings to rules of court, include provision requiring the payment of any fees payable under a conditional fee agreement which provides for a success fee.
(7) Rules of court may make provision with respect to the assessment of any costs which include fees payable under a conditional fee agreement (including one which provides for a success fee)."
Under the Civil Procedure Rules and its accompanying Practice Directions, success fees are now (subject to assessment) normally recoverable from the losing party. Section 9.1 of the Practice Direction accompanying Part 44 of the CPR says that under an order for payment of 'costs' the costs payable will include an "additional liability" incurred under a "funding arrangement". A funding arrangement means a CFA or a policy taken out to insure against liability to pay the other side's costs ("after the event" or "ATE" insurance) and an "additional liability" is the success fee or the ATE premium. Part 11.8 of the Practice Directions deals with the assessment of the success fee:
"(1) In deciding whether a percentage increase is reasonable relevant factors to be taken into account may include:
(a) the risk that the circumstances in which the costs, fees and expenses would be payable might or might not occur;
(b) the legal representative's liability for any disbursements;
(c) what other methods of financing the costs were available to the receiving party.
(2) The court has the power, when considering whether a percentage increase is reasonable, to allow different percentages for different items of costs or for different periods during which the costs were incurred."
It is important to notice the impact of the recoverability of success fees upon the principle that recoverable costs should have been proportionately and reasonably incurred. The overriding objective set out in CPR 1.1 includes—
"Dealing with the case in ways which are proportionate
(i) to the amount of money involved;
(ii) to the importance of the case
(iii) to the complexity of the issues; and
(iv) to the financial position of each party.".
As Lord Woolf CJ said in Lownds v Home Office (Practice Note) [2002] 1 WLR 2450, 2451, the policy is that "litigation should be conducted in a proportionate manner and, where possible, at a proportionate cost." But the test of proportionality and reasonableness is applied only to the basic costs. It is not applied to the total sum for which the losing party may be liable after the addition of the success fee. This is explicitly recognised in the Practice Direction. Section 11.5 says:
"In deciding whether the costs are reasonable and (on a standard basis assessment) proportionate, the court...
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