Campbell v MGN Ltd

The House of Lords considered whether success fees payable under conditional fee agreements (CFAs) and recoverable from a losing defendant are incompatible with the defendant's right to freedom of expression under article 10 of the European Convention on Human Rights. The court held that the statutory scheme (in particular sections 58 and 58A of the Courts and Legal Services Act 1990 as amended and the Civil Procedure Rules and Practice Directions on costs and CFAs) is a legitimate legislative choice designed to secure access to justice and is not, as such, incompatible with article 10.

The court emphasised that the proportionality and reasonableness tests in the Civil Procedure Rules and Practice Direction (notably Part 44 and Practice Direction, section 11) permit separate assessment of the base costs and any percentage success fee and afford the courts scope to control unreasonable or disproportionate success fees. The Lords rejected a requirement for means testing before entering into a CFA and refused to disallow success fees simply because they might produce a recoverable liability that appears disproportionate when added to base costs.

The decision recognised concerns about a "chilling effect" on the press and recorded that judges should be vigilant (including by use of cost-capping and robust case management) and that legislative remedies might be needed in future, but concluded that in principle the recoverability of success fees against media defendants is compatible with Convention rights.

Background and parties: Naomi Campbell claimed breach of confidence against the Daily Mirror (MGN) arising from publication of information and photographs about drug treatment. After trial Morland J awarded modest damages; the Court of Appeal reversed and dismissed the action; this House ultimately restored the trial judge's decision in the substantive appeal. The present proceedings concerned a petition by MGN challenging the recoverability from them of the success fee payable under Ms Campbell's conditional fee agreement for her appeal to the House of Lords.

Nature of the application: MGN sought a ruling that they should not be liable to pay any part of the success fee because, in the circumstances, liability to pay such a fee is so disproportionate as to infringe their article 10 right to freedom of expression.

Procedural posture: The substantive proceedings had already been determined in the House of Lords (see [2004] 2 AC 457). Pursuant to costs orders, Ms Campbell's solicitors presented large bills which included substantial success fees arising from a CFA used for the House of Lords appeal. MGN brought a petition to the Appeal Committee challenging in principle the recoverability of such success fees in media cases on article 10 grounds.

Issues framed:

• Whether the statutory scheme allowing recovery of success fees under CFAs from losing parties is incompatible with article 10 of the Convention when applied to media defendants in defamation or privacy/breach of confidence actions.
• Whether a success fee should be disallowed where the claimant could have funded the litigation without a CFA (i.e., the relevance of the claimant's means).
• What safeguards exist under the Civil Procedure Rules and Practice Directions to prevent disproportionate burdens on defendants.

Court's reasoning and conclusions: The Lords accepted that funding access to justice is a legitimate aim and that Parliament was entitled to adopt the scheme of CFAs with recoverable success fees. The court drew a distinction between the CPR's tests of proportionality for base costs and the separate assessment of the percentage uplift (success fee) under Practice Direction, section 11. It held there is no requirement in the legislation or rules for solicitors to means-test clients before entering CFAs, and it would be impractical and unfair to disallow success fees afterwards on that basis. The Practice Direction and court powers permit the assessment and, where appropriate, reduction of success fees as unreasonable or disproportionate, and additional case-management tools (including early cost-capping orders) are available to control potential abuse. While recognising the "chilling effect" and expressing concern about certain CFAs conduct, the House dismissed the petition and left open that legislative solutions might be desirable to address systemic problems.

Petition dismissed. The House held that the statutory scheme permitting recovery of success fees under conditional fee agreements from losing defendants is a permissible legislative choice compatible with Convention rights in principle. The Court rejected the argument that success fees must be disallowed as an infringement of article 10, rejected any general requirement for means-testing before CFAs are entered, and explained that existing rules (CPR Part 44 and the Practice Direction, in particular section 11) and active case management provide the means to prevent unreasonable or disproportionate success fees. The decision recorded judicial concern about the potential "chilling effect" and recommended vigilant use of procedural safeguards and possible future legislative amendment, but found no incompatibility on the facts and law addressed.

Trial before Morland J (findings for claimant; award £3,500). Court of Appeal reversed and dismissed the claim ([2003] QB 633; [2002] EWCA Civ 1373). House of Lords allowed the substantive appeal and restored Morland J's decision ([2004] 2 AC 457). This petition to the House dealt with the recoverability of CFA success fees and was decided by the House in [2005] UKHL 61.