has failed in its test case House of Lords challenge to the way no win,
no fee, agreements should be approached in defamation and breach of
confidence cases.

The challenge was mounted in the wake of MGN’s
defeat in its battle with supermodel, Naomi Campbell, over Daily Mirror
revelations about her attending Narcotics Anonymous.

In the end
Campbell won a total of £3,500 damages, but MGN has been left facing
the prospect of paying her potential legal costs bill of £1,086,295.

as the House of Lords rejected MGN’s challenge to the principles under
which it could be ordered to pay this much, Lord Hoffmann said that MGN
was “mortified” when it discovered the potential amount costs – a final
figure has not been decided yet – when balanced against the level of
damages and the fact that five out of nine judges who dealt with the
case had ruled that they should not be held liable.

However, he
and four other law lords went on to reject claims by MGN that if the
costs bill, which does not take into account the group’s own legal
costs, is allowed it will amount to a breach of the media’s rights to
freedom of expression.

MGN’s complaint centred on the costs in
respect of Campbell’s representation in the final House of Lords round
of her legal battle. For that she did a deal with top media lawyers,
Shillings, under which they would act on a no win – no fee basis.

they won, however, they claimed they were entitled to a 100 per cent
uplift in their costs. This is regarded as compensation for the risk
they would have taken had they lost. It was this that MGN challenged.

Lord Hoffmann said : “The basic profit costs claimed by the solicitors and fees claimed by counsel came to £288,468.

were £26,020.65. This basic total was more than twice the costs
incurred by MGN but these figures remain. It was the £279,981.35
success fees which brought the figure up to £594,470.”

During the
hearing in the House of Lords Richard Spearman QC for the Mirror argued
before the law lords that the situation over claims for costs in
actions which are funded in this was now “totally out of control.”

had sought a ruling 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 would so disproportionate as to infringe their right
to freedom of expression under article 10 of the Convention.

Hoffmann in the main judgment today said : “There is a human right to
freedom of expression with which the imposition of an excessive cost
burden may interfere.”

But he said costs were awarded only
against defendants who had been found to have wrongfully published
matter which is defamatory or in breach of a claimant’s right to the
confidentiality of personal information.

“So it may be said,
and Ms Campbell’s counsel does say, that there is no harm in inhibiting
such publications,” he said, though he accepted what he described as
“the effect which the threat of heavy liability may have upon the
conduct of a newspaper in deciding whether to publish information which
ought to be published but which carries a risk of legal proceedings
against it.”

In addition to the question of freedom of
information breaches, the case also focussed on the ability of Campbell
to pay her legal costs without the need for a no win – no fee agreement.

on that Lord Hoffmann said : “There is in my opinion nothing in the
relevant legislation which suggests that a solicitor, before entering
into a CFA, must inquire into his client’s means and satisfy himself
that he could not fund the litigation himself.

“By what
criteria should such an inquiry be conducted? An application for legal
aid requires a disclosure of means and sets out elaborate criteria for
eligibility. But there is no such machinery for a conditional fee
arrangement (CFA).

“And if the solicitor is not expected to
make such inquiries in advance, it would be most unfair for the success
fee to be afterwards disallowed on the ground that his client had
sufficient means.”

He added that Campbell denied she was so
wealthy that she could view with equanimity the risk of having to pay
both her own and MGN’s costs.

“She says, probably with justification, that there can be few such individuals,” said Lord Hoffmann.

he said he could not leave the case without recognising that CFAs were
causing problems with defamation litigation which had given rise to
concern that freedom of expression may be seriously inhibited. He said
it could be that ultimately new legislation would have to be introduced
to deal with the problem.

“One object of extending CFAs to
defamation and breach of confidence claims was to enable people of
modest means to protect their reputations and privacy from powerful
publishers who previously did not have to fear litigation even if their
publications were totally unjustified,” he said.

they would be able to vindicate their rights, which are also Convention
rights, in the way that the rich and powerful have always been able to
do. There may well be more of these cases in future.

ways of moderating the costs of defamation cases would then be in the
best interests of all concerned. But the rich and powerful have also
had to pay the price of failure. Finding ways of ensuring that the
impecunious claimant can also do this may be more of a challenge. In
the end, therefore, it may be that a legislative solution will be
needed to comply with article 10.”

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