Three newspaper publishers challenged orders to pay the extra costs of their opponents’ litigation funding. The question was how to protect freedom of expression when claimants had already incurred costs in reliance on a scheme approved by Parliament and the House of Lords.
Times Newspapers Ltd v Flood and Miller v Associated Newspapers Ltd were libel cases. Frost v MGN Ltd arose from unlawful information gathering. Each publisher relied on article 10 of the European Convention on Human Rights to challenge the costs orders.
The 1999 costs regime
Under the Access to Justice Act 1999 regime, a lawyer could agree to take a case for no fee if it failed and an increased fee if it succeeded. A claimant could also insure against the risk of paying the opponent’s costs. Under the applicable rules the losing defendant could be ordered to reimburse the success fee and the insurance premium, as well as ordinary legal costs.
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The House of Lords had upheld the recovery of a success fee against a newspaper in Campbell v MGN Ltd (No 2). Later reforms restricted recovery in most civil cases. At the date of this judgment, the exception for defamation and privacy proceedings remained significant.
The Strasbourg decision and the proposed rule
In MGN v United Kingdom, the European Court of Human Rights held that making MGN pay the success fees in Naomi Campbell’s case infringed article 10. The cost of losing could put pressure on publishers to settle defensible claims. Claimants had little incentive to control the fees, while solicitors could select the cases they expected to win.
The publishers argued that a costs order requiring a newspaper to pay a success fee and insurance premium in a case affecting freedom of expression would normally breach article 10. Lord Neuberger recognised the force of that argument and the competing need for access to justice.
A ruling on the validity of the scheme would affect the UK government, which was absent from the appeals. The Court could decide the cases without settling that wider question.
Mr Miller and Mr Flood
Mr Miller obtained £65,000 in libel damages after the Daily Mail accused his consultancy of obtaining public contracts improperly. He had entered his funding agreements before the Strasbourg ruling. The success fees and insurance premium he claimed greatly exceeded the damages.
Mr Flood recovered £60,000 over the continued online publication of corruption allegations. An investigation had found no evidence against him. The public-interest defence succeeded for the original publication but failed for the period after 5 September 2007. His funding arrangements also predated the Strasbourg ruling.
Even assuming the publishers’ proposed rule applied, Mr Miller and Mr Flood had undertaken financial obligations on the expectation that the statutory scheme would operate. That expectation was protected by article 1 of the First Protocol. A retrospective refusal to enforce the orders would interfere with their property rights.
The Court weighed that interference against the indirect chilling effect of the costs orders on the press. For these claimants the graver injustice would be to remove the protection after they had relied on it. The Miller appeal and the article 10 ground in Flood therefore failed.
The phone-hacking claims
The Frost litigation arose from phone hacking and obtaining private information by deception. These claimants entered their conditional fee agreements after the Strasbourg decision. Their claims to recover costs therefore raised a different issue from the reliance of Mr Miller and Mr Flood.
Their reliance argument was weaker because they contracted after MGN v United Kingdom. Even so, until the 2012 Act took effect the 1999 regime remained lawful domestically. Parliament had not given Strasbourg decisions direct effect: section 2 of the Human Rights Act requires only that they be taken into account.
Article 10 was engaged because the complaints generally included publication. But the awards chiefly concerned systematic unlawful intrusions into private lives. There was no suggestion that MGN had been gathering this information to contribute to a debate of legitimate public interest. The proposed rule did not give it a defence to those costs orders.
The judge’s discretion in Flood
Times Newspapers separately argued that Nicola Davies J could not reasonably order it to pay all of Mr Flood’s remaining costs. The Court of Appeal had upheld her, and the Supreme Court agreed that the point was within her discretion.
Mr Flood had gone to trial to vindicate his reputation, faced a justification defence the publisher later abandoned, and recovered substantially more than he had offered to accept. The judge was entitled to regard him as the overall winner.
The publisher’s partial success on its public-interest defence was relevant. It did not oblige the judge to apportion costs issue by issue.
No declaration of incompatibility
The Court made no declaration that the legislation was incompatible with the Convention. The effect of later reforms had not been examined closely enough to justify a ruling on them.
Verdict: The Supreme Court unanimously dismissed the appeals in Flood, Miller and Frost. The costs orders stood. The Court left open the wider article 10 question and upheld the trial judge’s exercise of discretion in Flood.
Source: Times Newspapers Ltd v Flood and related appeals (costs) [2017] UKSC 33
