In an ironic twist the privacy case BNM v MGN has become substantially more well known for its impact on costs legislation than revelations that a premier league footballer was ‘privately dating’ a school teacher. The Court of Appeal judgment in favour of the appellant has been awaited with eager anticipation amongst legal professionals keen to gain further clarity on the post LASPO application of proportionality in regard to costs and additional liabilities.
What does the outcome of this judgment mean to lawyers their clients, and those funding the litgation? First we have to acknowledge that BNM v MGN is the exception not the rule:
Post LASPO, a successful claimant is only able to recover the base fees and their own disbursements from the losing defendant, which means that any additional costs such as insurance premiums and success fees payable under a conditional fee agreement are borne by the claimant.
There are, however, some exceptions to the general rules within LASPO which still allow, in some cases, additional liabilities including ATE premiums and success fees to be claimed from the defendant should they lose. Privacy and defamation cases are one of those exceptions, such as the ‘phone hacking’ involved in BNM v MGN.
With this in mind, the judgment offers some welcome encouragement for claimant defamation lawyers that they can recover appropriate levels of income and specifically, that ATE policies are still viewed by the courts as critical when it comes to access to justice. Of paramount interest to clients is whether they can afford to take their case to the Judge once a national newspaper has infringed their rights because a major concern is the risk of adverse costs.
So therefore the ATE premium is still recoverable from the defendant MGN, case closed. Well not quite because despite being an exception, the costs in any litigation case have to be ‘reasonable and proportionate’ a term which is defined differently before and after LASPO. This term is where the grey area resides and it raises two questions: Do the rules determine whether the ‘pre’ or ‘post’ LASPO definition of ‘reasonable and proportionate’ should be applied? And, what is considered proportionate under each definition?
A great deal hinged on the answer to both these questions, specifically whether access to justice is preserved or degraded as a result of the cost implications of the LASPO reforms. Senior Costs Judge Master Gordon-Saker ruled that despite the case being an exception, the post-LASPO definition of reasonable and proportionate should be used. Whilst he recognised that the ATE premium was reasonable, he ruled that it, along with the success fees, were not proportionate and therefore stated that MGN were only liable for 50% of these costs.
The claimants legal team believed that Master Gordon-Saker had erred in his judgment and so took the matter to the Court of Appeal.
Mr James Laughland, Barrister (Temple Garden Chambers) appearing on behalf of the Appellant explains:
“The Court of Appeal’s decision in BNM v MGN reinforces the position of ATE as a necessary and integral part of the mechanism for achieving access for justice for litigants in those proceedings where the recovery of additional liabilities has been maintained.
Had it been held that the now-not-so-new test of proportionality applied to both success fees and ATE then this would have made the arrangements for litigation funding in these types of publication and privacy proceedings unworkable.
The Transitional Provisions of CPR Part 48, and the guidance in the accompanying Practice Direction, ought to have made it clear to the Senior Costs Judge that the former costs rules, together with the well-established practice and procedure for the assessment of additional liabilities, remained in force for those parties with a pre-commencement funding arrangement, as BNM had. That this is so has now been confirmed by the Court of Appeal.
Regrettably, BNM v MGN did not prove to be the opportunity for the Court of Appeal to give guidance of wider application on how reductions of base costs on the grounds of proportionality is to work in practice. As the base costs now have to be reconsidered in this case, that guidance will have to wait for another day.”
The importance of this ruling can be further understood with the realisation that compensation due to victims of conduct such as the phone hacking scandal may be relatively small and insufficient to cover their own legal costs let alone adverse costs. When poised against the financial might of an organisation such as the Mirror Group, it really is David against Goliath. Without the ability to recover additional liabilities i.e. success fees and ATE insurance premiums in full, the successful claimants will be substantially out of pocket making privacy and defamation claims, in the prophetic words of Mr Laughland: ‘Unworkable’. With this judgment, lawyers can focus on their professional expert services again and continue to provide genuine access to justice.
All eyes will now be focused on Master Gordon-Saker’s reassessment of the Court of Appeal’s decision and whether he will provide the guidance that the litigators and ATE Underwriters need.
Director, Underwriting division