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The cost of phone hacking: a case for exemplary damages?

Author: Dominic Crossley

15 Apr 2011 | 17:00

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Sympathy for News Group Newspapers and its News of the World employees is in short supply as the Metropolitan Police (finally), Mr Justice Vos, the Guardian, Keith Vaz, Tom Watson and countless claimants circle to bring this Fleet Street beast to its knees. Lord knows, even the Press Complaints Commission may decide they need a ticking-off.

But now that News Group have made the painful shift from belligerent resistance to apologies and offers, what can the victims now expect in compensation for having been subjected to this dark art and its spoils? It should be acknowledged that whilst reports of News Group's compensation fund give some grounds for encouragement, this fund exists in the continued ignorance of how many complainants are to share in it. Charlotte Harris, who knows more about this than most, has recently suggested as many as 7,000 victims. Cue watering eyes at Wapping. Their failure to properly investigate may have suited them in 2006, but in 2011 it means that it is only the Metropolitan Police who have a record of the extent of what was being commissioned of their busy private investigator.

So how much should be offered and what should be accepted? There is no one-size-fits-all solution. Sienna Miller (pictured) may have suffered more distress than most with apparently extensive hacking, harassment and intrusive articles. Other victims may have never featured in the newspaper, and were mere conduits to the private information of the high-profile targets, but these too are likely to have suffered shocking intrusions and distress; some lost jobs and faced accusations that they (not their voicemail) was the source of media stories. Pecuniary losses, such as lost income, will be sought to attempt to return the victims to the same financial position they would have been in if not for the hacking. Each of these claims will require careful analysis on both sides.

In terms of non-pecuniary loss Mr Justice's Eady's £60,000 award to Max Mosley remains the modest benchmark in the embryonic development of privacy damages awards. Whilst this sum was a substantial improvement on the £2,500 awarded to Naomi Campbell and the £3,750 Mr and Mrs Douglas received, the Mosley award has of course been dwarfed by settlements; chiefly James Murdoch's £700,000 settlement to Gordon Taylor and the subsequent arrangement with Max Clifford. News Group explained before Parliament in 2009 that Taylor's apparently generous settlement had nothing to do with the wish to keep these activities from the public eye so it is difficult to envisage how it can resile from reference to this sum now.

Compensatory damages for distress, loss of autonomy and injury to feelings plus aggravated damages by virtue of the way the matter has been dealt with by News Group are likely to be substantial in most hacking cases, but is a sum such as the £60,000 awarded to Mosley are likely to have a real deterrent effect? Even though the number of complainants is likely to be substantial it should be remembered that News Corp's annual turnover is something in the region of $33bn.

It is arguable that if ever there was a need for the civil court to provide a deterrent it is here. Whilst arrests and potential prison sentences must be a sobering prospect for some of the News of the World star journalists it appears that the fate of Goodman and Mulcaire was insufficient deterrent given the temptation to attempt to peek into Kelly Hoppen's messages in 2009 as alleged in her claim. Journalists have been and will remain under huge pressure from executives to break stories and it will require a cultural change, inspired by heavy financial consequences in every case, to prevent this technique from being used in the future by a tabloid industry that remain obsessed with celebrities' private lives. As Lord Diplock said in Broome v Cassell: "It is only if there is a prospect that the damages may exceed the defendant's gain that the social purpose of this category is achieved - to teach a wrongdoer that tort does not pay".

I believe that a number of the current phone-hacking claimants have included exemplary damages in their claims against News Group. They have not been deterred by the findings in Mosley and Douglas and the general reluctance of the courts in this jurisdiction to add a punitive element to a damages award. But Eady J, having found against Mosley on that head of claim indicated that this issue "may need to be considered at some stage by an appellate court". Lord Devlin's second category for exemplary damages in Rookes v Barnard - conduct calculated to make a profit which may well exceed the compensation payable - would be difficult to argue against here. The existence of the requisite calculation can include the pursuit of an "exclusive" as in Riches v News Group. In the case of phone hacking the availability of exemplary damages could surely be justified by reference to Article 10(2) of the Convention as being necessary in a democratic society. So perhaps a claim for exemplary damages could cause News Group a further unwanted headache; any "chilling effect" counter-argument would surely ring hollow.

Of course News Group's settlement strategy may mean that none of these cases reach their fruition in Mr Justice Vos' court. To achieve that aim their lawyers will have to assess the value of claims based upon experience and no little guesswork given the sparsity of comparable awards. This is before they get into the assessment of the claimant's lawyer's fees and uplifts on those fees. If News Group has to make an assessment of exemplary damages in each case its compensation fund will shortly require replenishment from the News Corp coffers - perhaps then hacking will become a sufficiently costly temptation that even those at the News of the World will resist.

Dominic Crossley is a partner at Collyer Bristow LLP. He represented Max Mosley in his claim against the News of the World. The International Forum for Responsible Media (Inforrm) was set up to debate issues of media responsibility. Click here to visit Inforrm's Blog, and click here to follow Inforrm on Twitter.

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