Coventry v Lawrence – additional liabilities compatible with A6 and A1P1

News | Wed 22nd Jul, 2015

The Supreme Court handed down judgment this morning in Coventry v Lawrence [2015] UKSC 50, the Court’s much-anticipated decision on the legality of the pre-2013 CFA system.  In short, there will not be any change in the law. 

As many readers will know, the question was this: would it infringe the paying party’s rights under Article 6 of the European Convention on Human Rights (“A6”) and Article 1 of the First Protocol to the Convention (“A1P1”), if they were liable to pay the receiving party’s success fee and ATE premium?

The answer is, “no”.  The pre-2013 CFA system, in which the losing party pays the winner’s base costs + success fee and ATE premium, is compatible with A6 and A1P1.

The appeal arose out of a claim for damages for nuisance.  After an 11-day High Court trial the Claimants recovered damages of just over £20,000.  The Defendants appealed to the Court of Appeal, which held that the Defendants were not guilty of nuisance.  The Claimants appealed to the Supreme Court, which restored the trial judge’s decision and ordered the Defendants to pay the Claimants’ costs of the two appeals.  The Defendants’ liability for the Claimants’ costs of the trial and the two appeals came to about £1.2m of which more than half was made up of success fees and ATE premiums.

The Defendants can probably be forgiven for supposing that a liability of this magnitude infringed their right to a fair trial (A6) and their right to peaceful enjoyment of their property (A1P1).

The argument in the Supreme Court might have appeared rather one-sided.  In one corner were the Defendants.  In the other corner were the Claimants, the SoS for Justice, the Bar Council, the Law Society, the Asbestos Victims’ Support Group Forum, the Association of Business Recovery Professionals and the Association of Costs Lawyers.

The Defendants’ best point was that the pre-2013 CFA regime had a “blackmail” or “chilling” effect, which drove parties to settle early despite good prospects of a defence.  In MGN v United Kingdom (2011) 53 EHRR 5 (a media law case where Naomi Campbell, backed by a CFA and ATE, had successfully sued a publisher) the European Court of Human Rights held that the flaws in the CFA regime were so serious that the regime had infringed the publisher’s A10 right to free speech.  Did MGN v UK, and the flaws in the CFA system generally (as described in Sir Rupert Jackson’s report) mean that the CFA regime had to be struck down?

The Supreme Court (Neuberger, Dyson, Sumption and Carnwath) held that they did not.  Though there were undoubtedly flaws in the system (litigants with no interest in the level of their lawyers’ fees; losers paying 3x the winners’ real costs; no proportionality examination of the ATE premium; and the costs exposure being greater the better the defendant’s case), these did not interfere with A6 or A1P1 rights.  The question was not whether the system was unfair; it was whether it was a proportionate means of achieving a legitimate aim.  It was.

Lord Clark and Lady Hale dissented.  They placed emphasis on the arbitrariness of the system.  It might be fair for insurance companies, who win some cases and lose others, to pay success fees.  But for an uninsured defendant it is hard to see why he should pay the winning claimant’s lawyers for some other case they lost.

This decision will give rise to a collective sigh of relief for lawyers running off large numbers of ‘old-style’ CFAs, as well as those conducting litigation such as asbestos claims, where additional liabilities are still recoverable.

(We should also note that the majority of the Supreme Court held that paragraph 11.1 of the Costs PD, wherein it was stated that the court would have regard to the financial position of the parties when applying the test of proportionality, was ultra vires: see para. [82] of the judgment.)