Coventry and others [Respondents] v Lawrence and another [Appellants] (No 2) [2014] UKSC 46
In July last year, the Supreme Court declined to order payment of a recoverable success fee and After the Event insurance premium against a losing party and adjourned the matter for the Attorney General and Secretary of State for Justice to be notified so that they may make representations in relation to the suggestion that recoverability breached a paying party’s right to a fair trial as enshrined in Article 6 of the European Convention on Human Rights. Further submissions were invited [including from the government] and various bodies were granted permission to intervene, including the Association of Costs Lawyers. Seven judges in the Supreme Court heard the matter last week and the Judgment is expected in July this year. In light of the recent media attention, here is our summary of the story so far:
The Appellants had brought a nuisance action against the defendant in respect of the noise generated by motor sports at a nearby stadium. The defendant held a certificate of lawful use under the Town and Country Planning Act 1990. The Appellants had purchased a house close to the track in 2006.
The trial judge [HHJ Seymour] found the operators of the speedway stadium liable in nuisance to the Appellant and awarded damages and an injunction. He therefore ordered the Respondents to pay 60% of the Appellants costs. These costs consisted of base costs of £398,000, a 100% success fee of £319,000 and an ATE premium of approximately £350,000. Total costs therefore amounted to £1,067,000 of which approx £640,000 could potentially be recovered. Importantly, these costs have to date, not yet been assessed.
The Court of Appeal over-turned this decision and on further appeal to the Supreme Court, Judge Seymour’s original orders were restored, including the original costs order.
However, the interesting part of the order [for this article !] is the fact that the losing Respondents argued that their obligation to pay those costs [including the pre-2013 ATE premium and success fee] would amount to a breach of their right to a fair trial, which was protected under article 6 of the European Convention of Human Rights [ECHR]. Lord Justice Neuberger accepted that the point was arguable and the matter was adjourned, leaving us where we are today. …..
Potential impact if pre-1st April CFA additional liabilities ruled not recoverable
If it were concluded that the provisions of s58 of the Courts and Legal Services Act 1990 and the pre-1st April 2013 regime infringe a party’s article 6 right to a fair trial, we need to consider the potential source of that infringement and more importantly the consequences of this.
- If the problem was found to be with for example the Lownds decision [Lownds –v- Home Office [2002] WLR 2450], the CPR rules or other secondary legislation, the Supreme Court’s decision would in effect, re-write the existing law and pre 2013 additional liabilities would then be disallowed or reduced in line with the ruling.
- If Primary Legislation was found to be the source of the infringement, the current law cannot be simply re-written. If the Primary Legislation cannot be construed to be compatible with the ECHR, a “declaration of incompatibility” must be made. This would be limited to High Court level or above and therefore in practical terms, it would not be possible for lower courts [i.e. most costs assessments] to declare that additional liabilities being sought were in breach of the ECHR.
The decision obviously does not affect post 31 March 2013 CFAs. In relation to pre 1 April CFAs where the success fee and ATE has been paid it is possible that the paying party will be able to appeal out of time and attempt to recover the additional liabilities paid out. However, to complicate matters further, Section 4(6) of the HRA points out that a party whose rights are breached has no remedy against its opponent. Damages would then have to be sought against the government for breach of Convention rights. It would therefore appear that potentially at least, the UK government could face claims by defendants (mostly insurance companies) for the return of substantial sums of money, for additional liabilities that they were illegally forced to pay out.
In relation to ongoing cases with pre 1 April 2013 CFAs and ATE premiums – the courts are currently still able to make costs orders providing for additional liabilities to be recovered, as the law states that these are recoverable. However, it is possible that the courts could adjourn such cases until Coventry is decided.
Conclusion
It goes without saying that a ruling of incompatibility of Primary Legislation with the ECHR would have far-reaching consequences. Given that additional liabilities are already being phased out and will naturally diminish over time, it may be that the Supreme Court will make a pragmatic decision, not make such a ruling and avoid the chaos of the multi-million pound damages claims against the government mentioned above. The other point to note, however, is that the judiciary have already expressed their dis-like of the pre-April 2013 regime in a number of high profile cases. We will await the Judgment in July with interest.