Coventry v Lawrence: A very damp squib?

The long-awaited decision in Coventry v Lawrence [2015] UKSC 50 was handed down on 22 July 2015. For those who are not familiar with the saga, the Supreme Court was considering whether or not the pre-Jackson regime of inter-party recovery of success fees and ATE premiums was lawful. In their latest guest post for the LexisNexis DR blog, Nicholas Bacon QC and George McDonald of 4 New Square consider the case and give their comments.

Introduction

In summary, the Claimants/Appellants brought a nuisance action against the nearby Defendants/Respondents (who run a speedway). The Appellants succeeded in the High Court and in the Supreme Court ([2014] UKSC 13, on a successful appeal from [2012] EWCA Civ 26) and recovered £20,000 in damages. The Appellants’ costs comprised:

(i) base costs up to the judge’s order of £307,642;

(ii) success fee of £215,007; and

(iii) an ATE premium in the region of £305,000.

The Respondents argued that recovery of items (ii) and (iii), the additional liabilities, would infringe their rights under Article 6 of the European Convention on Human Rights (“Article 6”) and/or Article 1 of the First Protocol to the Convention (“A1P1”). The Supreme Court heard argument from the parties and a number of interveners.

As can be imagined, the case generated considerable interest both in respect of thousands if not millions of historic cases and for those claims where additional liabilities are still recoverable inter-partes.

The outcome?

Claimants/receiving parties can heave a huge sigh of relief. The Supreme Court rejected the Respondents’ challenge and held that the regime was compatible with Article 6 and the A1P1. Put simply, nothing has changed: the industry’s excitement has been extinguished.

That said, this may not be the end of the story. Two of their Lordships, Lord Clarke and Lady Hale, dissented. They held that the regime did unlawfully infringe Article 6 and A1P1. Thus defendants/paying parties have a glimmer of hope if the challenge is pursued to the ECtHR.

The Decision

The Supreme Court gave three judgments: the leading judgment of Lord Neuberger and Lord Dyson (with whom Lord Sumption and Lord Carnworth agreed), the judgment of Lord Mance (with whom Lord Carnworth agreed) and the dissenting judgment of Lord Clarke (with whom Lady Hale agreed).

The leading judgment

Lord Neuberger and Lord Dyson conducted a detailed review of the history of the relevant legislation. They identified 4 flaws with the costs regime, as highlighted by Sir Rupert Jackson in his Review of Civil Litigation, summarised by the ECtHR in MGN v United Kingdom and mirrored by Lord Neuberger’s original reasons for airing the dispute. Those 4 flaws were:

  1. The lack of focus of the regime and the lack of any qualifying requirements for appellants who would be allowed to enter into a CFA;
  1. The absence of any incentive for appellants to control the incurring of legal costs and the fact that judges assessed costs only at the end of the case when it was too late to control costs that had been spent;
  1. The “blackmail” or “chilling” effect of the regime which drove parties to settle early despite good prospects of a defence; and
  1. The fact that the regime gave the opportunity to “cherry-pick” winning cases to conduct on CFAs.

The flaws led the ECtHR to conclude in MGN that the regime was incompatible with paying parties’ Article 10 rights in defamation cases.

Lord Neuberger and Lord Dyson held that the MGN decision did not require them to hold that the regime was incompatible with paying parties’ Article 6/A1P1 rights: the balancing of Article 6 rights was a wholly different matter to the balancing of Article 10 rights. The latter is always given particular weight by the ECtHR.

Lord Neuberger and Lord Dyson then decided that, whilst flaws, flaws 1, 2 and 4 could not adversely affect paying parties’ Article 6 or A1P1 rights. Their Lordships therefore concentrated on flaw 3.

After considering the objection to the regime in more detail, their Lordships held that regime was compatible with Article 6 or A1P1, as (see [83-84]):

…it is necessary to concentrate on the scheme as a whole. The scheme as a whole was a rational and coherent scheme for providing access to justice to those to whom it would probably otherwise have been denied. It was subject to certain safeguards. The government was entitled to a considerable area of discretionary judgment in choosing the scheme that it considered would strike the right balance between the interests of appellants and respondents whilst at the same time securing access to justice to those who would previously have qualified for legal aid. It had to find a solution to the problem created by the withdrawal of legal aid. The government has now produced three different schemes. Each was produced after wide consultation. Each has generated considerable criticism. As already indicated, once civil legal aid was constrained to the extent that it was in 1999, it became impossible to come up with a solution which would meet with universal approval. This is relevant to the question whether the 1999 Act struck a fair balance between the interests of different litigants”.

Lord Neuberger and Lord Dyson went on to hold that it was neither possible nor appropriate to read down paragraph 11.9 of the Costs Practice Direction so that additional liabilities were not treated as being proportionate.

The supporting judgment

Lord Mance supported the judgment of Lord Neuberger and Lord Dyson, and placed particular weight on the legitimate expectation of litigants and their lawyers that the regime applied and was valid.

The dissenting judgment

Lord Clarke disagreed that MGN could be properly distinguished. His Lordship considered that the principles identified by the ECtHR applied to the paying parties’ Article 6 rights and A1P1, which were not of a wholly different character to the Article 10 rights. The regime was discrimatory, disproportionate and unfair, as it did not treat all respondents in the same way but chose a particular class of respondents on whom to impose liabilities far beyond the bounds of what was reasonable or proportionate. Thus the regime was incompatible with the Article 6 rights as well as Article 10 rights.

The litigants and lawyers’ legitimate expectation could not render proportionate the discriminatory treatment and was only one factor to take into account when deciding the appropriate remedy.

Lord Clarke also held that the regime could have been rendered compatible with Article 6 and A1P1 by simply reading down or striking out paragraph 11.9 of the Costs Practice Direction so that all additional liabilities were included when determining proportionality.

Comment

We continue where we left off before the Supreme Court’s intervention. Only time will tell whether this is the end of the story, or if a litigant is brave enough to take this issue to the ECtHR. Such a litigant will receive encouragement from Lord Clarke’s dissenting judgment.

However, even if successful, the outcome may simply be the reading down or striking out of paragraph 11.9 of the Costs Practice Direction, rather than undermining the entire regime. Although this may assist paying parties in subsequent cases, whether it provides them with any remedy for historic claims will depend on the basis for the decision and is far from clear.

Further reading

See our previous post here where LexisPSL Dispute Resolution subscribers can find our full analysis of the case.

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