Questioning conditional fees

Recoverable success fees and after-the-event insurance may have breached the European Convention on Human Rights, Lord Neuberger warned last week. Neil Rose investigates

The pre-Jackson regime of recoverable success fees and after-the-event (ATE) insurance may breach the European Convention on Human Rights, with “very serious consequences for the government”, the Supreme Court suggested on Wednesday (23 July).

Lord Neuberger, the court’s president, said that if this argument was right, those who paid out disproportionate additional liabilities “may well have a claim for compensation against the government for infringement of their article 6 rights”. Article 6 is the right to a fair trial.

Implicitly acknowledging the tide of litigation that could follow such a decision, he did not take the argument any further at this stage, saying the government needed the chance to address the court.

Coventry v Lawrence (No2) [2014] UKSC 46 concerned a successful private claim for nuisance brought against the occupiers of a speedway track by two local residents. In a case run under the pre-Jackson costs regime established by the Access to Justice Act 1999, the residents won at first instance, a decision overturned by the Court of Appeal before being restored by the Supreme Court earlier this year. The two respondents were ordered to pay £10,350 each in damages, and 60% of the appellants’ costs.

The appellants’ base costs from the original trial were £398,000, plus a success fee of £319,000 and ATE premium of about £350,000, totalling £1,067,000. This meant the respondents were liable for over £640,000, even before the costs of the two appeals were considered.

“These figures are very disturbing,” said Lord Neuberger, giving the main ruling. “They give rise to grave concern even if one ignores the success fee and ATE premium. The fact that it can cost two citizens £400,000 in legal fees and disbursements to establish and enforce their right to live in peace in their home is on any view highly regrettable…

“The point can equally forcefully be made from the point of view of the respondents. As relatively small business operators, they are not only having to fund their own costs, which presumably would be of the same order, but in addition they are going to have to pay some £240,000 towards the appellants’ costs. It is true that the respondents lost, but they were seeking to defend their businesses and they plainly had a reasonable case, as is evidenced by the fact that they won in the Court of Appeal.”

Lord Neuberger acknowledged how hard it is to ensure that “a case, particularly one that does not involve a very large sum of money but is potentially complex in terms of fact, law and expertise, such as the present case, is both properly and proportionately litigated”.

But he continued: “It would be wrong for this court not to express its grave concern about the base costs in this case, and express the hope that those responsible for civil justice in England and Wales are considering what further steps can be taken to ensure better access to justice. It is only fair to emphasise that this concern relates to the current system and that it is not intended to imply any criticism of the lawyers in this case.”

Lord Neuberger made plain his support for the Jackson report changes introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, noting among other criticisms of the old regime that while proportionality had a part (albeit limited) to play when assessing the recoverability of base costs, it was excluded from consideration in relation to the recovery of success fee or ATE premium, which were simply required to be reasonable.

Lord Neuberger said the development of European Court of Human Rights jurisprudence – including in the Naomi Campbell case – in recent years meant the court could reconsider the question of whether the 1999 Act costs regime infringed the convention, despite the earlier House of Lords rulings in Callery v Gray and Campbell that it was lawful.

“In the light of the facts of this case and the Strasbourg court judgments relied on by [the defendants], it may be that the respondents are right in their contention that their liability for costs… would be inconsistent with their convention rights,” he said.

The judge also considered how the case may proceed, saying it could be that the Court of Appeal, or even the trial judge, should consider the issue first. There is likely to be a hearing to decide this with all those involved, including any relevant interveners.

Legal Futures editor Neil Rose

This article first appeared on Legal Futures