Coventry v Lawrence is fundamentally a nuisance case, but the costs outcome for the parties, both of relatively modest means, has exercised the legal costs community for some time.

A year ago, the Supreme Court was asked to decide on the legitimacy of the funding arrangements under the Access to Justice Act 1999 which allowed a winning party to recover from his losing opponent not only his legal fees but also any CFA “success fee” payable to his lawyers, and any ATE insurance premium he had paid for to cover his costs risk in the case.

That regime has largely ended, following the Jackson reforms in 2013, but there are still numerous cases where the old regime applies. The decision of the Supreme Court could therefore have forced some uncomfortable and expensive decisions for the parties to those ongoing cases.

A flawed but legitimate regime

The question at large was whether imposing such hefty legal bills on losing opponents could impinge on an individual’s right to a fair trial such that the regime should be declared incompatible with the Convention on Human Rights.

The Supreme Court could not answer last year. Given an adverse decision could lead parties who had suffered such legal bills during the recoverable regime to seek compensation from the government who allowed it, the Court wanted to hear from those interested parties in order to get a wider understanding of the regime as a whole.

Judgment on the point was finally handed down on 22 July 2015. By a majority of 5-2, the Supreme Court ruled that, despite its acknowledged “flaws”, the costs regime imposed by the Access to Justice Act was not incompatible with the respondents’ human rights.

The court accepted that the regime may have had an unfair effect on some litigants. In Coventry v Lawrence, at first instance alone, the losing party was fixed with a costs bill of almost £500,000, approximately two thirds of which comprised CFA success fees and ATE premium. The claim itself proved to be worth some £94,000. (There were comments in the Supreme Court judgment about proportionality and one can expect that point to be driven home on assessment, albeit that that can only affect the base costs awarded and not the additional liabilities.)

For parties of modest means, there is an obvious “chilling” factor from a costs regime like this, and access to justice may well be inhibited. The Supreme Court however found a “powerful argument” that the scheme was justified by a number of factors, including the pressing need to find an alternative for a failing legal aid system by shifting the burden from the private sector to the public.

The Supreme Court had to look past the issue of whether the scheme decided upon was flawed or unfair to some – the point was that the scheme, nevertheless, was a proportionate way of achieving the government’s legitimate aims of funding litigation and maintaining access to justice. The court stated clearly that although there is no “perfect solution”, the one found in 1999 came after wide consultation, and was within the government’s discretion.

The majority of the Supreme Court seems to be saying that the recoverability regime imposed in 1999 was the best of a bad bunch (the dissenting views of Lord Clarke and Lady Hale give a harsher assessment).

BLP Perspective

Various commentators have suggested that the outcome of Coventry v Lawrence is academic now that we have a regime where recoverability of additional liabilities is a rarity. The very “flaws” discussed in the Supreme Court’s judgment were those found by Jackson LJ in his review of civil litigation costs in 2010 which led to that recoverability regime being overturned for most cases after 1 April 2013.

However that does not take account of the outstanding claims started prior to the Jackson reforms which still fall into the old regime, nor the exceptional cases since 2013 where recoverability survives.

So no reprieve for parties (mostly defendants, who have no choice about having to enter the fray) falling into the old regime – they may yet be fixed with a chilling legal bill like the respondents in Coventry v Lawrence. That said, those claimant parties who embarked on litigation, possibly only because the costs regime of the time made it possible, can continue without the fear that their financial planning has come undone.

A big reprieve, however, for the government which could have been facing its own chilling legal bills had the decision gone the other way.