The Supreme Court judgment in Coventry and others (Respondents) v Lawrence and another (Appellants) [2015] UKSC 50 has recently been handed down and the Court has decided that a Claimant's right to recover additional liabilities from an unsuccessful defendant under the old costs regime is not an infringement of Article 6 of the European Convention Human Rights or Article 1 of the First Protocol to the Convention (hereafter called Art 6 ECHR and A1P1).

The historical context

s.58 of the Courts and Legal Services Act 1990 permitted lawyers, for the first time, to enter into conditional fee agreements (CFAs) subject to qualifying conditions. However, it was not until reforms in 1999 that additional liabilities such as success fees and ATE premiums were held to be recoverable from the paying party (s.58(A)(6) and (7) and s.29 Courts and Legal Services Act 1999 (the 1999 Act)). The CPR was amended (Civil Procedure (Amendment No 3) Rules 2000 (SI 2000/1317) to reflect the changes. It was hoped that this new approach would widen access to justice for many litigants who would otherwise be unable to fund litigation.

Claim background

The Appellants were the owners of a residential bungalow in Suffolk and brought injunctive proceedings against the Respondents for nuisance caused by the noise originating from their motorsports stadium, situated 800m away from the Appellant's premises. 

Following a lengthy trial, HHJ Seymour QC found in favour of the Appellants and awarded damages in the sum of £20,750.00 and an injunction limiting the level of noise. The crux of the issue however was the Appellant's costs. The Judge ordered the Respondents to pay 60% of the Appellant's costs as assessed on the standard basis. These costs amounted to some £307,642 plus additional liabilities such as the success fee (£215,007) and ATE premium (£305,000). The Respondents were therefore required to pay £496,589 in costs in respect of a £20,000 claim for damages.

The Respondent argued that in respect of the costs that had been awarded:

  • the Appellant's base costs were disproportionate and included items which it was not reasonable to have incurred; and
  • the requirement on the Respondent to meet additional liabilities such as the success fee and ATE premium was incompatible with Art 6 ECHR and A1P1.

McCracken QC argued on behalf of the Respondents that the recoverability of additional liabilities as set out above 'unjustifiably interfered' with Art 6 ECHR and A1P1 and, in accordance with the ECtHR's decision in MGN v United Kingdom, urged the court to apply the same reasoning to find that the system was also incompatible with Art 6 and A1P1. The court rejected his submission.

In the judgment, the court acknowledged 'flaws' in the system brought in by the 1999 Act (which are discussed in detail in LJ Jackson's report and eventually lead to the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) which was brought in on 1 April 2013) those being;

  1. Appellants had no interest in the level of fees which they agreed to pay their lawyers;
  2. In many unsuccessful cases, respondents found themselves paying, in addition to their own costs, three times the appellants' 'real costs';
  3. Proportionality was excluded from consideration in relation to the recovery of additional liabilities such as the success fee or ATE premium; and
  4. The stronger the respondent's case, the greater their liability for costs would be if they lost, since the appellant's success fee and/or ATE premium would be based upon the level of risk.

However the court concluded that whilst the system in place may have been considered to be 'unfair' by some, there is no requirement for the state to pursue a legitimate aim (in this instance, the 1999 Act and the desire to promote greater access to justice) in the fairest or most proportionate way, simply that it does so in a way which is proportionate. The court held that it was necessary to strike a balance between the pursuit of the aim and protecting the rights of those who would be infringed upon but that ultimately, one would always have to yield to the other.

The judgment held in the favour of the appellants by a majority of 5 votes to 2.