Next week the Supreme Court will hear representations on whether the pre-civil justice reform costs regime, in which success fees and after the event insurance premiums were recoverable from the losing party, infringed provisions of the European Convention on Human Rights. A panel of seven judges will hear the case, including Lords’ Neuberger and Dyson.

Coventry -v- Lawrence concerned a successful private claim for nuisance brought against the occupiers of a speedway track by two local residents. The pre-civil justice reform costs regime applied and after various appeals the two respondents were ordered to pay £10,350 each in damages and 60% of the appellants’ costs. For the trial alone those costs were noted to be £398,000, plus a success fee of £319,000. Factoring in an after the event insurance (ATE)  premium of about £350,000, the overall costs bill (excluding appeal costs) came to over £1 million.

The importance of the case has been dismissed in some quarters, but there is no doubt that those involved are taking it seriously - including the Government. A large number of organisations have applied to  intervene, including the Attorney General, the Law Society, the Bar Council, the Northern Ireland Department of Justice, Asbestos Victims Support Groups Forum UK, and the Association of Business Recovery Professionals. More recently, the Association of Costs Lawyers applied to participate. It is unclear both how many of those interested will be given permission to do so or the issues on which they will be allowed to make oral submissions.

Those dealing with asbestos and insolvency work will be interested because at present additional liabilities are still recoverable in these areas.

The mere fact that Lord Neuberger was interested in the submissions made regarding the compatibility of the old regime with European law is interesting. Commenting on the amount of costs claimed, he referred to the figures as ‘very disturbing… 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’. Lord Neuberger voiced equal concern that the successful parties, as small businesses, might also face this level of costs.

The pre-civil justice reform regime of recoverable success fees and after-the-event insurance may breach the European Convention on Human Rights, with ‘very serious consequences for the Government’ confirmed Lord Neuberger - who also set out the potential consequences of a finding that the Access to Justice Act 1999 contravenes the right to a fair trial under Article 6. He suggested that those who had paid ‘disproportionate additional liabilities may well have a claim for compensation against the government for infringement of their Article 6 rights’.

We will be watching this case with interest. If the court does make a finding of incompatibility, then the consequences could be substantial with the 1999 Act referred back to Parliament to consider. Of course, the relevant parts of the Act have already been repealed in some areas and, having supported Lord Justice Jackson’s recommendations,  by removing the aspects of the old regime that are now subject to challenge, it is difficult to see how the Government will be able to defend the old regime in Coventry.

Should a finding of incompatibility be made, there is likely to be a whole host of further litigation. Is it really feasible to imagine a scenario where the Government has to compensate those who paid out disproportionate additional liabilities during the last 14 years? What does disproportionate mean? What form would compensation take?