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Supreme Court confirms that successful parties can continue to recover success fees and ATE insurance premiums in long-running cases

Andrew Dodd
23/07/2015
The Supreme Court in Coventry & Ors v Lawrence & Anor [2015] UKSC 50 has confirmed that the previous scheme requiring losing litigants to pay success fees under Conditional Fee Agreements (CFA) and The Supreme Court in Coventry & Ors v Lawrence & Anor [2015] UKSC 50 has confirmed that the previous scheme requiring losing litigants to pay success fees under Conditional Fee Agreements (CFA) and After the Event (ATE) insurance premiums is compatible with the European Convention of Human Rights (ECHR). Whilst this scheme has now been replaced, it still affects arrangements entered into before April 2013, so it will still be possible for successful claimants in long-running cases to recover success fees and ATE premiums from the other side.

Background

The Appellants were successful before the Supreme Court in 2014 in a substantive nuisance claim. The current judgment addresses the outstanding question of costs. The judge had made an order that the Respondents pay 60% of the Appellant's costs, which consisted of 3 elements:

  • "base costs" i.e. lawyers' fees and disbursements (£184,585);

  • a CFA (or "no win no fee") success fee (£129,004); and

  • an ATE insurance premium (£183,000).


Lord Neuberger has previously commented that these costs were "disturbing" and "highly regrettable" not least because the potentially recoverable costs were nearly 3 times the base cost.

The costs provisions in the Access to Justice Act 1999, which applied to arrangements in place between April 2000 and April 2013, provided that success fees under CFAs (of up to 100% of costs) plus the other side's ATE insurance premiums were recoverable from unsuccessful litigants (the "AJA regime"). The Respondents, however, argued that their liability for the Appellant's success fee and ATE premium was incompatible with Article 6 of the ECHR, which preserves the right to a fair trial and forms part of English law pursuant to the Human Rights Act 1988.

Supreme Court Ruling

The Supreme Court, by a majority of 5:2, has ruled that the AJA regime is not incompatible with Article 6 of the ECHR. The Court noted that, although it has its flaws, the scheme is a general measure which was: (i) justified by the need to widen access to justice to litigants following the withdrawal of legal aid; (ii) made following wide consultation; and (iii) fell within the wide area of discretionary judgment of the legislature and rule-makers to make. In the Court's view, there is no perfect solution to the problem of how best to enhance access to justice following the withdrawal of legal aid for most civil cases.

Although the Respondents had argued that the AJA regime failed to take account of the financial position of the paying party, the Court noted that this had never been a relevant factor in determining the assessment of reasonable and proportionate costs. The AJA regime as a whole was a rational and coherent scheme for providing access to justice and the ECHR recognises that a regulatory scheme may be compatible even if it operates harshly in individual cases.

Comment

The decision is pragmatic and maintains the status quo in relation to CFA and ATE arrangements dating from 2000-2013. Under the current system, which was introduced following the Jackson reforms in April 2013, success fees and ATE premiums are no longer recoverable from the other side in litigation. Nevertheless, there could have been far-reaching consequences for the government had the AJA regime been held to breach human rights, as other losing parties could have potentially claimed compensation from the government for fees that they had previously been ordered to pay.

In addition to obvious relief in government quarters, others will welcome the decision because it restores certainty and reduces the potential for satellite litigation. In this respect, it is interesting that the Court specifically noted that clients and lawyers had been working under a legitimate expectation that these fees would be recoverable from a losing party.

 

 

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