Coventry and others v Lawrence and another

The former civil costs regime permitting recovery of conditional-fee success fees and after-the-event insurance premiums was compatible with article 6 and article 1 of the First Protocol. Viewed as a whole, it rationally pursued the legitimate aim of widening access to justice after legal aid was withdrawn. Parliament and the rule-makers were entitled to balance the competing interests of different classes of litigant through a general measure, despite hardship in individual cases.

For costs assessed on the standard basis, a reasonable additional liability which was necessary to secure litigation funding was treated as proportionate. The paying party’s financial circumstances did not affect the amount recoverable. A conflicting costs practice direction had to yield to the rules.

The owners of a bungalow obtained damages and an injunction in private nuisance against operators of nearby motorsport facilities. The trial judge ordered the operators to pay 60% of the owners’ costs, including conditional-fee success fees and after-the-event insurance premiums. The Court of Appeal reversed the nuisance decision in [2012] EWCA Civ 26, but the Supreme Court subsequently restored the trial judge’s order, with modifications.

This third Supreme Court judgment in the litigation concerned the operators’ contention that liability for the additional costs infringed article 6 of the European Convention on Human Rights and article 1 of the First Protocol. The central issue was whether the costs regime established following the Access to Justice Act 1999 struck a proportionate balance between access to justice for funded claimants and the rights of unsuccessful opposing parties.

1. By a majority, the Convention challenge was rejected. Lord Neuberger and Lord Dyson, with whom Lord Sumption and Lord Carnwath agreed, held that the regime established following the Access to Justice Act 1999 was compatible with article 6 and article 1 of the First Protocol. Lord Mance, with whom Lord Carnwath also agreed, reached the same result, placing additional weight on legal certainty and legitimate expectations. Lady Hale and Lord Clarke dissented.

2. The regime pursued the legitimate aim of widening access to justice after the withdrawal of civil legal aid. It transferred the expense of successful conditional-fee litigation to unsuccessful opposing parties, while lawyers and insurers bore the cost of unsuccessful claims. The scheme resulted from consultation and fell within the legislature’s and rule-makers’ wide discretionary area of judgment.

3. Compatibility had to be assessed primarily by reference to the scheme as a whole. A general measure may be proportionate even though it produces hard results in individual cases. The regime was rational and coherent and contained safeguards, including judicial assessment of the reasonableness of base costs, success fees and insurance premiums.

4. The decision in MGN Ltd v United Kingdom did not require a finding of incompatibility. That decision concerned the special weight given to freedom of expression under article 10. Balancing the article 6 rights of claimants against those of opposing parties was an exercise of a different character.

5. Under the applicable costs rules, necessary base costs were treated as proportionate. The same approach applied to additional liabilities. A success fee or insurance premium which was reasonable by reference to the litigation risk and necessary to secure access to justice was treated as proportionate, even where large compared with the value at stake.

6. The rules did not permit the amount of recoverable costs to be assessed by reference to either party’s financial position. Paragraph 11.1 of the costs practice direction conflicted with the rules insofar as it suggested otherwise and should not be followed or should be disapplied.

7. Even if the scheme had been incompatible, the majority would neither have read down nor disapplied paragraph 11.9. It was integral to the regime, and altering it retrospectively would have undermined legitimate expectations and affected many pending cases.

8. Lord Clarke, with whom Lady Hale agreed, considered the regime discriminatory and disproportionate as applied to uninsured individuals and small undertakings exposed to liabilities far beyond reasonable costs. He would have allowed the challenge and considered reading down or striking down paragraph 11.9.

1. Supreme Court: In [2015] UKSC 50, by a 5–2 majority, rejected the challenge to the recoverability of success fees and after-the-event insurance premiums.
2. Supreme Court: Earlier judgments in [2014] UKSC 13 and [2014] UKSC 46 restored the trial judge’s nuisance order, with modifications, and addressed the landlords’ liability and preliminary costs issues.
3. Court of Appeal: In [2012] EWCA Civ 26, reversed the trial judge’s decision and held that the respondents had not committed nuisance.
4. High Court: HHJ Seymour QC, sitting as a Deputy High Court Judge, awarded damages and an injunction and ordered the respondents to pay 60% of the appellants’ costs.