Coventry & Ors v Lawrence & Anor [2015] UKSC 50

Homeowners successfully sued for noise nuisance from a nearby speedway, funded by a CFA and ATE insurance. The defendants challenged liability for success fees and ATE premiums under the 1999 Act as incompatible with Convention rights. The Supreme Court upheld the scheme's compatibility.

Facts

The appellants, Katherine Lawrence and Raymond Shields, owned a bungalow in Mildenhall, Suffolk. They brought proceedings against the respondents, David Coventry and Moto-Land UK Limited, for nuisance caused by noise from speedway and motorsport activities operated some 800 metres away. HHJ Seymour QC found in the appellants’ favour, awarding £20,750 in damages and an injunction. The order also required the respondents to pay 60% of the appellants’ costs on the standard basis.

The appellants had funded the litigation under a Conditional Fee Agreement (CFA) with After the Event (ATE) insurance. The base costs at first instance were £307,642, with success fees of £215,007 and ATE premium of approximately £305,000. Following appeals, further substantial costs were incurred in the Court of Appeal and Supreme Court. The respondents accepted liability in principle for 60% of base costs but challenged liability for the success fees and ATE premiums as infringing their Convention rights.

Issues

The central issue was whether the costs recovery regime introduced by the Access to Justice Act 1999 (“the 1999 Act”), permitting recovery of CFA success fees and ATE premiums from unsuccessful opposing parties, was compatible with Article 6 of the European Convention on Human Rights and Article 1 of the First Protocol (A1P1). A subsidiary issue concerned the appropriate remedy if incompatibility were established, in particular whether paragraphs 11.7 and 11.9 of the Costs Practice Direction could be read down or disapplied.

Arguments

Respondents’ submissions

Mr McCracken QC argued that the system unjustifiably interfered with Article 6 and A1P1 rights of “non-rich” respondents. He relied on the four flaws identified by Sir Rupert Jackson and endorsed by the ECtHR in MGN v United Kingdom: (i) lack of focus and qualifying requirements; (ii) absence of incentive to control costs; (iii) the “blackmail” or “chilling” effect; and (iv) cherry-picking of winning cases. He argued the system was arbitrary and that paragraph 11.9 of the CPD wrongly disallowed proportionality challenges to the overall total. Less intrusive alternatives existed, including a levy on adverse costs, limiting the scheme to defined groups, or requiring full consideration of proportionality and the payer’s circumstances.

Appellants and interveners’ submissions

The appellants, supported by the Secretary of State for Justice, the Bar Council, the Law Society, and other interveners, argued that the scheme pursued the legitimate aim of widening access to justice following the withdrawal of legal aid, that it fell within the wide margin of discretionary judgment afforded to the legislature, and that MGN was distinguishable as concerning Article 10.

Judgment

The majority (Lord Neuberger, Lord Dyson, Lord Sumption and Lord Carnwath) held that the 1999 Act scheme was compatible with Article 6 and A1P1. Lord Mance (with Lord Carnwath) agreed in a separate judgment. Lord Clarke dissented, with Lady Hale agreeing.

Majority reasoning

The majority held that MGN v United Kingdom did not require a finding of incompatibility. The ECtHR’s reasoning was directed to the particular weight given to freedom of expression under Article 10 in defamation and privacy cases, and the balancing of Article 6 rights between opposing parties was “of a wholly different character”.

The court emphasised that, while the system had flaws, the question was not whether it was unfair or could be made fairer, but whether it was a disproportionate means of pursuing a legitimate aim. Considerable weight had to be given to informed legislative choices, particularly where competing interests of different groups were being reconciled following wide consultation. Drawing on Animal Defenders International v United Kingdom, a general measure could be Convention-compatible even if it produced hard cases in individual instances.

The scheme was a rational and coherent response to the withdrawal of legal aid, with safeguards including assessment of costs by costs judges and the possibility of cost-capping orders. The Lownds approach treated necessary costs as proportionate, and this was integral to making CFAs viable. To require proportionality assessment of success fees against the value of the claim, as in Rogers v Merthyr Tydfil, would have deterred lawyers from entering CFAs and undermined the scheme.

The majority rejected the argument that the financial circumstances of the paying party should be taken into account, noting this had never been a relevant factor in costs assessment and would lead to satellite litigation. Paragraph 11.1 of the CPD, in so far as it suggested otherwise, conflicted with the CPR and should not be followed.

On remedy, even if incompatibility had been established, the majority would not have read down paragraph 11.9 or disapplied it. Lawyers and litigants had legitimate expectations based on a decade of appellate endorsement of the scheme, and any change would have serious effects on thousands of pending cases.

Lord Mance’s concurring judgment

Lord Mance acknowledged the case as “awkward” but agreed with the majority’s conclusion. He emphasised legal certainty, consistency, and the legitimate expectations generated by repeated judicial endorsement of the scheme.

Lord Clarke’s dissent

Lord Clarke (with Lady Hale) considered the scheme discriminatory, disproportionate, and in breach of Article 6 and A1P1, particularly as applied to individual or small uninsured respondents facing one-off litigation. He cited extra-judicial criticism by Sir Anthony May and academic commentary by Professor Zuckerman. He considered that MGN‘s reasoning was applicable beyond Article 10 cases and that respondents’ right to a fair trial was not adequately weighed by the majority.

Implications

The decision confirms that the pre-LASPO costs regime under the 1999 Act, permitting recovery of CFA success fees and ATE premiums from unsuccessful opposing parties, was compatible with Convention rights when judged as a whole. This is significant because, although LASPO has replaced the regime for most new litigation since April 2013, the old scheme continues to apply to many cases in run-off and to certain categories such as mesothelioma, insolvency, and publication and privacy cases.

The judgment reinforces that, in evaluating general statutory and procedural schemes for Convention compatibility, the court will give considerable weight to informed legislative choices made after consultation, and will assess the scheme as a whole rather than focusing on individual hard cases. The reasoning from Animal Defenders International is applied in a domestic costs context.

The decision also reaffirms that the Lownds approach to proportionality – treating necessary costs as proportionate – was integral to the operation of the 1999 Act scheme, and that the financial circumstances of the paying party are not a relevant factor in costs assessment under the CPR. Paragraph 11.1 of the CPD, in so far as it suggested otherwise, was inconsistent with the rules.

The judgment matters particularly to litigants in pending pre-LASPO cases, their lawyers and ATE insurers, who can continue to rely on the validity of additional liabilities. The dissent of Lord Clarke and Lady Hale highlights continuing concerns about the fairness of the scheme as applied to individual uninsured respondents, but these did not prevail. The court did not address whether a challenge to the scheme could still succeed before the Strasbourg court, leaving that possibility open.

Verdict: The Supreme Court held, by a majority, that the costs recovery scheme introduced by the Access to Justice Act 1999, permitting recovery of CFA success fees and ATE insurance premiums from unsuccessful opposing parties, was compatible with Article 6 of the Convention and Article 1 of the First Protocol. The respondents’ challenge to their liability for the appellants’ success fees and ATE premiums was accordingly rejected. Lord Clarke and Lady Hale dissented.

Source: Coventry & Ors v Lawrence & Anor [2015] UKSC 50