Coventry v Lawrence (No 2) [2014] UKSC 46 (23 July 2014)

Following a successful nuisance claim, the losing party challenged their liability for the winners' success fee and insurance premium under a Conditional Fee Agreement. The Supreme Court held the costs regime was incompatible with Article 6 ECHR but declined to disapply it.

Facts

This case followed the Supreme Court’s earlier judgment in Coventry v Lawrence [2014] UKSC 13, where the respondents (the Lawrences) succeeded in their private nuisance claim against the appellants (the operators of a motorsport stadium). The Lawrences were funded by a Conditional Fee Agreement (CFA) and had taken out an After the Event (ATE) insurance policy. Consequently, the appellants were ordered to pay the Lawrences’ costs, which included a success fee and the ATE premium, together amounting to a sum significantly larger than the damages awarded. The appellants appealed against the costs order, arguing that the legislative scheme under the Access to Justice Act 1999, which allowed for the recovery of these additional liabilities from the losing party, was incompatible with their right to a fair trial under Article 6 of the European Convention on Human Rights (ECHR) and their property rights under Article 1 of the First Protocol (A1P1).

Issues

The central legal issues before the Supreme Court were:

1. Whether the costs regime established by the Access to Justice Act 1999, permitting a successful party with a CFA to recover from the unsuccessful party both the success fee and the ATE premium, was incompatible with Article 6 ECHR.

2. If the regime was incompatible, whether the Supreme Court had the power to, and should, read down or disapply the relevant legislative provisions (sections 29 and 30 of the 1999 Act and associated court rules).

3. Whether the Supreme Court should depart from the previous House of Lords decision in Campbell v MGN Ltd [2005] UKHL 61, which had held that the costs regime was compatible with Article 6 ECHR.

Judgment

The Supreme Court was divided, but a majority (Lords Neuberger, Clarke, and Sumption) held that the pre-LASPO 2012 costs regime was indeed incompatible with the ECHR. However, they concluded that a remedy should not be granted in this case.

Reasoning of the Majority

Lord Neuberger, giving the lead judgment, departed from the earlier House of Lords authority in Campbell. He accepted the reasoning of the European Court of Human Rights in MGN v United Kingdom (2011) 53 EHRR 5, which found the same costs regime to be a disproportionate interference with the paying party’s rights. He stated that the scheme imposed an excessive and unpredictable financial burden on the losing party, which could deter them from defending a claim, thereby restricting their access to court.

The 1999 Act scheme, which I have briefly described and which is considered in more detail by Lord Clarke and Lord Sumption, cannot be justified, and it is a disproportionate interference with the article 6(1) right of the defendant to a fair trial, for the reasons given by the Strasbourg court in MGN v United Kingdom… (Lord Neuberger, para 37)

Despite this finding of incompatibility, the majority declined to grant a remedy. Lord Neuberger reasoned that the regime had already been repealed by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) for future cases. To disapply the old provisions retrospectively would be unfair to claimants and their lawyers who had relied on the established law. Furthermore, it would require the court to engage in a legislative task of creating a new, fairer costs system, which was a role best left to Parliament.

However, for the reasons I have given when discussing remedy, it seems to me that it would be wrong for this court to hold that the 1999 Act scheme should not be applied in the present case. Such a decision would be inconsistent with the repeated and consistent statements on the topic by the domestic courts at the highest level, on which the respondents and their legal advisers were entitled to rely, and it would involve the court legislating as to a new costs regime for all cases which fell within the 1999 Act scheme in a very unsatisfactory and possibly incoherent way. (Lord Neuberger, para 60)

Dissenting Opinions

Lady Hale and Lord Carnwath dissented, arguing that having found the regime to be incompatible with Article 6, the court was obliged to provide a remedy. They suggested that the court could have ‘read down’ the provisions or used its discretion to limit the amount of additional liabilities recoverable to a level that was proportionate.

Implications

The judgment is of major significance. It formally acknowledged, at the highest domestic level, the human rights incompatibility of the pre-LASPO CFA and ATE costs recovery regime. However, its refusal to provide a retrospective remedy meant that for all cases concluded under the old system, the liability to pay success fees and ATE premiums remained. The decision is a crucial case study in the doctrine of precedent, showing the Supreme Court’s willingness to depart from a past House of Lords decision in light of subsequent Strasbourg jurisprudence. It also provides a detailed analysis of the constitutional balance between the judiciary and Parliament, particularly concerning the creation of complex remedial schemes following a finding of legislative incompatibility with the ECHR.

Verdict: The appeal was dismissed. The appellants remained liable to pay the respondents’ costs, including the success fee and the ATE insurance premium.

Source: Coventry v Lawrence (No 2) [2014] UKSC 46 (23 July 2014)