Supreme Court rules recoverable success fees / ATE premiums do not breach Article 6 rights

In a judgment handed down this morning, 22 July, the Supreme Court held (by a majority of five to two) that a claimant’s right to recover a conditional fee agreement (CFA) success fee and after-the-event (ATE) insurance premium from an unsuccessful defendant, under the pre-Jackson regime governing CFAs and ATE insurance, did not breach the defendant’s right to a fair trial under Article 6 of the European Convention on Human Rights: Coventry and others (Respondents) v Lawrence and another (Appellants) [2015] UKSC 50.

The ruling follows on from a judgment last July (see post) in which the Supreme Court had said the point should be reconsidered, in the context of a case where home owners brought a claim in private nuisance against a nearby motor sport stadium and track, with the benefit of a pre-Jackson CFA and ATE insurance policy. The claimants were ultimately awarded an injunction limiting the level of noise from the track, and damages of approximately £20,000. The defendants were ordered to pay 60% of the claimants' costs at first instance, and would also be liable for the appeal costs. The "base costs" at first instance were approximately £185,000, but the effect of the CFA success fee and ATE premium was that the defendant could be liable for a further £312,000 (ignoring the costs of the appeals). The defendants argued that if they were liable for these additional sums, it would infringe their Article 6 rights.

The majority of the Supreme Court rejected that argument. It considered the decision of the European Court of Human Rights in MGN v UK (2011) 53 EHRR 5 (see post) which held that the requirement for MGN to pay CFA success fees due to Naomi Campbell’s lawyers was incompatible with MGN's rights under Article 10 of the Convention (freedom of expression). However, the Supreme Court said, the right to freedom of expression is always given particular weight by the ECtHR, and there was no basis for concluding that the court would have held that the scheme violated MGN's article 6 rights in that case. Accordingly, the ECtHR's decision did not require the Supreme Court to hold that the pre-Jackson regime was incompatible with article 6 rights.

The Supreme Court accepted that the regime had flaws, as recognised in the MGN case, including a potential "blackmail" or "chilling" effect in that it imposed a costs burden on opposing parties which was excessive and in some cases may have interfered with a defendant's right of access to justice. However, it concluded that the scheme, overall, was a proportionate way of achieving the legitimate aim of providing access to justice following the withdrawal of legal aid for most civil cases.

This judgment had been awaited with keen interest. A contrary decision could have had a dramatic impact, despite the abolition of recoverability from 1 April 2013 as a result of the Jackson reforms. The pre-Jackson regime still applies to CFAs and ATE policies entered into before that date, as well as certain types of claim which are excluded from the reforms, such as claims brought by insolvent companies. The decision will therefore come as a relief to many who have brought claims under the old regime.