In a stunning decision the Supreme Court has given an indication that the pre-Jackson costs regime may breach the rights of paying parties under the European Convention of Human Rights. The issue has the potential to affect all agreements signed under the pre-April 2013 costs regime.
The question arose because the respondents in, Coventry and others v Lawrence and other (No 2)  UKSC 46, who were ultimately unsuccessful in defending the claimants’ action for nuisance, had been ordered at first instance to pay 60% of the claimants’ costs. The costs amounted to around £1,067,000 – £398,000 in base costs, £319,000 in uplift, and £350,000 for the ATE insurance premium.
Citing these figures in the Supreme Court’s lead judgment, Lord Neuberger said that they were “very disturbing” particularly since the respondents “plainly had a reasonable” case, which they won in the Court of Appeal. Recognising that many of the aspects of the dispute would not be applicable under the Jackson costs regime, Lord Neuberger said the respondents were “understandable aggrieved” by the judge’s order that they should pay not only 60 per cent of the appellant’s total costs, but also 60 per cent of the 100 per cent success fee and 60 per cent of the ATE premium. He said at  that the pre-Jackson CFA system had the disadvantages that claimants were not worried about the level of their own costs; defendants had no control over the claimants’ costs as they were run up; and the stronger the defendants’ case, the greater their liability would be for costs if they lost. He went on to say: “It must, in my view, follow that the issue of whether the 1999 Act cost regime, and in particular a claimant’s right to recover any success fee and ATE premium from an unsuccessful defendant, infringes the Convention, is one that is open to this Court to reconsider.”
Before the Supreme Court decides on its next course of action, including the possibility of declaring the pre-Jackson costs regime incompatible with the ECHR, notice has been given to the Attorney-General and the Secretary of State for Justice as Lord Neuberger recognised that a determination of incompatibility could have “very serious consequences for the Government”.
Significantly, a declaration of incompatibility will have no material effect on the legality of the recoverability of additional liabilities for pre-Jackson CFAs. In fact, should the pre-Jackson recovery regime be declared incompatible with the ECHR, it will ultimately be the Government that is hit with a floodgate of litigation. This will come in the form of unsuccessful litigants seeking to recover the cost of the opposition success fee and ATE premium payments that they have paid out.
Whether the court is to get the chance to consider the issue remains to be seen, but it is clear that the costs of litigation, as an issue of access to justice continues. As Lord Neuberger said “it would be wrong for this Court not to express its grave concern about the base costs in this case, and express the hope that those responsible for civil justice in England and Wales are considering what further steps can be taken to ensure better access to justice.”
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