Coventry v Lawrence – The Supreme Court hands down long awaited judgement

Coventry v Lawrence – The Supreme Court hands down long awaited judgement

Many within the profession were very considerably concerned last year when Lord Neuberger, in the matter of Coventry v Lawrence [2014] UKSC 46, passed what appeared to be somewhat of a casual comment that

“In the light of the facts of this case and the Strasbourg court judgments relied on by…[the 1st Respondent]…, it may be that the respondents are right in their contention that their liability for costs under the 1990 Act, as amended by Part II of the 1999 Act, and in accordance with the CPR, would be inconsistent with their Convention rights.”

which then plunged the profession into the turmoil of questioning whether additional liabilities were, or indeed ever had been lawfully recoverable. The ramifications of such a finding were considerable to say the least and very concerning not only for the profession but also the Government, a fact not lost on Lord Neuberger who then further commented that

“…it would be wrong for this Court to decide the point without the Government having had the opportunity to address the Court on the issue.”

hence the issue was left to be determined and the further judgement of the Court eagerly awaited by anyone with even a passing interest in either the payment or recovery of additional liabilities.

The process since has been somewhat drawn-out. Since the original comments were passed in the judgement of 23 July 2014 (UKSC 46), not only have the original parties to the action made their views known, but no less than 8 other interested parties were permitted to intervene, being the Government (Secretary of State for Justice), the Department of Justice Northern Ireland, The Bar Council, The Law Society, the Association of Costs Lawyers, the Asbestos Victim Support Group Forum UK, the Association of Business Recovery Professionals and the Media Lawyers Association, all of which culminated in an unprecedented three-day hearing between 9 & 12 February 2015 before a seven-member judicial panel.

The judgement now handed down today, 22 July 2015, in Coventry & Others v Lawrence and another [2015] UKSC 50 specifically addressed the outstanding question of whether the system of recovery of costs in England & Wales under the Access to Justice Act 1999 was compatible with article 6 of the European Convention on Human Rights as, whilst the paying party accepted that they could not challenge the liability for base fees, the issue of additional liabilities remained live on the basis of an alleged infringement of that article.

The Supreme Court, by a majority 5–2, held that the regime was compatible with the European Convention on Human Rights and accordingly there was no infringement.

In reaching that conclusion, the Court (majority judgement given by Lords Neuberger & Dyson, with whom Lords Sumption and Carnwath agreed; Lord Clarke dissenting, with whom Lade Hale agreed) recognised that there was an arguable point, following the decision of the European Court of Human Rights in MGN Limited v United Kingdom [2011] 53 EHRR 5 that there were flaws in the regime under the Access to Justice Act 1999, namely that a lack of focus and of any qualifying requirements of the claimant to be allowed to enter into CFA’s; the absence of incentive the claimants to control the level of legal costs, with assessment of those costs only taking place at the conclusion of any given matter, thus the level of those costs being incapable judicial control during the currency of the case; the element of “blackmail” brought about by the regime which led to parties settling early given the cost risk, despite perhaps good prospects of a viable defence; and that the regime gave practitioners the opportunity to “cherry pick” only winning cases to conduct on CFAs, denying some potential litigants access to justice.

Whilst acknowledging these flaws and some overlap with this matter, Lords Neuberger & Dyson found that

“Much has been made of the alleged unfairness of the system. But the issue is not whether the system was unfair or had “flaws”. It is whether it was a disproportionate way of achieving the legitimate aim.”

that aim (or in fact, those aims) being, to contain if not mitigate the rising cost of the provision of Legal Aid, to improve access to justice and discourage weak claims.

Further, it was found that

“…in a field such as access to justice and legal costs, the court, while being vigilant to protect fundamental rights, must give considerable weight to informed legislative choices, at least where state authorities are seeking to reconcile the competing interests of different groups in society…”

and that

“…The choices made by Parliament in enacting the 1999 Act followed a wide consultation to enable it to evaluate the various interests at stake. Similarly, in formulating the CPR and the CPD, the relevant rule-makers were (following consultation) in the best position to determine how to effect the reforms and how to strike the appropriate balance between the different types of litigant.”

Therefore, even though the system may have operated harshly towards some litigants, it did not necessarily render it incompatible with the Convention and further that

“…there is a powerful argument that the 1999 Act scheme is compatible with the Convention for the simple reason that it is a general measure which was (i) justified by the need to widen access to justice to litigants following the withdrawal of legal aid; (ii) made following wide consultation and (iii) fell within the wide area of discretionary judgment of the legislature and rule-makers to make. On that basis, it is no answer to say that other measures could have been taken which would have operated less harshly on non-rich respondents…”

and, specifically on the topic and effect of the withdrawal of Legal Aid, that

“There was, and indeed there is, no perfect solution to the problem of how best to enhance access to justice following the withdrawal of legal aid for most civil cases. A successful defendant was often better off under the 1999 Act scheme than he had been when legal aid was generally available to appellants. At that time, a successful defendant usually had to bear his own costs of defending a claim. The appellant did not have the means to meet the defendant’s costs and it was a rare case in which a successful defendant would be able to obtain its costs from the legal aid fund. Under the 1999 Act regime, the successful defendant would usually obtain its costs from the ATE insurer. On the other hand, the unsuccessful defendant was unquestionably better off under the previous regime because it was only liable for the claimant’s base costs. This was the policy choice that was made by Parliament.”

Thus, summarising the Judgement of the Court, Lords Neuberger & Dyson (Lords Sumption and Carnwath agreeing) concluded that

“…It was undoubtedly a feature of the 1999 Act scheme that the costs awarded to successful appellants who had the benefit of CFAs could be very high indeed. For that reason, it had the potential to place respondents under considerable pressure to settle before even more costs were incurred. This is the third flaw identified by the ECtHR in MGN v United Kingdom and the second of Lord Neuberger’s four unique and regrettable features. We accept that, in a number of individual cases, the scheme might be said to have interfered with a defendant’s right of access to justice. But for the reasons stated earlier…, it is necessary to concentrate on the scheme as a whole. The scheme as a whole was a rational and coherent scheme for providing access to justice to those to whom it would probably otherwise have been denied. It was subject to certain safeguards. The government was entitled to a considerable area of discretionary judgment in choosing the scheme that it considered would strike the right balance between the interests of appellants and respondents whilst at the same time securing access to justice to those who would previously have qualified for legal aid. It had to find a solution to the problem created by the withdrawal of legal aid. The government has now produced three different schemes. Each was produced after wide consultation. Each has generated considerable criticism. As already indicated, once civil legal aid was constrained to the extent that it was in 1999, it became impossible to come up with a solution which would meet with universal approval. This is relevant to the question whether the 1999 Act scheme struck a fair balance between the interests of different litigants.

For the reasons that we have given, we are satisfied that the scheme was not incompatible with article 6…[EHCR]…or…[article 1]…”

In his dissenting judgement, Lord Clarke argued that the irrespective of whether the scheme was unfair or had flaws,

“…it was a disproportionate way of achieving the legitimate aim…because it did not treat all respondents in the same way but chose a particular class of respondents on whom to impose liabilities far beyond the bounds of what was reasonable or proportionate.”

For his part, Lord Mance (with whom Lord Carnwath agreed), in supporting the Judgement, provided further helpful insight in acknowledging that

“…This is an awkward case…”

in which

“…Lord Neuberger and Lord Dyson make a powerful case in their judgment for a conclusion that the system of costs not only fulfils the legitimate aim of affording access to justice to appellants (that is unchallenged), but does so in a way which falls within the wide area of discretionary judgment which rule-makers must be recognised as having when balancing the interests of those seeking access to justice and respondents faced with the additional burden of costs which the system could impose.

In striking such a balance, the state is entitled to look at the system as a whole, and the possibility of individual hard cases is not itself fatal…”

and further

“…the balancing exercise and any decision as to the validity of the system and the grant of any relief must all be undertaken taking account of the circumstances and competing interests as they stand at the time of the present proceedings. It is unnecessary and indeed inappropriate to scrutinise the scheme in the same way as would or might have been appropriate before or when it first came into force. Since then, much water has flowed under the bridge, in terms of the rules made and practice directions issued under the legislation, and the constant jurisprudence of domestic courts endorsing the system and of litigants and their lawyers acting on the basis that it applied and was valid.

I do not in this context accept the submission, made by the respondents and supported by the Department of Justice for Northern Ireland, that litigants and their lawyers cannot have had a legitimate expectation that the system would apply and be upheld. When appellate courts have repeatedly endorsed the system, it seems to me unrealistic to expect them to have avoided use of the system from concern about what would, if appreciated at all, have been seen as a remote risk that courts might change their attitude. I also consider that their legitimate expectation that the system would be enforced is one which falls to be taken into account at the present stage, and is not merely a matter that might…be raised as against the United Kingdom in Strasbourg.

In the above circumstances, I reject the respondents’ challenge to the system of costs whereby they are potentially liable in respect of success fees agreed and ATE premia incurred by the appellants. The position must, as Lord Neuberger and Lord Dyson have said, be considered as a whole. The system had a legitimate aim, the present is on its face an extreme and unusual case. It is difficult to conceive of any solution which would cater for such cases, without imperilling the whole system. The system has been repeatedly endorsed by domestic courts over a decade. Litigants and their lawyers have justifiably relied upon its validity. Legal certainty, consistency and the legitimate expectations which have so been generated all militate in favour of the Supreme Court upholding the system…; and I would uphold it and refuse any relief accordingly.”

Whilst also acknowledged by Lord Mance that there were still avenues of further challenge it is hoped, especially as the regime against which this Appeal was directed has now been superseded, that the matter has been finally clarified and resolved.