Coventry v United Kingdom (6016/16): The recoverability of CFA success fees and ATE premiums

The European Court of Human Rights (ECtHR) recently handed down judgment in Coventry v United Kingdom.

Mr Coventry was an unsuccessful defendant in a nuisance claim relating to noise. He did not have insurance and so was personally liable to pay any damages or costs awarded by the courts. The claimants had funded the litigation through a Conditional Fee Arrangement (CFA) and After the Event (ATE) insurance. Mr Coventry argued that he should not be liable to pay the CFA success fees and ATE premium incurred by the claimants on the basis that the costs were disproportionate and therefore interfered with his rights under Article 6 of the ECHR and Article 1 of Protocol No 1 to the ECHR. The relevant costs regime in this case was that introduced by the Access to Justice Act 1999.

The Supreme Court had previously upheld a decision that Mr Coventry was liable to pay 60% of the Claimant’s costs, including the CFA success fees and ATE premium. In Coventry v Lawrence [2015] UKSC 50, the Supreme Court held by a majority of five to two that the costs regime did not breach Mr Coventry’s rights and that therefore CFA success fees and ATE premiums would be recoverable provided they were necessarily incurred.

 

The ECtHR has now held that the CFA success fees and ATE premium were disproportionate and it did breach Mr Coventry’s rights under both Article 6 of the ECHR and Article 1 of Protocol No 1 to the ECHR for him to be held liable to pay these costs.

It was noted that the costs regime may mean that a defendant with good prospects of success would be pushed to settle due to the costs risk, particularly as the CFA success fees and ATE premium are likely to be higher if the defendant had good prospects of success. It was found that there were insufficient safeguards to redress the imbalance caused by the regime and that the regime placed an excessive burden on uninsured defendants in litigation where the claimants’ case was funded by way of a CFA.

Whilst this case concerned the costs regime under the Access to Justice Act 1999 as opposed to the current regime under the Legal Aid, Sentencing and Punishment of Offenders Act 2012, it is relevant to any ongoing cases under the old regime and can provide some reassurance to defendants that the old regime will not be returned to.

With regard to ongoing cases under the old regime (CFAs agreed pre-1.4.13), there is the issue whether the non-binding ECtHR decision will be followed by the English courts, or that of the Supreme Court. Further, there are mesothelioma cases where uplifts and ATE premiums remain recoverable; not all mesothelioma defendants are insured and consequently the ECtHR decision will be relevant to these claims. ATE premiums in clinical negligence claims can be surprisingly high; these are likely to come under the spotlight where the defendant is not insured. Finally, will the UK Government be paying uplifts & ATE premiums if they prove to be irrecoverable from uninsured defendants. These points are yet to be decided.

 

Summary by Holly Girven, pupil at Farrar’s Building.

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