Are Success Fees being sent to Coventry?
Shamina Chowdhury, Solicitor at Saunders Law Ltd, discusses the potential implications of Coventry v Lawrence (No 2) [2014] UKSC 46 on pre-commencement funding arrangements.
In the weeks preceding the 1st of April 2013, lawyers were panic-signing their clients up to Conditional Fee Agreements and entering into After The Event (ATE) insurance policies like their lives depended on them. Why? Because the Jackson reforms - statutory changes to how legal cases could be funded - were being introduced. Entering into funding arrangements before these changes took effect entitled you to stay within the Recovery Regime - simply put, your success fees and premiums were recoverable from the paying party, rather than paid by your client.
For a firm like Saunders Law Ltd, with a significant number of Actions Against the Police and Civil Liberties clients, this was imperative. Where possible, we seek to limit the impact on the client and on any damages they recover.
And so, as the sun set on the 31st March 2013, solicitors breathed a sigh of relief as they clutched their stacks of signed CFAs and freshly printed insurance policies.
However, the case of Coventry has thrown a spanner in the works.
The claim
The case concerned a claim for nuisance by owners of a residential property, against the occupier of a sporting stadium which was used for motor racing and speedway events, David Coventry.
In February 2014, the Supreme Court determined that Coventry was liable to the home owners, reversing the decision of the Court of Appeal and reinstating the first instance decision.
The costs
The appellants' base costs were around lb398,000. With additional liabilities of a no win, no fee success fee and ATE insurance premium, this figure rose to lb1,067,000. The respondent was ordered to pay 60%. Shouts of jubilation could probably be heard from the appellants' solicitors' offices for miles around.
But not so from the respondents. Not only did they have to fund their own costs, but they would also have to foot the appellants' bill which included the success fee and ATE insurance premium. Take into account that the appellants' property was worth less than lb300,000 and that the value of the nuisance claim was lb74,000, it's no wonder than the parties soon found themselves in the Supreme Court again.
The appeal"| Human Rights?
Lord Neuberger was deeply troubled: "These figures are very disturbing. They give rise to grave concern even if one ignores the success fee and ATE premium." He acknowledged the difficulties with ensuring that a complex case, albeit involving relatively small sums of money, is both 'properly and proportionately' litigated. Nonetheless, he 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".
The respondents argued that the requirements to pay the success fee and ATE premium amounted to a breach of the right to a fair trial under Article 6 of the European Convention on Human Rights (ECHR) and the right to protection of property under Article 1 of the Protocol to the ECHR.
Lord Neuberger stated that the appeal should therefore be re-listed for hearing "after appropriate notice has been given to the attorney general and the secretary of state for justice".
The possible outcomes
The Supreme Court indicated that if the respondents' arguments are successful then a Declaration of Incompatibility may be granted. If this happens, litigants could have a claim for compensation against the government for infringement - the levels of such compensation payments running to billions of pounds.
What about the effect of a Declaration on cases which remain subject to the funding arrangements pre-Jackson? Many litigants may suddenly find themselves liable for their ATE premiums and success fees that they didn't previously expect to pay.
What does this mean now?
Be prepared for paying parties jumping on the bandwagon (destination: Coventry) and adjourning any impending assessment hearings until the Supreme Court has resolved the matter. Consider how a Declaration is going to affect your business and more importantly, your clients. Where possible, settle your costs early and factor in this additional risk when negotiating.
We'll leave you with a final word from Lord Neuberger:
"If I was satisfied that there was any satisfactory way of proceeding without incurring the parties in further costs, I would eagerly grasp it, but sadly, I cannot see any such course."
Make of that what you will.
Shamina Chowdhury is a Solicitor in the Civil Litigation Department