The Supreme Court Rules That Success Fees and ATE Premiums May Be Illegal

Article

19 August, 2014

In the recent case of Coventry and others v Lawrence and another (No2) [2014] UKSC 46, the Supreme Court took a surprising step and refrained from ordering the payment of a recoverable pre 1st April 2013 success fee and ATE insurance premium against a losing party declaring that the pre-Jackson right of recoverability could amount to a breach of Article 6 of the European Convention of Human Rights - a right to a fair trial.

The case concerned a nuisance claim brought by the owners of a residential property against the owner of a sports stadium used for motor racing events. The Appellant (Claimant) was successful at first instance and the Respondent (Defendant) was successful on appeal, the Appellant was then successful in the Supreme Court. The Appellants property was worth less than £300,000 and the nuisance claim was valued at £74,000. However, the Appellants base costs amounted to £398,000; together with a success fee of £319,000 and an ATE premium in the sum of £350,000. Lord Neuberger described the figures as "very disturbing", he stated it would be wrong for the Court not to express its concern at the total recoverable costs in this case.

Lord Neuberger stated that the liability for costs was inconsistent with the paying party's Convention Rights. However, he refrained from making a final decision on the point. He stated that it would be wrong to do so without allowing the Government the opportunity to address the Court on the issue. The Supreme Court has therefore adjourned the matter.

Should it be concluded that the pre-Jackson right of recoverability does breach Article 6 of the European Convention of Human Rights, a Declaration of Incompatibility may follow. In this event, any persons (legal or natural) that has paid out a success fee and/or ATE premium under the old regime may have a right of recourse against the Government. It is expected that the Government would be forced to return amounts running into billions of pounds to paying Defendants and/or their insurers.

It should be noted that where the Defendant/ paying party is a local authority, there may be difficulties in establishing its status as a "victim" of a human rights violation owing to its relationship with the Government.

If the Supreme Court does make a Declaration of Incompatibility, the pre-Jackson recoverability would still stand on matters where the CFA was dated pre-1st April 2013, albeit illegally, and the sums would still be payable to the Claimant. Any recourse would be against the Government and not the Claimant. It is therefore not cost effective to seek an adjournment of a costs matter pending the outcome of the Coventry case as further interest would inevitably be incurred. Although, it may be the case that Judges take this step in any event. Any decision made by the Supreme Court will have no effect on post 1st April 2013 CFA's.

For further information please contact Sarah Wilkinson on 01254 662831 or email sarah.wilkinson@forbessolicitors.co.uk

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