Recovery of Additional Liabilities: Breach of Human Rights?

On the 23rd July 2014, Lord Neuberger dealt a potentially fatal blow to over a decade of litigation. Sitting as President of the Supreme Court in Coventry v Lawrence (No 2) [2014] UKSC 46, Lord Neuberger suggested that the pre-Jackson regime of recoverability of additional liabilities such as success fees and after-the-event (ATE) insurance premiums may constitute a breach of the European Convention on Human Rights, with grave consequences for the government for having passed an Act that could be in breach of Article 6 ECHR and Article 1 of the First Protocol – the former being the right to a fair and public hearing, and the latter affording protection of property and the right to ‘peaceful enjoyment of possessions’.

Coventry v Lawrence concerned a private claim for nuisance brought by two local residents against the occupiers of a speedway track. The case was subject to the ‘old’ costs regime – i.e. pre-Jackson – which was established by the Access to Justice Act 1999. It is this Act that could see the government in hot water. The residents won their case at first instance, which was then overturned by the Court of Appeal, before finally being restored by the Supreme Court on the 12th May 2014.

The two respondents were ordered to pay 60% of the appellant’s trial costs: the base costs from the original trial were £398,000 with a success fee of £319,000. This coupled with an ATE premium in the sum of around £350,000 brought the sum to somewhere in the region of £1,067,000, meaning the respondents were liable for around £640,000 before the costs of the two appeals had even been accounted for.

It is here that Lord Neuberger took issue, calling the figures ‘very disturbing’, and stating that the figures ‘gave rise to grave concern, even if one ignores the success fee and ATE premium’. Lord Neuberger felt that the issue affected both parties comparatively, describing the situation as ‘highly regrettable’ that it could cost two citizens £400,000 in legal fees to ‘merely establish and enforce their right to live in peace in their home’, a building valued at less than £300,000, with the effect of the nuisance being valued at no more than £74,000 at most. Correspondingly, the respondents were small business owners who, as well as having to fund their own costs, were liable to pay the lion’s share of the appellant’s costs. They were justifiably seeking to defend their business and their case clearly had merit, as demonstrated by their success in the Court of Appeal.

Callery v Gray [2002] UKHL 28 decided that the ‘old’ costs regime currently in dispute did not breach Article 10 ECHR – freedom of expression. However, several years later in MGN v UK, the European Court took a different view, concluding that the obligation on MGN to pay a 100% success fee to Naomi Campbell (following the Campbell v  MGN Ltd [2002] UKHL 22 case) was disproportionate, and constituted a breach of MGN’s freedom of expression. This was one of the catalysts that sparked the government’s requirement for reform, bound by its duties under the Convention, leading to 2013’s ‘Jackson reforms’ under the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

As yet is it unknown what the ramifications of Lord Neuberger’s comments will be, the matter having been adjourned for a further hearing. However, any potential future decision that the recovery of additional liabilities could in some circumstances constitute a breach of Article 6 and so be irrecoverable could have serious and far-reaching implications for not only litigants and their representatives but also the government itself. It is a very real possibility that the future could hold a compensation claim against the government itself for the victims of those whose Convention rights have been breached.