The cost of Coventry v Lawrence

Transcription

1 1 The cst f Cventry v Lawrence 23/07/2015 Dispute Reslutin analysis: What is the significance f the Supreme Curt's decisin that the pre-2013 system f recvering success fees and after the event (ATE) insurance premiums frm the lsing party is cmpatible with the Eurpean Cnventin n Human Rights (ECHR)? David Bwden, freelance independent cnsultant, examines the judgment and talks t Alex Bagnall, assciate and csts advcate f Just Csts, as well getting reactin frm Mr Cventry and his slicitr Janne Pley, partner f Pley Bendall & Watsn. Original news Cventry and thers v Lawrence and anther [2015] UKSC 50, [2015] All ER (D) 234 (Jul) Lawrence and Shields (Lawrence) brught a nise nuisance claim in relatin t Mr Cventry's speedway track. Lawrence's lawyers acted n a 'n win, n fee' arrangement. At trial Lawrence and Shields were awarded damages f just ver 10,000. Mr Cventry had that ruling ver-turned in the Curt f Appeal, but the Supreme Curt restred the trial judge's ruling. Lawrence's legal csts fr all curts were nearly 1.5m. Lawrence sught recvery f these csts frm Mr Cventry. In a previus judgment Lrd Neuberger said 'these figures are very disturbing' (Cventry v Lawrence [2014] UKSC 46, [2014] 4 All ER 517 at para [34]). The Supreme Curt set anther hearing t determine whether the success fee and ATE premiums (which frmed ver 1.3m f the csts) were recverable. In its reserved judgment handed dwn n 22 July 2015 a majrity f five judges in a seven-judge curt held that the system set up by the Access t Justice Act 1999 (AJA 1999) in relatin t the recvery f additinal liabilities (that is success fees and ATE premiums) was cmpliant with the ECHR. There was a strng dissenting judgment by tw judges. Significantly, fur f the seven judges were unanimus in labelling this case as 'an awkward case'. There may be a final appeal t the Eurpean Curt f Human Rights in Strasburg. What were the facts f the underlying case? Mr Cventry and his cmpany Mt-Land UK Limited perate a stadium in Mildenhall in Sufflk. This is used fr weekly greyhund racing, stck car racing and speedway racing n summer weekends. Initially Lawrence and Shields cmplained abut a nise nuisance t the lcal authrity. Mr Cventry put up an acustic barrier t reduce the nise. This satisfied the lcal authrity and it tk n further actin. Lawrence then brught a nise nuisance actin n a 'n win, n fee' arrangement thrugh Richard Buxtn Envirnmental Law. At trial, HHJ Seymur ruled there was a nise nuisance, dismissed all ther claims and made an rder that Mr Cventry paid nly 60% csts (Lawrence v Fen Tigers Ltd [2011] EWHC 360 (QB), [2011] 4 All ER 1314). Mr Cventry appealed and was successful in the Curt f Appeal (Lawrence v Fen Tigers Ltd [2012] EWCA Civ 26, [2012] 3 All ER 168). Lawrence appealed and the Supreme Curt restred the trial judge's decisin (Cventry v Lawrence [2014] UKSC 13, [2014] 2 All ER 622). Mr Cventry was respnsible fr his wn csts, 60% f his ppnent's csts at trial and his ppnent's csts f the appeal. The Supreme Curt tk the case t reslve a cnflict which had been identified in nuisance in anther case, Barr v Biffa Waste Services Ltd [2012] EWCA Civ 312, [2012] 3 All ER 380. With hindsight, it wuld have been better fr Barr t have been heard by the Supreme Curt because Biffa was a cmpany with substantial resurces. What damages were Lawrence and Shields awarded? The trial judge awarded 10,325 nly. There is an errr in the majrity judgment (para [4]) where this is stated t be 20,750. This is wrng and the crrect damages figure is set ut in para [325] f HHJ Seymur's judgment. What csts have been incurred?

2 2 Lrd Mance handed dwn the judgment and in ding s even he muddled up all the figures. Mr Lawrence's base csts fr the trial alne are 307,642. Mr Cventry is liable t pay 60% f this ( 184,585). The success fee fr trial is 215,007 and the ATE fr trial is 305,000. The csts f the substantive prceedings up t and including the first Supreme Curt hearing that Lawrence seeks in ttal frm Mr Cventry are 1,067,000 (see paras [32], [33] f judgment at [2014] UKSC 46). Mr Lawrence estimates that the ttal csts nw sught against him are 1.25m and this des nt include the csts f the Supreme Curt csts appeal. At the February 2015 hearing, it was said by cunsel that the ttal additinal liability (that is success fee and ATE) that Cventry seeks frm Mr Lawrence was then 1.3m. Of curse, all figures will be subject t a detailed assessment f csts which has nt yet ccurred. Why is this case f such significance? Legal aid was ablished fr the majrity f civil cases when AJA 1999 was brught int frce. In England and Wales, t replace it, lawyers were allwed t act instead under cnditinal fee agreements (CFAs). These CFAs meant n csts were payable if a litigant lst but, t cmpensate, a success fee f up t 100% f the base csts culd be recvered frm the ther side n successful cases. A CFA litigant usually tk ut a plicy f ATE insurance t pay the ther side's csts if his claim failed. Where a CFA litigant wn, the ther side als had t pay this ATE premium. AJA 1999 envisaged that litigants facing a CFA ppnent wuld usually have insurance t cver claims--fr example, third party liability under a car insurance plicy. In April 2013, this system was refrmed when the Legal Aid, Sentencing and Punishment f Offenders Act 2012 (LASPO 2012) came int frce. Fr CFAs entered int after April 2013, a CFA litigant had t pay success fees and ATE premiums ut f any damages recvered. Mr Cventry says he has n bjectin t paying the base csts f Lawrence subject t an assessment. Mr Cventry challenged paying bth the success fee and ATE and said the AJA 1999 system is 'grtesque'. If the AJA 1999 system had been held t be invalid, then the UK gvernment culd ptentially have had t pay cmpensatin t lawyers and insurers wh culd nt recver success fees r ATE premiums fr the 13 years the AJA 1999 prvisins were in frce. The ptential bill culd have been very large indeed. The AJA 1999 scheme did nt apply in Sctland r Nrthern Ireland. Hw is the judgment structured? The majrity judgment is a jint judgment that was c-written by the President f the Supreme Curt, Lrd Neuberger f Abbtsbury, and the Master f the Rlls and head f the Civil Divisin f the Curt f Appeal, Lrd Dysn. Lrd Sumptin agrees with this jint majrity judgment and adds nthing else f his wn. Lrd Mance gives a shrt judgment cncurring with this jint majrity judgment. Lrd Carnwath agrees with the jint majrity judgment and with Lrd Mance. Lrd Clarke (a frmer Master f the Rlls) gives a strng dissenting judgment which n the critical issues cmes t cnclusins diametrically ppsed t the majrity judgment. The Deputy President f the Supreme Curt, Barness Hale agrees with Lrd Clarke's dissent and adds nthing f her wn. This piece will fcus n the majrity view but, in view f its imprtance, a summary f the minrity view is als set ut belw. What issues did the Supreme Curt address? There were essentially tw issues: Shuld a csts judge cnsider the circumstances f a paying party when assessing csts? Is the AJA 1999 system cmpliant with the ECHR? What did the majrity f the Supreme Curt rule n the paying party's circumstances? Under the Csts Practice Directin (CPD) (pre-1 April 2013), a csts judge assesses base csts and then ges n t assess success fees and ATE separately. Mr Cventry submitted that this is wrng and that the verriding bjective in the Civil Prcedure Rules 1998, SI 1998/3132 (CPR) means that his circumstances must be taken int accunt t. Mr

3 3 Cventry said he fell int a categry f rdinary uninsured nn-rich litigants and that an exemptin shuld be carved ut fr this categry f litigants. On the first issue, the majrity ruled against Mr Cventry. What did the majrity f the Supreme Curt rule n the ECHR? ECHR, art 6 prvides that: 'In the determinatin f his civil rights and bligatins...everyne is entitled t a fair and public hearing within a reasnable time by an independent and impartial tribunal established by law.' Article 1 f the First Prtcl t the ECHR (A1P1) deals with prtectin f prperty and prvides: 'Every natural r legal persn is entitled t the peaceful enjyment f his pssessins. N ne shall be deprived f his pssessins except in the public interest and subject t the cnditins prvided fr by law and by the general principles f internatinal law.' Mr Cventry submitted that the system under AJA 1999 was effectively a blck n these rights f his. Again, n the secnd issue, the majrity ruled against Mr Cventry. What des the majrity judgment say? The majrity nte that AJA 1999 was intrduced and was there t plug the gap caused by the withdrawal f legal aid fr mst civil claims. It ntes that there was prper prir cnsultatin by the UK gvernment befre AJA 1999 was intrduced. AJA 1999, ss 27 and 29 intrduced the requirement fr lsing parties t pay a success fee and the ATE premium f the ther side when its case was funded n a 'n win, n fee' basis. CPR 43.2 and CPR 44.5 sets ut hw a csts judge assesses these. The majrity endrse the well-knwn csts judgment f the Curt f Appeal in Lwnds v Hme Office [2002] EWCA Civ 365, [2002] 4 All ER 775 that n the standard basis, a csts judge applies a test f reasnableness. The CPD is neither primary nr secndary legislatin and des nt strictly frm part f the CPR. Paragraph 11.9 f the CPD prvides that a percentage increase fr a success fee (a maximum success fee f 100% was permitted under AJA 1999) 'will nt be reduced simply n the grund that, when added t base csts which are reasnable...the ttal appears disprprtinate.' The majrity nte and endrse the three legitimate aims f the Westminster Parliament when AJA 1999 was intrduced: cntaining the rising cst f legal aid imprving access t the curts fr meritrius claims, and discuraging weak claims The majrity are at pains t pint ut that 'prprtinality' has a duble meaning: in relatin t rights under the ECHR, it means a value judgment as t whether UK law meets the stated bjective t justify limiting rights under the ECHR, and in relatin t csts, the Lwnds test that a csts judge will nly permit csts 'which are prprtinate t the matters in issue' The majrity als endrse the Curt f Appeal's apprach t ATE assessment in the well-knwn csts case f Rgers v Merthyr Tydfil Cunty Brugh Cuncil [2006] EWCA Civ 1134, [2007] 1 All ER 354. The majrity agree that a csts judge des nt ask whether an ATE premium was prprtinate t the imprtance f the case. Instead, if an ATE premium was necessarily incurred, a csts judge can find it t be prprtinate. The majrity als endrse the Curt f Appeal's 'readyreckner' apprach t assessing success fees set ut in Atack v Lee [2004] EWCA Civ 1712, [2004] All ER (D) 262 (Dec). The majrity nte the flaws in AJA 1999 that were set ut in the Jacksn review f civil litigatin: lack f fcus f the regime

4 4 absence f any incentive fr appellants t cntrl csts csts were nly assessed at the end f prceedings blackmail r chilling effect f a regime which drve a party with a gd case t settle, and claimant's slicitrs culd cherry pick cases t take n a CFA In MGN Ltd v United Kingdm [2012] ECHR 39401/04, the Strasburg curt held this was enugh t prevent the recvery f a success fee. Hwever, the majrity held that this case funded n ECHR, art 6 (access t the curt) is different and therefre is distinguished. As t 'unfairness' this hlds n sway with the majrity wh brutally say this is irrelevant. Instead, the majrity say the questin is whether the AJA 1999 system 'was a disprprtinate way f achieving a legitimate aim'. The majrity pray in aid an early judgment f Lrd Dysn in Swift v Secretary f State fr Justice [2013] EWCA Civ 193, [2013] All ER (D) 155 (Mar) t supprt this. The majrity hld that the Westminster Parliament had t make hard chices but that the scheme in AJA 1999 was put in place after wide public cnsultatin. It has t be nted that in these cnsultatins it was never cnsidered what wuld happen n appeals where the expsure fr ATE snwballed in the way it has here. The majrity brush this aside saying 'a few unfrtunate results are inevitable'. Similarly, the majrity say MGN permits it t rule that AJA 1999 is ECHR cmpatible because 'a legislative r regulatry scheme may in sme circumstances be cmpatible with the Cnventin even if it perates harshly in individual cases'. The majrity say AJA 1999 is cmpatible with the ECHR because it is a general measure which was: justified by the need t widen access t justice fllwing the withdrawal f legal aid made fllwing wide cnsultatin, and fell within the wide area f discretinary judgment f the UK gvernment and rule makers Mr Cventry submitted that better alternatives were available, such as a levy n all litigants. Hwever, this is rejected by the majrity as 'speculative' and 'highly cntrversial'. Mr Cventry's attempt t carve ut an exceptin fr rdinary 'nnrich' litigants that were embriled in a nce-in-a-lifetime piece f litigatin als had cld water pured n it by the majrity wh lambasted this idea as 'uncertain and arbitrary'. The majrity view Mr Cventry's best submissin as that relating t the CPD where a csts judge cannt stand back and assess the verall reasnableness f success fees and ATE at the end f litigatin. T this the majrity brush this substantial submissin aside by saying 'it wuld have imperilled the whle scheme'. In cnclusin, the majrity find the AJA 1999 scheme (which Mr Cventry's cunsel branded 'grtesque') as nt incmpatible with ECHR, art 6 r A1P1. Rather ddly, the majrity g n t cnsider what they wuld have ruled in relatin t remedy if they had fund in Mr Cventry's favur. Perhaps this is an indicatin the majrity knw at heart that the majrity judgment cannt survive in its present frm after the Strasburg curt has scrutinised it. The majrity say the CPD cannt be read dwn as this wuld invlve a departure frm Lwnds. The majrity say a revisiting f the CPD t allw csts judges t lk at the financial circumstances f a paying party (in the case f Mr Cventry f cmfrtable but nt verly substantial means) 'cannt be achieved under the guise f interpretatin'. In cnclusin, the majrity say that if, cntrary t its view, the AJA 1999 scheme was incmpatible with ECHR, art 6 and/r A1P1, they wuld neither read it dwn s as t make it cmpatible, nr strike the AJA 1999 scheme dwn nr disapply it. What else did Lrd Mance say in agreeing with the majrity view? Lrd Mance is clear that 'this is an awkward case'. He ntes the 'eye-catchingly large csts expsure'. Lrd Mance feels that even a small business shuld have carried sme frm f insurance--and that ne carrying n mtr racing shuld have had insurance against nise nuisance. This is all wise after the event, but neglects the reality that a mtr racing business had been carried n at the site fr 40 years and that sund insulatin had been installed which satisfied the lcal authrity that there was n such nise nuisance.

5 5 Lrd Mance says that legal certainty, cnsistency and the legitimate expectatins f claimant lawyers acting n 'n win, n fee' deals (that they will recver success fees in due curse) 'all militate in favur f the Supreme Curt uphlding the system'. What did the minrity rule? The minrity agree with tw judges in the majrity that 'this is an awkward case'. Hwever, because f its awkwardness, they rule that the AJA 1999 scheme is nt cmpatible with the ECHR. They are swayed by the academic criticism f the scheme by Prfessr Zuckerman in his bk n civil prcedure where he ntes that: 'An individual defendant withut the benefit f a CFA is in a wrse psitin that the CFA claimant because he is expsed t the risk f having t pay as much as twice the claimant's reasnable and prprtinate csts.' The minrity say this pint has great frce and the AJA 1999 system is 'unfairly discriminatry against sme classes f respndent by cmparisn with thers'. The minrity nte the striking feature f a CFA that it is available t pr litigants such as Lawrence as well as rich litigants such as Nami Campbell. The minrity nte that the AJA 1999 scheme prvides a 'risk free means r prviding access t lawyers t thse wh culd affrd t fund it in ther ways'. The minrity say the facts f this case bear this ut and again reassert that Lawrence's csts in this case 'are very disturbing'. The minrity nte and endrse the extra-judicial adverse criticism f the AJA 1999 scheme. They cite a speech frm Sir Anthny May where he asks: 'Is it in principle right that an eventual lsing party t litigatin shuld be at risk f paying a greater uplift if he has a strngly arguable case he nevertheless lses, whereas, if he has a rtten case, the justifiable uplift will be less?' The minrity respectfully disagree with the majrity n the balancing exercise they have struck n the ECHR rights. The minrity say that: 'The interest f any defendant in being able t defend himself...in litigatin, at a reasnable and prprtinate cst is als ne f sme weight and it certainly engages...a balancing exercise.' The minrity are clear that 'just as a claimant is entitled t a fair trial, s t is a defendant'. The minrity are swayed by that fact that Mr Cventry was 'faced with ne-ff litigatin which has invlved him in eyecatchingly large csts expsure'. The minrity find the AJA 1999 scheme t be 'discriminatry and disprprtinate and disregards their rights' (ie thse f Mr Cventry). The minrity cnsider what rder they shuld make in view f their incmpatibility finding. The minrity say it is at least arguable that the CPD can be read dwn but say there wuld be scpe fr further argument n this if they were in the majrity. Any thughts n the case nw that it is finished in the UK? At the February hearing, Mr Rbert McCracken QC fr Mr Cventry submitted: 'The law like the Ritz is pen t rich and pr alike but here we are expected t pay fr ur wn meal, that f ur ppnents (frm an unpriced menu) and thse f their lawyers and insurers n a future ccasin.' This is still the thughts nw f Mr Cventry and his slicitr, Mrs Pley, wh agree that this is an awkward case. What shuld lawyers d next?

6 6 Mr Cventry is cnsidering any next steps with his cunsel. There are pwerful indicatins in the minrity judgment that the csts utcme fr Mr Cventry des nt cmply with either the ECHR r A1P1. There is a time limit f six mnths frm the handing dwn f the Supreme Curt judgment t ldge an applicatin with the Eurpean Curt f Human Rights in Strasburg. If this case des g t Strasburg, there will be a delay befre it is heard. The Attrney General f Nrthern Ireland supprted Mr Cventry in submissins befre the Supreme Curt. His case was structured arund tw recent cases frm the Strasburg Curt (Stankv v Bulgaria [2007] ECHR 68490/01 and Klauz v Cratia [2013] ECHR 28963/10 where high curt fees were held t infringe ECHR, art 6. There is n mentin f these cases in any f the Supreme Curt judgments. In MGN, the Strasburg Curt ruled unanimusly that there has been a vilatin f ECHR, art 10 in relatin t the success fees payable by Miss Campbell. If Cventry des g n t Strasburg, then these tw cases, taken with the Nami Campbell ruling, culd be an indicatr f which way the Strasburg curt might ultimately rule. What abut thse acting fr thers invlved in csts prceedings? Fr csts lawyers wh are dealing with assessment f csts in mre rutine csts prceedings in either the Senir Curts Csts Office r befre csts judges in the cunty curt, this judgment is a bit f a damp squib and it is business as usual. The majrity judgment in particular means the attack n the CPD has been dismissed. This means that csts judges will nt have t cnsider the circumstances f paying party when assessing a receiving party's csts. Further, para 11.9 f the CPD will stand and the additinal liabilities (be it success fee r ATE premium) will nt be reduced by a csts judge (as is the case nw) simply n the grund that when added t the assessed r reasnable base csts the ttal appears disprprtinate. Hw will this affect the cnduct f csts prceedings? The utcme f this case des nt affect the liability t pay base csts as they are assessed by a csts judge r agreed between the parties. In thery it is pssible t ask a csts judge fr a stay if Mr Cventry decides t take his case t Strasburg. Hwever, such a stay, even if granted, wuld nly be in relatin t additinal liabilities. In practice, as this case has nw reached its final reslutin in the UK by the Supreme Curt it seems highly unlikely that an applicatin fr a stay wuld be granted. Are there any final thughts frm a csts slicitr's perspective? Alex Bagnall: Had the Supreme Curt declared that the recverability regime was incmpatible with the ECHR, the effects culd have been apcalyptic. Cmmentatrs have suggested that such a declaratin culd have resulted in anything frm nthing at all thrugh t the unravelling f all csts settlements that have been reached since the recverability regime was incepted at the turn f the century. Significant amunts f satellite litigatin wuld almst certainly have arisen. Frtunately, this issue des nt fall t be cnsidered. The md amng csts prfessinals is relatively unanimus--the decisin f the Supreme Curt was the crrect ne. While the recverability regime was far frm perfect, the Supreme Curt identified that it is impssible t devise a fair scheme which prmtes access t justice fr all litigants in the absence f a widely available civil legal aid scheme. There will, f curse, be sme wh are disappinted by the judgment. There still exists a recverability regime in certain types f case, fr example: within mesthelima certain inslvency and defamatin cases in relatin t specified ATE insurance premiums in clinical negligence matters A declaratin f incmpatibility wuld have been welcmed by thse wh are frequently defendants in such matters. After mnths f uncertainty, it is nw business as usual fr csts lawyers. What been the reactin frm Mr Cventry's slicitr, Janne Pley?

7 7 Ms Pley agrees that this has been an awkward case but has n regrets abut taking this case n. It has been a ne-ff experience fr her and her firm. She desn't think a case like this will cme her way again. The riginal file f papers has nw expanded smewhat t take ver her ffice. Ms Pley praises the excellent memry f bth her client and junir cunsel wh has had the case frm the beginning. She is surprised that the split between the judges was nly 5:2. The cnsultatins befre AJA 1999 never cnsidered the figures r circumstances that have nw arisen in this case. And we shuld allw Mr Cventry t have the last wrd Mr Cventry is happy with the service he has received frm his legal team including Mrs Pley and his junir cunsel (Sebastian Kkelaar) and leader (Rbert McCracken QC) wh acted pr bn in the Supreme Curt csts appeal. It wuld have been a better utcme if the Supreme Curt had dismissed the appeal frm the Curt f Appeal rather than uphlding it. He feels it was unfair that he has been made t pay the price fr determining bright line distinctins in the law f nuisance and it wuld have been fairer if the Barr case was taken n appeal n this pint as Biffa Waste Management have deep pckets and culd affrd t lse t clarify the law. Mr Cventry feels he has been let dwn in this case-- particularly in the Supreme Curt and especially in view f the indicatin f Lrd Neuberger in the secnd judgment where he said the csts were 'very disturbing'. He has the stmach thugh t cntinue the fight t Strasburg if that is where he has t g t get justice that the UK curts have denied him. Interviewed by David Bwden. The views expressed by ur Legal Analysis interviewees are nt necessarily thse f the prprietr Abut LexisNexis Terms & Cnditins Privacy & Ckies Plicy Cpyright 2015 LexisNexis. All rights reserved.