Conditional Fee Agreement Insurance

What was intended to be guidance and some fundamental changes to the law of nuisance by the Supreme Court in the matter of Coventry –v- Lawrence, has in fact caused consternation for litigants who entered into CFA’s and ATEI policies before 1st April 2013. 

Under the Access to Justice Act 1999 (AJA) which introduced Conditional Fee Agreements (CFA), a successful party is entitled to recover their success fee and any ATEI premium from the losing party.  This altered on 1st April 2013 with the introduction of the Legal Aid, Sentencing & Punishment of Offenders Act 2012 (LASPO).  Under this new regime, the success fee and ATEI premium are not recoverable from the losing party.  This only applies to CFAs entered into after that date; pre-LASPO CFAs remain unaffected: Until 23rd July 2014 that is, when Coventry –v- Lawrence (No 2) [2014] UKSC 46 was heard and the Supreme Court hinted that this may not be the case.

The facts of the matter are very simple.  The Claimant purchased a bungalow in 2006 near a speedway racing track owned by the Defendant that had been operating since 1975.  The Claimants complained about the noise and obtained an injunction against the Defendants from operating above a certain noise level.  The matter was appealed to the Court of Appeal and again to the Supreme Court.  Ultimately, the Claimants were successful, retained their injunction and were awarded £20,700 by way of damages.  The Defendants were also ordered to pay 60% of their costs.

It is the costs that are the crux of the matter.  The Claimants’ basic costs were £398k with a 100% success fee and an ATEI premium of around £350k – a total figure of about £1.06m.  This figure did not include the cost of the two appeals.  Even though the Defendants only have to pay 60% of that figure, it is easy to see that the costs vastly exceed the damages.

It was whilst this was being discussed that Lord Neuberger raised the possibility that the recoverability of success fees and ATEI premiums in pre-LASPO cases could in fact infringe Art 6 of the ECHR.  Article 6 grants the right to everyone to have a “fair and public hearing”.  What was being hinted at was that with the sort of costs involved, it prevents ready access to the courts meaning potential litigants lose the right to a fair trial.

Because the AJA is primary legislation, the Supreme Court cannot overrule it and must be bound by it.  All the Court can do is declare that the AJA is “incompatible” with the ECHR.  According to Lord Neuberger, this could have serious consequences for the government as “victims” could, in theory, claim compensation from the government for additional liabilities that have been paid in the past.  It also raises questions as to how legal representatives deal with cases that they still have in their filing cabinets that have pre-LASPO CFAs in them.

The Court has decided to defer making any decision on this matter and has invited the Government to make any submissions it may wish to by 7th October 2014.  It is also understood that the Law Society is taking advice and considering whether to intervene in the matter simply because of the enormous ramifications that this case will have if the Court does make a declaration of incompatibility.  It is simply a case therefore of waiting to see what the final verdict is.

Even if the Court does declare that pre-LASPO CFAs are incompatible with the ECHR, as said above, they will still be bound by the AJA and it will not change the final outcome for the parties involved.  The irony is that it is simply incurring more costs for the parties involved.

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