Court of Appeal Overturns 'Michelin Man' Pay-Out Decision - Charles Bagot, Hardwicke

13/08/15. It had been 10 years since a secondary victim claim had reached the Court of Appeal when the important case of Taylor v A.Novo(UK) Ltd [2014] QB 150 was decided, in March 2013. By contrast, the last six months have seen a series of key decisions illustrating the approach first-instance Courts will take in the light of Taylor, namely Wild v Southend NHS; Brock v Northampton NHS; Berisha v Stone Superstore; Shorter v Surrey & Sussex NHS and culminating in another landmark Appeal decision in Liverpool Women’s Hospital NHS Foundation Trust v Ronayne [2015] EWCA Civ 588.

As long ago as 1999, in White, Lord Hoffmann observed, “It seems to me that in this area of the law, the search for principle was called off in Alcock v Chief Constable of South Yorkshire [1992] 1 A.C. 310. No one can pretend that the existing law, which your Lordships have to accept, is founded upon principle.” This lack of principle made it hard to advise clients on likely outcomes. A series of decisions followed Alcock and White which were difficult to reconcile with each other. But taken as a whole, the five cases decided in the months since December 2014 bring some welcome consistency for practitioners advising in this complex and policy driven area of law...

Image ©iStockphoto.com/STEFANOLUNARDI

Read more (PIBULJ subscribers only)...

Coventry v Lawrence: Old Style Costs Regime Survives Human Rights Challenge - Robert Weir QC, Devereux Chambers

12/08/15. On 23 July 2014, in a judgment in Coventry v Lawrence [2014] UKSC 46 also covering the issue of a landlord’s liability for nuisance, Lord Neuberger endorsed the arguability of the defendant’s case that its liability to pay the successful party’s success fee and ATE premium breached the defendant’s Convention rights under article 6 (the right to a fair trial) and Article 1 of the First Protocol, known as A1P1 (the right to possessions).

This nuisance claim had been run under an old style CFA, that is one under Access to Justice Act 1999 under which success fees and ATE premium are recoverable from the losing party. Lord Neuberger did not hold back, describing this old style CFA regime as having 4 “unique and regrettable features”, not least that the unsuccessful defendant could be liable for 3 times base costs (by virtue of paying 100% uplift and an ATE premium at about the level of base costs). Lord Neuberger required that the issue, which clearly extended well beyond nuisance claims and into the arena of personal injury CFAs, be resolved at a further hearing. The Supreme Court permitted interventions from the Law Society and the Bar Council as well as from the Asbestos Victims Support Group Forum UK and others.

Having set the cat among the pigeons, there followed a period of uncertainty lasting 1 day less than 1 year during which time all of us barristers and solicitors, with run off work under old style CFAs and representing ongoing mesothelioma claimants (who still operate under the old style CFA regime), were left not knowing whether our agreements would be held viable and enforceable. In the event, the Supreme Court by a majority of 5:2 tempered their criticisms of the old regime and backed away from any finding of Convention non-compliance. So we are left (thankfully) where we thought we were prior to the earlier judgment in Coventry v Lawrence in July 2014: old style CFAs do not fall foul of defendant’s Convention rights and are fully enforceable. Those interested only in the result need read no further...

Image ©iStockphoto.com/

Read more (PIBULJ subscribers only)...

Coventry v Lawrence: Supreme Court Rules That Conditional Fee Agreements Don’t Breach Human Rights - Frances Coulson, Moon Beever Solicitors

11/08/15. On 22 July the Supreme Court gave judgment in Coventry v Lawrence. This simple neighbour nuisance case had the misfortune to become a test case for the argument that the recoverability of adverse costs premiums and success fees on CFAs from the opponent amount to a breach of that paying party’s Article 6 ECHR (and/or article 1 of the first protocol to the Convention) human rights.

The court found that that recoverability did not amount to any such breach. Had they found otherwise, this would have had massive implications for pre-2012 cases. There could have been a cause of action against the Government for failing to ensure EHCR-compliant legislation in the Access to Justice regime, which allowed recoverable costs in the CFA regime until LASPO banned it from April 2013 for most scenarios. This could have run into billions and perhaps for that reason the case has taken a considerable time to be dealt with. The Supreme Court gave the Government, represented by the Attorney General, the opportunity to intervene. Seven other bodies intervened, including R3, the Association of Business Recovery Professionals (the trade body for insolvency practitioners) and the Asbestos Victims Support Group Forum UK.

The background to all this was the serious (and continuing) reduction in availability of legal aid. Section 17(1) of the Courts and Legal Services Act 1990 Act stated that the general objective of Part II of the Act was the development of legal services in England and Wales “by making provision for new or better ways of providing such services and a wider choice of persons providing them, while maintaining the proper and efficient administration of justice”. Section 58 permitted lawyers, for the first time, to enter CFAs. The Act did not, however, at that time, permit the successful party to recover the success fee. ATE insurance was then developed and, after a further white paper, the Access to Justice Act 1999 allowed recoverability of success fees and ATE premiums from the paying party (subject to assessment).

Lord Jackson’s 2010 report severely criticised legal costs overall and recommended the abolition of recoverability of uplifts and ATE premiums. He disliked the “blackmail” or “chilling” effect of the regime, which drove parties to settle early despite good prospects of a defence, and, as the Supreme Court reiterated, the fact that the regime allowed lawyers to cherry-pick winning cases to conduct on CFAs. Much of Lord Jackson’s report was implemented, including this amendment, save for temporary carve-outs in three areas - including insolvency cases - for two years, to enable alternatives to be explored.

R3 liaised with insurers, funders and government bodies and concluded that no alternative gave the same results to creditors as the extant regime. R3 therefore lobbied hard to retain its insolvency exemption, commissioning a report by Professor Peter Walton of Wolverhampton University to research the current framework and likely result of any change. Professor Walton reviewed sanctions data from the insolvency service as well as membership survey material from R3 members and data directly from IPs, insurers and other stakeholders including creditors.

Mr Coventry, the paying party, also argued that, rather than take the base costs and consider proportionality and then separately consider the ATE and success fee, the courts should consider the whole costs and the effect on the paying party. CPD 11.9 states that “A percentage increase will not be reduced simply on the ground that, when added to base costs which are reasonable and (where relevant) proportionate, the total appears disproportionate” This argument was also rejected.

Lords Neuberger and Dyson held that the Access to Justice Scheme is a general measure, justified by the need to widen access to justice to litigants after the withdrawal of legal aid, made following wide consultation, and well within the wide area of discretionary judgment that the legislature and rule-makers had, it being noted that this was the third such scheme enacted.

The Supreme Court accepted that, in a situation where there are no perfect solutions, the Scheme, looked at as a whole, was a rational and coherent one for providing access to justice to those to whom it would probably otherwise have been denied, and hence struck a fair balance between the interests of different litigants.

The court further observed that the attack would have imperilled the whole Scheme and disincentivised any lawyer from taking on such cases. This had lain at the heart of R3’s concerns, given the number of insolvency cases litigated under CFAs. In insolvency the office holder is suing as an officer of the court for the benefit of creditors. His own fees are not recoverable, only those of his lawyers and, even if he can retain lawyers on CFA, he is unlikely to expend irrecoverable cost from his own pocket on a flier which hasn’t the highest merit.

Mr Coventry has indicated he will take this case to the European Court of Justice, so it isn’t the end of the story.

Frances Coulson is Head of Litigation and Insolvency at Moon Beever Solicitors. In Coventry v Lawrence she represented R3, the Association of Business Recovery Professionals Limited, instructing Simon Davenport QC, Daniel Lewis, Clara Johnson and Tom Poole, barristers from 3 Hare Court.

Image ©iStockphoto.com/catenarymedia