An interesting and important judgment has been handed down in the case of Coventry v Lawrence
In summary, the regime of recoverable Success Fees and After the Event Insurance policies under the Access to Justice Act 1999 (“AJA”) has been found compatible with the European Convention on Human Rights. That is the recovery of additional liabilities is not an infringement of Article 6 which amongst other things provides the right to a fair hearing and access to justice. It was not a unanimous decision at 5:2, but the Lords’ decision maintains the status quo.
The Lords’ reasoning focuses on the test of proportionality, but not the type which commonly arises in costs disputes. This was a test of the benefits of the AJA regime against the detrimental effect it has on paying parties. The Lords recognise that flaws exist in the AJA regime – particularly in relation to the four issues identified in MGN v UK in 2011. In summary, they are:-
1. the lack of qualifying criterion for claimant’s to utilise CFAs;
2. the absence of any incentive for Claimant’s to control their level of costs expenditure;
3. the “chilling effect” which caused good defences to be abandoned on economic grounds; and
4. the cherry picking of cases upon which CFAs would be offered.
Nevertheless, given the overall benefits of the AJA regime in providing access to justice in the face of increasingly limited public funding, it was held to be a proportionate and reasonable scheme. The President, Lord Neuburger acknowledged “it was undoubtedly a feature of the 1999 Act scheme that the costs awarded to successful appellants who had the benefit of CFAs could be very high indeed” with the scheme overall providing “a rational and coherent scheme for providing access to justice to those to whom it would probably otherwise have been denied”. The conclusion therefore was that the AJA regime was compatible with Article 6 of the ECHR and additional liabilities will remain recoverable. This will no doubt be quite a relief for the government, but perhaps more than a little disappointing for insurers.