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Success fees in old-style CFAs under threat?

The litigation in Coventry v Lawrence is best known for its impact on the law of nuisance (see, for instance, the April 2014 round-up).

However, in Coventry v Lawrence (No 2) [2014] UKSC 46, Lord Neuberger made a number of comments (at [32] – [48]) which will cause concern to anyone undertaking claimant work under a pre-Jackson CFA – and which may yet lead to a Coventry v Lawrence (No 3) (Costs).

The issue arose because the respondents in the Supreme Court, who were ultimately unsuccessful in defending the claimants’ action for nuisance, had been ordered at first instance to pay 60% of the claimants’ costs. Those costs amounted to around £1,067,000 – £398,000 in base costs, roughly £319,000 in uplift, and £350,000 for the ATE insurance premium. Lord Neuberger said that, as the claim was only worth £74,000 at most, the level of even the base costs was of grave concern.

The issue of general importance, though, is the recoverability of the success fee and the ATE premium. Lord Neuberger said at [37] that the pre-Jackson CFA system had the disadvantages that claimants were not concerned about the level of their own costs; defendants had no say over the claimants’ costs as they were run up; and the stronger the defendants’ case, the greater their liability would be for costs if they lost (because the claimants’ lawyers will have a higher success fee and a higher premium for taking on a riskier case). He went on to say that that it was open to the court to reconsider whether or not the regime which entitles claimants to recover their success fees and ATE premiums is compatible with the ECHR.

It may be that the parties and their respective representatives settle the issue of costs in this case without further recourse to the Supreme Court. However, claimant representatives acting under pre-Jackson CFAs should now be alive to possible arguments by defendants that, for instance, the CPR provisions for payment of their success fees should be disregarded as they are incompatible with the ECHR. Lord Neuberger’s tone suggests that the result of such an argument would not be a foregone conclusion. It is also worth noting that in Marley v Rawlings (Costs) [2014] UKSC 51, handed down on 18 September, counsel who had acted on CFAs in the Supreme Court were not permitted to recover any success fee.

/ 1st Oct 2014


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