Dispute Resolution analysis: The European Court of Human Rights (ECtHR) considered a claim by Mr Coventry challenging on human rights grounds the costs consequences attendant on losing in litigation in the United Kingdom. Before the ECtHR, Mr Coventry alleged the UK government had failed to secure his convention rights. In the domestic proceedings, Mr Coventry was one of several unsuccessful defendants in nuisance litigation that ended in a second appeal before the Supreme Court (the 'Nuisance Proceedings'). The costs consequences for Mr Coventry in the Nuisance Proceedings were described in the ECtHR judgment as 'eye-catching' approximating £600,000 (even on a 60% basis). The question for the ECtHR was whether these cost consequences interfered with Mr Coventry's convention rights: (1) to a fair determination of his civil rights (Article 6); and (2) his property rights (Article 1 of Protocol 1 to the Convention).
Coventry v United Kingdom  EWHC 888 (QB)
What are the practical implications of this case?
Albeit this decision related to cost consequences under a conditional fee arrangement (CFA) governed by the CFA regime, applying prior to the Jackson reforms, where after the event (ATE) premiums and success uplift were recoverable unless unreasonably incurred, the case will be of interest to any practitioners wanting to chart the progress of human rights challenges to costs orders, and particularly recovery under a CFA, on access to justice grounds.
Further, the ECtHR rejected the UK government's submission on admissibility which attempted to narrow the concept of victim to a litigant whose Article 6 rights had been infringed by them being prevented from participating in proceedings rather than simply disadvantaged at its end.
The ECtHR referred to previous ECtHR case law where applications were upheld on the ground that Article 6 rights were infringed by practices and procedures effecting the 'equality of arms' in litigation. This may open the door for further applications based on such arguments framed under Article 6. It is particularly significant that the ECtHR disagreed with the Supreme Court's assessment of proportionality, finding that the government policy exceeded even the wide margin of appreciation afforded to secure convention rights.
Personal injury lawyers will recall that mesothelioma claims success fees and ATE premiums remain recoverable, after a successful judicial review by claimants: see R (Whitston (Asbestos Victims Support Groups Forum UK)) v Secretary of State for Justice  EWHC 3044 (Admin).
Therefore, it is conceivable that the ECtHR decision may prompt the government to return to the review it announced as long ago as 2014. However, the significant cost bill accrued and the fact that paying party was uninsured augur to distinguish this claim from typical mesothelioma claims.
What was the background?
Mr Coventry owned the freehold of a stadium which was used for various motor sports. Mr Coventry and other defendants were sued in nuisance by the claimants who lived in their property in the vicinity of the stadium. The claimants' legal fees were funded pursuant to a CFA which covered the claimants' base legal costs and a success fee to reward their lawyers for adopting the risks of the litigation. The CFA was coupled with ATE insurance and the ATE insurance premium was a disbursement under the CFA retainer in principle recoverable against Mr Coventry.
A key issue was whether the costs liability that Mr Coventry faced was proportion to the issues at stake in the litigation given that the potential liability in costs significantly dwarfed the damages awarded in the litigation (£10,325 against Mr Coventry) and even the value of Claimants' property (around £300,000) which the litigation sought to protect.
This 'eye catching' liability in costs was described by the ECHR in these terms:
'... the applicant and third defendant were liable to pay 60% of [the claimants'] base costs, success fees, and ATE premiums. In its judgment of 22 July 2015 the Supreme Court noted that the claimants' base costs at first instance amounted to GBP 307,642; the 100% success fee amounted to GBP 215,007; and the ATE premium was in the region of GBP 305,000. Furthermore, the claimants' base costs in the Court of Appeal and Supreme Court were GBP 103,457 and GBP 204,226, respectively; their success fees were GBP 71,770 in the Court of Appeal and GBP 92,115 in the Supreme Court; and their ATE premiums were GBP 70,141 in the Court of Appeal and GBP 126,588 in the Supreme Court.'
It was noted in the judgment that in respect of base costs, the claimants had little interest in controlling or limiting their own solicitors' costs and that due to the ATE insurance policy, the claimants carried no risk of personal exposure to adverse cost consequences.
At the relevant time, under the Civil Procedure Rules, whereas base costs were potentially subject of assessment imposing some requirements for both proportionality and reasonableness, the only control on the success fees and ATE premiums were reasonableness. This regime persists in relation to
The UK Supreme Court had considered Mr Coventry's human rights challenges to the costs order after making the costs order as a matter of principle: see Coventry v Lawrence  UKSC 50. In his leading judgment, Lord Neuberger (then) President of the Supreme Court, observed that the level of costs in the case were 'very disturbing'.
Further, the Supreme Court (majority judgment) noted the criticism of the CFA regime that were addressed (at least in part) in the Jackson reforms in these terms:
'The amount of the base costs in this case is however dwarfed by the total potentially recoverable costs, which are nearly three times as much. The figures illustrate the malign influence of the amendments made to the 1990 Act by Part II of the 1999 Act, and as implemented through CPR rule 44 and CPR44 PD—now fortunately repealed and replaced...following Sir Rupert Jackson's Review of Civil Litigation Costs (2010), ... As Sir Rupert pointed out in his Review ... the system introduced in 1999 had a number of unique and regrettable features, four of which are worth mentioning for present purposes. First, claimants had no interest whatever in the level of base costs, success fee or ATE premium which they agreed with their lawyers, as, if they lost they had to pay nothing, and if they won the costs would all be paid by the defendants, who, on the other hand, had no say about the costs (other than retrospectively on an assessment). Secondly, in many cases, unsuccessful defendants found themselves paying, in addition to the whole of their own costs, three times the claimants' 'real' costs. Thirdly, while proportionality had a part to play when assessing the recoverability of base costs (albeit a limited part—see Home Office v Lownds  1 WLR 2450), it was excluded from consideration in relation to the recovery of success fee or ATE premium (which were simply required to be reasonable)—see CPR44 PD, paras 11.7–11.10. Fourthly, the stronger the defendants' case, the greater their liability for costs would be if they lost, as the size of the success fee and the ATE premium should have reflected the claimants' prospects of success.'
Relying on these forceful criticisms, Mr Coventry's advocates submitted that the ECtHR decision in MGN Ltd v United Kingdom (39401/04)  1 WLUK 236 which considered the same CFA costs regime (as enacted in 1999) was incompatible with Article10 compelled the conclusion that it was also incompatible with Article 6 and Protocol Article 1.
Notwithstanding, the Supreme Court had found (by a majority) that the interference was legitimate and proportionate.
ECtHR case law suggested the right to access to justice and the property right were not absolute convention rights—interference is allowed provided the interference was proportionate to a legitimate aim. Thus, it was common ground between the UK government and Mr Coventry that the UK CFA scheme under the CPR was an interference with a convention right that was potentially justified. Thus, the question for the ECtHR was whether the specific interference by the UK government was proportionate and in deciding that question the ECtHR was required to afford the UK government a wide margin of appreciation.
What did the court decide?
As noted, the court first dealt with admissibility, rejecting the UK government's argument that as Mr Coventry had participated fully in all stages of the Nuisance Proceedings, he was not a 'victim' in the sense that his right of access to justice had been infringed. The ECHR noted that cost consequences at the conclusion of proceedings that are significantly disproportionate to the sums and issues substantively in issue, were precisely the type of matters that could undermine access to justice; and this was supported by previous ECHR decisions: see Stankov v Bulgaria, no 68490/01, § 54, 12 July 2007, Klauz v Croatia, no 28963/10, § 77, 18 July 2013 and Dragan Kovacevic v Croatia, no. 49281/15, § 70, 12 May 2022.
On the substance, the difficulty for the UK government was that Mr Coventry's case was quite extreme – the cost consequences (as noted in the UK Supreme Court) for Mr Coventry were grossly disproportionate to the dispute. This left the UK government with the difficult submission that the ECtHR should not set down a principle based on an extreme case. However, the extremity of the facts indicated that Mr Coventry's rights were infringed in a disproportionate manner.
Further, as the ECtHR noted, there was precedent for the 1999 CFA regime infringing convention rights (albeit Article 10): see MGN Ltd v United Kingdom (39401/04)  1 WLUK 236 (in respect of Article 10).
Further, the ECtHR referred to the damning criticism of the CFA regime advanced as part of the Jackson review and set out in the Supreme Court costs judgment (per Lord Neuberger) and held that the 1999 CFA regime was not proportionate even considering the UK government's wide margin of appreciate in securing convention rights.
Analysing these deficiencies against Mr Coventry's case on Article 6, the ECtHR held that:
'...the Court considers that in respect of uninsured defendants, who bore an excessive and arbitrary burden in CFA litigation, the impugned scheme, when viewed as a whole, infringed the very essence of the principle of equality of arms as guaranteed by Article 6 § 1 of the Convention.'
On Article 1 of Protocol 1, the ECtHR held:
'Although the Court has, in the context of costs in civil proceedings, acknowledged the legitimate aim behind the "loser pays" rule, it has found that the imposition of a disproportionate costs burden on a losing party may violate Article 1 of Protocol No. 1 to the Convention (see Cindric and Bealic v. Croatia, no. 72152/13, §§ 94-111, 6 September 2016)'
- Court: European Court of Human Rights (Fourth Section)
- Judges: Gabriele Kucsko-Stadlmayer (President), Tim Eicke, Faris Vehabovic, Iulia Antoanella Motoc, Armen Harutyunyan, Pere Pastor Vilanova, Jolien Schukking, judges, and Ilse Freiwirth (Deputy Section Registrar)
- Date of judgment: 11 October 2022
Article by Lauren Godfrey – first published by LexisNexis
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