Costs – Human rights – After-the-event insurance – Appellants bringing claim in private nuisance in respect of noise from respondents’ motor sport stadium and track – Claim succeeding on appeal to Supreme Court – Whether costs awarded against respondents breaching right to fair hearing under Article 6 of European Convention on Human Rights
The respondents organised motor sports events at a stadium and track located on former farmland close to the appellants’ house. The appellants brought a successful claim against them in private nuisance for noise emanating from the respondents’ site. At first instance, the judge awarded damages and an injunction that imposed limits on the times and levels at which noise could be generated: see [2011] EWHC 360 (QB). That decision was reversed by the Court of Appeal but subsequently reinstated by the Supreme Court: see [2012] EWCA Civ 26; [2012] 1 EGLR 165 and [2014] UKSC 13; [2014] 1 EGLR 147.
In a separate judgment, the Supreme Court held that the respondents’ landlords were not liable in nuisance and further ordered that the injunction against the respondents be suspended until such time as the appellants’ property, which had been damaged by fire, was once again fit to be occupied: see [2014] UKSC 46; [2014] 3 EGLR 71; [2014] EGILR 47.
The respondents argued that the terms of the costs order made against them, requiring them to pay 60% of the appellants’ costs in the sum of £640,000, infringed their right to a fair hearing under Article 6 of the European Convention on Human Rights or to the peaceful enjoyment of their possessions under Article 1 of the First Protocol (A1P1) to the Convention. The appellants’ costs, up to the date of the judge’s order, comprised: (i) base costs of £307,642, representing an hourly rate plus disbursements; (ii) a success fee of £215,007 under a conditional fee agreement (CFA); and (iii) an after-the-event (ATE) premium of approximately £305,000 for insurance underwriting their potential costs liability to the respondents had they lost. Further base costs, success fees and ATE premiums were incurred in the proceedings in the Court of Appeal and Supreme Court. The respondents accepted that they were liable to pay the base costs but disputed their liability for the success fees and ATE premiums.
After inviting further submissions from various interveners, the Supreme Court gave a further judgment considering the compatibility with the Convention of the costs system under the Access to Justice Act 1999.
Held (Lord Clarke and Lady Hale dissenting): The issue was determined in favour of the appellants.
(1) The 1999 Act introduced a new regime for funding litigation with the three key aims of containing the rising cost of legal aid, improving access to the courts for members of the public with meritorious claims and discouraging weak claims. The use of CFAs with recoverable success fees sought to achieve the legitimate aim of ensuring the widest public access to legal services for civil litigation funded by the private sector. It was a deliberate policy of the 1999 Act to impose the cost of all CFA litigation on unsuccessful respondents as a class. There was a fundamental rebalancing of the means of access to justice by resort to the private sector rather than by the use of public funds; instead of placing a burden on the legal aid fund, legal proceedings were to be funded in the first instance by a party’s lawyers, who would undertake the work “on risk” in exchange for a potential success fee, which, if the proceedings were successful, would then be paid by the losing party: Callery v Gray [2002] UKHL 28; [2002] 1 WLR 2000, MGN Ltd v United Kingdom (2011) 53 EHRR 5 and Campbell v MGN Ltd (No 2) [2005] UKHL 61; [2005] 1 WLR 3394 considered.
(2) The concept of proportionality applied to the case in two distinct senses. First, in the context of the Convention, it focused on the nature of the balance which the 1999 Act struck between the rights of different types of litigant. Second, the costs rules under the CPR only allowed the recovery of costs which were “proportionate to the matters in issue”: see CPR 44.4(2)(a). That involved first asking whether the total sum claimed was disproportionate. If the overall costs did not appear disproportionate, then all that was normally required was that each item of costs had been reasonably incurred and the cost for each item was reasonable. If the costs did appear disproportionate, then the court would need to be satisfied that the work in relation to each item was necessary and, if so, that the cost of each item was reasonable.
Under CPD 11, the courts would consider the amount of any additional liabilities, such as success fees and ATE premiums, separately from the base costs. While the base costs were considered after the fact, by reference to what had happened in the litigation, additional liabilities were viewed having regard to the facts and circumstances as they reasonably appeared to the solicitors and counsel when the funding arrangement was entered into. ATE insurance was integral to the fundamental objective of improving access to justice in civil litigation. A premium that was necessarily incurred and was reasonable in amount, having regard to the litigation risk, was therefore necessary and proportionate, regardless of whether it appeared proportionate to the importance of the case and what was at stake: see CPD 11.9. By the same reasoning, a success fee that was reasonable in amount was also necessary and proportionate: Rogers v Merthyr Tydfil County Borough Council [2006] EWCA Civ 1134; [2007] 1 WLR 808 and Home Office v Lownds [2002] EWCA Civ 365; [2002] 1 WLR 2450 applied. That principle was essential to the viability of the 1999 Act scheme. If legal representative knew that reasonable success fees might be reduced on the grounds that, when added to the base costs, the total appeared to be disproportionate, that might have deterred them from entering into CFAs and would have risked undermining the whole system introduced by the 1999 Act.
(3) The Court was not bound by the decision of the European Court of Human Rights (ECtHR) in MGN Ltd v United Kingdom to hold that the 1999 Act scheme was incompatible with Article 6 or A1P1. The ECtHR’s criticisms of the scheme were made in the context of defamation and privacy cases and concerned the failure of the scheme to strike a fair balance between the Article 10 right of publishers to freedom of expression and the Article 6 rights of parties who alleged defamation or breach of privacy. The balancing of the Article 6 rights of appellants against the Article 6 rights of respondents, or their respective rights under A1P1, was an exercise of a wholly different character.
(4) While the 1999 Act scheme did have various flaws, the issue for the purposes of the Convention was not whether the system was flawed but whether it was a proportionate means of pursuing a legitimate aim. A legislative or regulatory scheme might in some circumstance be compatible with the Convention even if it operated harshly in individual cases. There was a powerful argument that the 1999 Act scheme was compatible with the Convention for the simple reason that it was a general measure which was justified by the need to widen access to justice to all litigants following the withdrawal of legal aim, it was made following wide consultation and it fell within the wide area of discretionary judgment of the legislature and the rule-makers.
Moreover, the 199 Act scheme had been enacted to overcome the problem of how best to enhance access to justice following the withdrawal of legal aid for most civil cases. There was no perfect solution to that problem. The regime of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, which now replaced the 1999 Act regime, contained inherent restrictions on access to justice and demonstrated that, at least in the absence of a widely accessible civil legal aid system, it was impossible to devise a fair scheme which promoted access to justice for all litigants. While the assessment of the successful party’s total costs under the 1999 Act scheme did not take account of the paying party’s financial position, that had never been a relevant factor in determining the assessment of reasonable and proportionate costs. It was true that the costs awarded to successful appellants who had the benefit of CFAs could be very high indeed under the 1999 Act scheme, and that, accordingly, it had the potential to place respondents under pressure to settle and to interfere with a respondent’s the right to access to justice in certain individual cases. However, viewed as a whole, the 1999 Act scheme was a rational and coherent scheme for providing access to justice to those to whom it would probably otherwise have been denied. It was subject to certain safeguards. The government was entitled to a considerable area of discretionary judgment in choosing the scheme that it considered would strike the right balance between the interests of appellants and respondents while at the same time securing access to justice to those who would previously have qualified for legal aid. Overall, the 1999 Act scheme was not incompatible with Article 6 or A1P1.
Stephen Hockman QC, Timothy Dutton QC, William Upton and Benjamin Williams (instructed by Richard Buxton Environmental & Public Law, of Cambridge) appeared for the appellants; Robert McCracken QC and Sebastian Kokelaar (instructed by Pooley Bendall & Watson Solicitors, of Cambridge) appeared for the respondents; Tom Weisselberg QC and Jason Pobjoy (instructed by the Government Legal Department) appeared for the secretary of state for justice, as intervener; Robert Weir QC, Harry Steinberg and Achas Burin (instructed by Leigh Day) appeared for the Asbestos Victims Support group Forum UK, as intervener; Nicholas Bacon QC, Dr Mark Friston and Greg Cox (instructed by Colemans CTTS) appeared for the General Bar Council, as intervener; Kieron Beal QC (instructed by the Law Society) appeared for the Law Society, as intervener; Simon Davenport QC, Tom Poole, Daniel Lewis and Clara Johnson (instructed by Moon Beever) made written submissions for the Association of Business Recovery Professionals, as intevener; the Attorney-General for Northern Ireland (instructed by the Department of Justice Northern Ireland) appeared as intervener; Gavin Millar QC and Chloe Strong (instructed by Reynolds Porter Chamberlain LLP) appeared for the Media Lawyers Association, as intervener; Roger Mallalieu (instructed by the Association of Costs Lawyers) appeared for the Association of Costs Lawyers, as intervener.
Sally Dobson, barrister
