In a much-awaited judgment, Supreme Court justices today ruled by a majority of five to two that the system for recovery of costs in civil litigation in England and Wales is compatible with the European Convention on Human Rights.

The judgment, in Coventry and others v Lawrence and another [2015] UKSC50 addressed the question of whether the recovery of a success fee and after-the-event insurance premium under the Access to Justice Act 1999 costs regime constituted a breach of the defendant’s human rights under article 6, the fair-trial provision of the convention.   

Although the 1999 act’s regime has been replaced by the provisions of the Legal Aid, Sentencing and Punishment of Offenders Act 2012, its provisions still apply to many cases.

The case originated in an action brought under a conditional fee agreement by owners of a Suffolk bungalow against the operators of a nearby motor-sports stadium operated by David Coventry and Moto-Land UK Ltd.

The High Court awarded them damages of £20,750 and ordered the other party to pay 60% of the costs, which included a success fee and ATE insurance premium. A series of appeals attracted interventions from a spectrum of organisations, including the Law Society and the Asbestos Victims Support Group.

Backing Supreme Court president Lord Neuberger’s majority decision, Lord Mance said although Coventry was ‘an awkward case… it is difficult to conceive of any solution which would cater for such cases, without imperilling the whole system. The system has been repeatedly endorsed by domestic courts over a decade. Litigants and their lawyers have justifiably relied upon its validity.

‘Legal certainty, consistency and the legitimate expectations which have so been generated all militate in favour of the Supreme Court upholding the system (though it can of course still be challenged as against the UK in proceedings in Strasbourg); and I would uphold it and refuse any relief accordingly.’

Dissenting, Lord Clarke and Lady Hale said the costs recovery system ‘was unfairly discriminatory against some classes of respondent by comparison with others’. 

The Law Society, which intervened in the case, welcomed the judgment.

President Jonathan Smithers said: 'We intervened because there was an important point of law about "no win no fee" arrangements entered into before April 2013.

'As the Supreme Court said today in its ruling, a decision to declare that the previous no-win, no-fee scheme was incompatible with the European Convention on Human Rights would have had a serious impact on many thousands of pre-April 2013 cases which are still being litigated, as well as claims to which the pre-Jackson costs rules continue to apply, such as mesothelioma, insolvency and publication and privacy cases.'

He added: 'Such a ruling could also have caused huge confusion in the system and whatever the merits of the previous "no-win, no-fee" arrangements that would not have been in the wider interests of justice.'

The Bar Council also welcomed the judgment, saying that any other outcome would have resulted in uncertainty and disruption to clients, lawyers and to the justice system as a whole.

Alistair MacDonald QC, chair of the bar, said: 'Today’s decision by the Supreme Court means arrangements in to which clients entered in good faith will be upheld. As far as access to justice is concerned, this is the result that is in the best interests of both clients and practitioners.'

Sue Nash, chair of the Association of Costs Lawyers, which also intervened, said that the flaws in the CFA regime identified in the judgment ‘have now been fully aired by the highest court in the land. The “costs wars” generated by that regime - with which we are all familiar - arguably took up a disproportionate amount of the courts’ time, energy and resources.  

‘The majority judgment has now consigned such arguments to history.’