Fiat justitia ruat caelum ?

The title of this post reflects the Latin maxim “Let justice be done though the heavens fall”, a principle formulated originally by Terence, or Piso and echoed in famous cases in more modern times, by judges as diverse as Lord Mansfield and Judge James Horton in the infamous Scottsboro’ Boys trial in the 1930s.

It seems to have gone out of fashion in the United Kingdom more recently given the non-event of the decision of the Supreme Court last week in the case of Coventry.v.Lawrence [2015] UKSC 50, a copy of which can be found here:

Coventry v Lawrence [2015] UKSC 50

This case it will be remembered, was set to re-examine the compatibility of the Access to Justice Act 1999 with its scheme of recoverable additional liabilities, with article 6 and article 1 of the First Protocol of the European Convention on Human Rights.

In particular the issue, had been thrown starkly into relief by the decision of the European Court of Human Rights that the scheme breached the article 10 rights of a newspaper publishing company, in the unhappy aftermath of the Naomi Campbell litigation. As noted by the majority judgment at paragraphs 43 and 44:

The system had a number of shortcomings which were described as “flaws” by Jackson LJ in his Review of Civil Litigation which were summarised by the ECtHR at paras 207 to 210 of its judgment in MGN v United The flaws were (i) the lack of focus of the regime and the lack of any qualifying requirements for appellants who would be allowed to enter into a CFA; (ii) the absence of any incentive for appellants to control the incurring of legal costs and the fact that judges assessed costs only at the end of the case when it was too late to control costs that had been spent; (iii) the “blackmail” or “chilling” effect of the regime which drove parties to settle early despite good prospects of a defence; and (iv) the fact that the regime gave the opportunity to “cherry pick” winning cases to conduct on CFAs. At para 217, the court concluded that:

“… the depth and nature of the flaws in the system … are such that the court can conclude that the impugned scheme exceeded even the broad margin of appreciation to be accorded to the state in respect of general measures pursuing social and economic interests.”

These flaws were regarded by the ECtHR as sufficiently serious to lead it to conclude that the system was incompatible with article 10 of the Convention. Mr McCracken submits that the same reasoning necessarily requires the court to hold that the system was also incompatible with article 6 and A1P1.

The issue then in Coventry.v.Lawrence was whether the decision in MGN.v.The United Kingdom could be distinguished by the Supreme Court.

As the majority noted in paragraph 50:

The first question that we must consider is whether the decision of the ECtHR in MGN v United Kingdom requires us to hold that the 1999 Act scheme is incompatible with article 6 and/or A1P1, at least in relation to the respondents in this case. In that case, the claimant sought damages for breach of confidence and compensation under the Data Protection Act 1998 in respect of the publication in The Daily Mirror of an article and photographs of her. She succeeded at first instance, but lost in the Court of Appeal. She entered into a CFA for the purposes of an appeal to the House of Lords. Her appeal was allowed. The respondents challenged the proportionality of the claimant’s costs (including the success fee). The ECtHR held that there had been a violation of article 10 of the Convention (the right to freedom of expression) as regards the success fee that was payable by the respondents. In defending the CFA scheme, the UK Government advanced arguments similar to those that have been advanced by the Secretary of State (as well as by the appellants and some of the interveners) in the present case. The court held that the requirement to pay the success fees constituted an interference with the defendant’s article 10 rights. The central issue was whether the UK authorities had struck a “fair balance” between freedom of expression protected by article 10 and an individual’s right of access to court protected by article 6 (para 199).

The majority of the Supreme Court began its survey of this issue at paragraph 58:

It is common ground that the question whether a fair balance has been struck between the interests of those litigants who have CFAs and ATE insurance and those who do not is one for the court to But, even in a field such as access to justice and legal costs, the court, while being vigilant to protect fundamental rights, must give considerable weight to informed legislative choices, at least where state authorities are seeking to reconcile the competing interests of different groups in society. In such cases, they are bound to have to draw a line somewhere in order to mark where a particular interest prevails and another one yields. Making a reasonable assessment of where to draw the line, especially if that assessment involves balancing conflicting interests falls within the State’s wide discretionary area of judgment. As Lord Bingham said in Brown v Stott [2003] 1 AC 681, 703:

“Judicial recognition and assertion of the human rights defined in the Convention is not a substitute for the processes of democratic government but a complement to them. While a national court does not accord the margin of appreciation recognised by the European court as a supra-national court, it will give weight to the decisions of a representative legislature and a democratic government within the discretionary area of judgment accorded to those bodies.”

The choices made by Parliament in enacting the 1999 Act followed a wide consultation to enable it to evaluate the various interests at Similarly, in formulating the CPR and the CPD, the relevant rule-makers were (following consultation) in the best position to determine how to effect the reforms and how to strike the appropriate balance between the different types of litigant.

It is interesting to note that the Supreme Court accepted the withdrawal of Legal Aid as a “given”: I recall at the time, that the withdrawal of Legal Aid, was done without any consideration of a fairly obvious cost/benefit analysis.

This was the evident fact that the government or state, would be immediately at risk of picking up a far heavier bill than the net cost to it of providing Legal Aid for personal injury and clinical negligence cases, as it would invariably be paying out large sums to compensate people for personal injuries caused by the state or clinical negligence for which the NHS would be liable.

Equally, the political motivation for withdrawal of Legal Aid (to reduce the number of complaints made to Labour MPs about the failings in the administration of the scheme) or the interesting anecdote about how recoverability was devised as an option in response to a debate at the Oxford Union, does not feature in the Suprem Court’s majority judgment.

The Supreme Court went on:

The withdrawal of legal aid in most areas of civil litigation presented a real problem for the state. It had to decide how to secure access to justice for those who previously qualified for legal aid. Under the first scheme that was adopted (and which was in force from 1995 until 2000), when success fees were permitted for the first time and ATE insurance was first encouraged, the success fee and ATE insurance premium were not recoverable from the opposing party. The problems with this scheme included that (i) it only worked well where appellants sought substantial monetary relief (thereby realising a fund, in the event of success, from which the success fee would be paid) and (ii) damages recoverable by CFA appellants were eroded by the irrecoverable cost of funding and ATE insurance.

These difficulties were overcome by the 1999 Act The first difficulty was overcome because a substantial fund of damages was no longer necessary to secure the payment of success fees and ATE premiums: inter partes costs orders were sufficient. The second difficulty was resolved because damages (or, in a low money or non-money claim, the litigant’s own funds) were no longer eroded by irrecoverable success fees and premiums. In policy terms, the principal shift from the first scheme to the second scheme was to transfer the cost of financing successful claims from winning litigants to losing litigants. The cost of unsuccessful claims remained with lawyers and ATE insurers.

The potential unfairness of the 1999 Act scheme on unsuccessful litigants was mitigated by the fact that district judges and costs judges would perform the role of “watchdog” as Lord Bingham described it in Callery v Gray (Nos 1 and 2) [2002] UKHL 28, [2002] 1 WLR 2000 at para 6. Lord Bingham said that the courts would be astute to check any practices which might undermine the fairness of the new funding regime, which was to “operate so as to promote access to justice and not so as to confer disproportionate benefits on legal practitioners or after the event insurers or impose unfair burdens on respondents or their insurers” (para 10). Thus the base cost and any additional liabilities were to be assessed by the court. As to base costs, where costs were to be paid on the standard basis they were to be judged by the criteria of reasonableness and proportionality. Where costs were to be paid on the indemnity basis, they were to be judged by the sole criterion of reasonableness. As regards any additional liability, a successful litigant was only entitled to a reasonable success fee and ATE premium and (where costs were assessed on the standard basis) a proportionate success fee (as explained in Lownds). In an appropriate case, the court had the ability to make a cost-capping order as was required, for example, by the Court of Appeal in King v Telegraph Group Ltd [2004] EWCA Civ 613, [2005] 1 WLR 2282.

In a sense this is an outrageous glossing upon history. The Costs Wars of the last 15 years arose out of the flaws and unfairness in the system, which caused huge amounts of satellite litigation and repeated amendments to the scheme.

The failure of detailed assessment to control costs is well known and in even clear cut cases where a costs capping order was called for, the court regularly refused to make one, or hedged the issue with such qualifications that few orders were ever made.

The Supreme Court went on:

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. For that reason, it had the potential to place respondents under considerable pressure to settle before even more costs were incurred. This is the third flaw identified by the ECtHR in MGN v United Kingdom and the second of Lord Neuberger’s four unique and regrettable features. We accept that, in a number of individual cases, the scheme might be said to have interfered with a defendant’s right of access to justice. But for the reasons stated earlier (paras 58 to 63 above), it is necessary to concentrate on the scheme as a whole. The scheme as a whole 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 whilst at the same time securing access to justice to those who would previously have qualified for legal aid. It had to find a solution to the problem created by the withdrawal of legal aid. The government has now produced three different schemes. Each was produced after wide consultation. Each has generated considerable criticism. As already indicated, once civil legal aid was constrained to the extent that it was in 1999, it became impossible to come up with a solution which would meet with universal approval. This is relevant to the question whether the 1999 Act scheme struck a fair balance between the interests of different litigants.

For the reasons that we have given, we are satisfied that the scheme was not incompatible with article 6 or article 1 of the First Protocol.

For completeness, we should add that it was argued that, in any event, at least one of the respondents had failed to establish that he was not “non-ordinary” or “non-rich” (see para 48), either because there was no evidence of his means or because he was in fact insured against liability for For the reasons we have given, it is unnecessary to decide whether that is a well-founded argument. However, the very fact that it has been raised demonstrates the risk of satellite litigation if the respondents’ case is accepted: it would be necessary to assess a party’s means and liabilities, identify the precise terms of an insurance policy that has been mislaid, and then decide whether it covered nuisance by noise.

The above analysis, whilst it displays a remarkable judicial sleight of hand, fails to grapple with the issue in plain sight: who without the benefit of their own insurance policy, owning a home of modest value, and earning an average wage I/e the average person, would be able to gain access to justice if sued by a litigant funded by lawyers acting on CFAs and with the benefit of an ATE policy, without being at risk of insolvency and financial disaster?

In reality there is no sensible basis for a principled departure from the earlier decision of the European Court: the real issue thrown up by this case was whether the Supreme Court should contemplate the consequences of unwinding the unfairnesses of the past 15 years, or act pragmatically, to draw a line under the past.

It did just that:

This is no mere abstract. A decision to declare that the 1999 Act scheme was incompatible with the Convention would have a serious impact on many thousands of pre-April 2013 cases which are in run-off, as well as claims to which the pre-Jackson costs rules continue to apply, such as mesothelioma, insolvency and publication and privacy cases. Any order made by this court in the present case would have no effect on the contractual obligations of litigants to pay success fees to their lawyers and ATE premiums to their insurers. Successful parties would, therefore, still be liable to pay their lawyers and insurers if they won their cases and could not recover them from unsuccessful respondents.

For the reasons that we have given, the 1999 Act scheme was compatible with article 6 and A1P1. We have not addressed A1P1 separately. That is because it has (rightly) not been suggested that, if the scheme was compatible with article 6, it could nevertheless for some other reason be incompatible with A1P1.

The last paragraph of the majority reads curiously defiantly.

I suspect that it is aimed at a potential application to the European Court of Human Rights, should the disappointed litigant in this case seek to take the matter further to Strasbourg.

If (contrary to our view) the scheme was incompatible with article 6 and A1P1, we would not read it down so as to make it compatible and we would not strike the scheme down or disapply it.

This is conclusive in terms of the domestic courts.

Theoretically this is not the end of the matter.

An application could be made to the European Court of Human Rights by the disappointed litigant: but as illustrated in the prisoners voting litigation, such an application if made and successful, would not impose a financial obligation on the United Kingdom, to compensate the insurance industry.

In all probability the European Court would decline to order compensation as part of a decision on just satisfaction, conscious of the risk of conflict with the Supreme Court of the United Kingdom and the concept of a dialogue being necessary between those two courts.

So the heavens have not fallen. It would be easy to write the case off, as part of the ongoing sequence of non events in the world of costs which seem to take place in July each year.

Hourly rates anyone?

But this decision is undoubtedly a milestone, in the increasing intrusion of public law arguments into the world  of costs and litigation funding.

Perhaps the next issue will be whether the LASPO regime is itself flawed, given the inability of vast numbers of litigants who do not benefit from the QUOCS scheme which applies to personal injury litigation to seek access to justice in their own cases,without facing the risk of financial ruin through the possibility of an adverse costs order?

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