European Court of Human Rights rules that old CFA regime infringed human rights

On 11 October 2022, the ECtHR (the court) handed down judgment in Coventry v The United Kingdom (Application no. 6016/16). The applicant, an uninsured defendant in the original noise nuisance litigation which centred around noise disturbances emitted from greyhound racing and motocross activities at Mildenhall Stadium in Suffolk, was found to have had his rights violated under Article 6.1 (right to a fair hearing) and Article 1 of Protocol 1 ECHR (Protection of Property), as a result of the Claimants’ CFA which resulted in him being personally liable for not only the Claimants’ base costs but also the success fees owed to the Claimant’s solicitor and counsel, and the Claimants’ ATE premiums.

The European court considered the principle issue to be the ‘impact of the recoverability of the success fees and ATE premiums on the overall fairness of the proceedings’, having particular regard to the principle of ‘equality of arms’ (para 59).

The court considered Jackson’s LJ’s conclusions in the 2010 Jackson review of the rules and principles governing the costs of civil litigation. Principally, the third of the four flaws Jackson LJ considered in relation to allowing success fees to be recovered from the losing party, that ‘there was the “blackmail” or “chilling”’ effect due to the fact that the costs burden on the opposing parties was so excessive that often a party was driven to settle early despite good prospects of a successful defence’ (para 80). Lord Neuberger had pointed out in the second Supreme court judgment of 23 July 2014 of the original case, ‘a curious feature of the scheme was that the stronger the defendant’s cases, the greater their liability for costs would be if they lost, as the size of the success fee and the ATE premium reflected the Claimants’ prospects of success’ (para 82).

Lord Neuberger had also recognised the ‘fact that Claimants had no interest whatever in the level of base casts, success fees or ATE premiums which they agreed with their lawyers, since if they lost they had to pay nothing, and if they won the costs would all be paid by the defendants’ (para 83) as one of ‘the unique and regrettable features of the scheme’.

The applicant defendant in this case is personally liable to pay a total sum of £846,838.27, and this does not include the Claimants’ costs before the Supreme court, which are still to be assessed. Of this total sum, £320,658.56 represents the Claimants’ base costs, £236,113.41 the success fees and £290,066.30 the ATE premiums. This represents more than 80 times the award for damages made against the applicant defendant.

With regards to the violation of Article 1 of Protocol 1 ECHR, the court found that the scheme placed an excessive burden on uninsured defendants in CFA litigation, and it ‘exceeded even the wide margin of appreciation accorded to the State in matters of social and economic policy’ (para 97).

This is an important decision which confirms, in particular, one of the flaws of the recovery of success fees in CFA litigation recognised in the Jackson Review to be a violation of a defendant’s human rights in relation to a fair trial. It appears that, if the CFA landscape is ever reviewed or reformed in the future, Human Rights cannot be overlooked when considering how to balance the need to provide Access to Justice with the need to keep costs consequences for an unsuccessful defendant proportionate to the matters as issue.