Litigation costs limbo ends

Today's Supreme Court ruling in Coventry v Lawrence, which means that the original cost agreements in ongoing cases undertaken under pre-Jackson conditional fee agreements (CFAs) or after-the-event (ATE) insurance arrangements, will be upheld, has been widely welcomed by lawyers.

The case, a nuisance claim valued at £74,000, racked up costs of more than £1m. The subsequent costs challenge, raised on the basis that the pre-Jackson recovery regime breached a paying party’s Art 6 right to a fair trial, put the recovery of costs under on-going fee arrangements in doubt. The Supreme Court (5:2) has now rejected this contention (see Coventry and others (Respondents) v Lawrence and another (Appellants) [2015] UKSC 50).

Bar Chairman Alistair MacDonald QC says the decision means that arrangements into 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,” he says.

Frances Coulson, chairman of the fraud group of R3, the insolvency trade body which intervened in the case, says: “Common sense has won out. This decision is a victory for creditors and will help them get back money that they are owed after insolvencies.”

The case concerned the liability to pay a fee to the successful party’s lawyers on top of the base costs, to compensate them for acting on a CFA and an ATE insurance premium in return for an insurance company having agreed to underwrite any liability for costs had the other party won.

Coulson says that a decision the other way would have made legal action by insolvency practitioners to retrieve the money unaffordable in most cases.