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No win no fee: Supreme Court judgment grants breathing space to IPs

Frances Coulson, head of litigation and insolvency at Moon Beever Solicitors, looks at the implications of Coventry v Lawrence.

Frances Coulson
head of litigation and insolvency, Moon Beever Solicitors

On 22 July the Supreme Court gave judgment in Coventry v Lawrence, a fairly simple neighbour nuisance case which had the misfortune to become a test case for the argument that the recoverability of adverse costs premiums and success fees on conditional fee agreements from the opponent amount to a breach of that paying party’s human rights.

By a majority of 5:2 the court found that that recoverability did not amount to any such breach. Had they found otherwise, this would have had massive implications for pre-2012 cases generally and for insolvency cases pre- and post-2012. The Supreme Court had delayed the case so that the Government, represented by the Attorney General, could intervene to make representations. Seven other bodies intervened, including R3, the Association of Business Recovery Professionals (the trade body for insolvency practitioners).

The background to this was the serious reduction in availability of legal aid. The Access to Justice Act 1999 allowed recoverability of success fees and ATE premiums from the paying party (subject to assessment). Lord Jackson’s 2010 report severely criticised legal costs overall and recommended the abolition of recoverability of uplifts and ATE premiums. Most of Lord Jackson’s report was implemented, including this abolition, save for temporary two- year carve-outs in three areas – including insolvency cases – to enable alternatives to be explored.

R3 lobbied to retain the insolvency exemption and commissioned a report by Professor Peter Walton of Wolverhampton University to research the current framework and likely result of any change. Professor Walton concluded there was no system which would produce as good results for creditors.

Mr Coventry also argued that, rather than take the base costs and consider proportionality and then separately consider the ATE and success fee, the courts should consider the whole costs and the effect on the paying party. Present rules state that “A percentage increase will not be reduced simply on the ground that, when added to base costs which are reasonable and (where relevant) proportionate, the total appears disproportionate.” This argument was also rejected.

The court held that the current Access to Justice Scheme is justified by the need to widen access to justice after the withdrawal of legal aid, was made following wide consultation and was well within the wide area of discretionary judgment of the legislature and rule-makers. This was the third such scheme enacted.

The Supreme Court accepted that, where there were no perfect solutions, the Scheme was a rational and coherent one for providing access to justice for those to whom it would probably otherwise have been denied, and hence struck a fair balance between the interests of different litigants.

Mr Coventry has indicated he will take this case to the European Court of Justice but hopefully the insolvency exemption will survive. As officers of the court, insolvency practitioners maintain the highest standards and when they cannot recover their own fees in litigation they are unlikely to risk their own money on any but the best of cases for the benefit of creditors, against those who have deprived them of their money.

In Coventry v Lawrence, Frances Coulson represented R3, the Association of Business Recovery Professionals Limited, instructing Simon Davenport QC, Daniel Lewis, Clara Johnson and Tom Poole, barristers from 3 Hare Court.

Posted on 26th August 2015 by Fred Crawley



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