By a majority of 5-2, the UK Supreme Court has found that the system for recovery of costs in civil litigation in England and Wales under the Access to Justice Act 1999 (the ‘AJA’) is compatible with the European Convention on Human Rights (the ’Convention’), and more specifically Article 6 on the right to a fair trial.
By way of background, the owners of a bungalow sued the operators of a nearby stadium used for motor sports for nuisance and were successful in their action. The owners were awarded damages and costs, however, alarmed with the level of costs associated with the case, the Supreme Court ordered a further hearing to determine whether the regime under the AJA was compatible with the Convention. The Attorney General, the Secretary of State for Justice, and other interveners (including the Asbestos Victims Support Group Forum and the General Council of the Bar) were given the opportunity to make submissions.
The owners of the bungalow instructed their solicitors on a ‘no win no fee’ basis, referred to as a conditional fee arrangement. Under the AJA, the costs in a conditional fee arrangement fall on unsuccessful defendants as a class. Instead of placing a burden on the legal aid fund, legal proceedings were to be funded by a party’s lawyers (who would undertake the work ‘on risk’ in exchange for a potential success fee) and then, if the proceedings were successful, the burden of the success fee would be transferred to the losing party. The operators of the stadium argued while they accepted liability for the base fees, their liability to pay the success fee and other insurance related costs infringed their rights under Article 6 of the Convention.
The Supreme Court considered the decision of the European Court of Human Rights (ECtHR) in MGN v UK which had held that the AJA scheme was incompatible with Article 10 (freedom of expression). In that case the ECtHR identified four flaws with the AJA scheme: (1) the lack of focus of the regime and the lack of any qualifying requirements for claimants who would be allowed to enter into a conditional fee arrangements; (2) the absence of any incentive for claimants to control the level 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; (3) the ‘blackmail’ or ‘chilling’ effect of the regime which drove parties to settle early despite good prospects of a defence; and (4) the fact that the regime gave the opportunity to ‘cherry pick’ winning cases to conduct on conditional fee arrangements.
The majority of the Supreme Court found the issue in the case was not whether the AJA regime had flaws but rather whether it was a proportionate way of achieving the legitimate aim it pursued. They pointed to the fact that the ECtHR in its own case law recognised that a regulatory scheme may be compatible with the Convention even if it operates harshly in individual cases. They were not persuaded by the arguments put forward by the stadium operators that the AJA failed to take account of the financial position of the paying party. The Supreme Court found this was not a relevant factor in determining the assessment of reasonable and proportionate costs. It was found the regime as a whole was a rational and coherent scheme for providing access to justice.
In his dissenting judgement, Lord Clarke (with which Lady Hale concurred) argued the AJA regime was disproportionate because it did not treat all defendants in the same way but chose a particular class of defendants to impose liabilities far beyond the bounds of what was reasonable or proportionate. This was a case where the measure was discriminatory in a way that was incapable of objective justification.
Click here to read the Supreme Court judgement in full.
Click here to read an analysis of the reasoning in the judgement by David Hart QC.