Two sides to the story

Nuisance claims are expensive to bring and expensive to defend. No one familiar with this practice area would disagree. But the latest hearing of Coventry v Lawrence [2014] UKSC 13 in the Supreme Court and recent draft findings from the United Nations Aarhus Convention Compliance Committee (ACCC) have seen the blame for those exorbitant costs placed not on greedy claimants or obstinate defendants but on the UK government, for failing to take steps to ensure the costs did not become so burdensome.

In Coventry v Lawrence, the appellants won their claim in nuisance against the operators of a motorsport stadium and motocross track in East Anglia. They had previously been successful in the High Court, lost in the Court of Appeal, but won again in the Supreme Court. On the question of costs, the Supreme Court considered the High Court order that the respondents pay 60 per cent of costs (including disbursements, VAT, success fee uplift, and after the event insurance (ATE) premium). The total bill came to £1,067,000, therefore making their liability £640,000.

Lord Neuberger described this result as ‘very disturbing’. Although no criticism of the lawyers involved was intended, the fact that the litigation process and the operation of the conditional fee agreement (CFA) and ATE insurance could result in such a large bill for a ‘relatively small business operator’ deeply troubled the court.

Proportionality of costs

The respondents’ complaint was that the liability for the ATE premium/CFA uplift was a violation of their rights under article 6 and article 1 to the first protocol of the European Convention on Human Rights (ECHR). The court had to consider whether part II of the 1999 Access to Justice Act, which had the effect of requiring defendants who have been ordered to pay a claimant’s costs to pay the uplift and ATE premium in full, subject to the uplift and premium having been reasonable, but irrespective of proportionality and secondary legislation (namely Civil Procedure Rules (CPR) 44 and CPR 44 practice direction on costs), were incompatible with the rights enshrined in the convention. The respondents argued that they could not have a fair hearing because of the risk of these excessive costs. Lord Neuberger reviewed the relevant case law and observed that in Campbell v MGN Ltd (No 2) [2005] UKHL 61, the House of Lords held that the 1999 Act costs recovery regime did not infringe article 10. He concluded, however, that as Strasbourg took a different view on that very point, it was open to the court to consider the issues.

In February the hearing resumed, with the secretary of state for justice arguing that article 6 could only be engaged in rare cases where the respondent is unfairly ‘strong-armed’ into settling despite having a strong defence. This did not happen here as the respondents participated in a full trial and appeals. The rules on ATE premium/success fee recovery were plainly ‘prescribed by law’ and ‘pursued a legitimate aim’. The only real issue before the court was the proportionality of the costs regime.

On the proportionality point, the secretary of state responded that it was maintained principally via the discretion of judges to assess and award costs. The ATE regime performed a useful function in that successful defendants were able to recover their costs from insured claimants. The 1999 regime was an improvement on the previous situation where legal aid was much more commonly available as no costs then could be recovered from an unsuccessful claimant. Parliament had been in the best position to determine where the balance should be struck between the rights of individual parties to litigation and society as a whole when deciding the costs rules.

The secretary of state also argued that the Strasbourg decision in MGN v UK 39401/04 [2011] ECHR 66 did not mean that similar doubt should be cast on article 6. In that case, the issue was privacy versus freedom of speech (article 8 versus article 10). In the current case there is no counterbalancing right to article 6 that should be taken into account. The emphasis on proportionality between competing rights in MGN cannot be ‘read across’ to this situation.

Interestingly, the secretary of state laid his cards on the table by arguing that the respondents’ position (of having to pay their own costs plus effectively three times the claimants’ costs) was the intended result of the balance struck by parliament in enacting the costs regime. Unsuccessful defendants, having been found by the courts to have violated the rights of others or agreed to accept such liability, were to carry the wider costs of civil litigation. This was justified in the public interest.

Finally, the secretary of state asserted that a declaration of incompatibility between the 1999 costs regime and the ECHR would have ‘far-reaching, uncertain and potentially catastrophic consequences for legal certainty, society and the government more generally in that it could, conceivably, entitle any losing party who has been required to pay a CFA success fee and/or ATE premium’ to seek to claim compensation from the government. One can imagine the Pandora’s box that would be opened at that point.

Prohibitively expensive

On the flip side, the Aarhus Convention concerns access to justice in environmental claims from the perspective of the claimant (as a private individual or small organisation of individuals). The ACCC draft findings were that the UK government was in breach of its duties under the convention because it has failed to ensure that bringing claims in nuisance is not prohibitively expensive. In previous communications the ACCC had told the UK government that under the terms of the convention the duty to ensure access to justice in environmental matters was not prohibitively expensive did not just apply to public law claims such as judicial review (where the UK could argue in its defence that it had improved the situation through CPR 45.41 on Aarhus case costs limits). It was argued in communications to the committee that the recent abolition of recovery of ATE and success fees meant that access to the courts in nuisance claims had become more difficult, not less.

The committee accepted these points and rejected the UK government’s argument that viable alternatives to private nuisance claims existed in the form of complaints to a regulator, judicial review of a failure to act by a regulator, and statutory nuisance. The last option was considered at some length by the committee, as in some circumstances it could be considered a satisfactory substitute for private nuisance as the complainant is at no risk of adverse costs (unless they behave unreasonably). The fact that damages cannot be awarded in lieu of an injunction in statutory nuisance, however, convinced the court that statutory nuisance was not a complete answer to the problem.

The ACCC has recommended that the UK review its procedures and take legislative and practical steps to ensure that private nuisance claims are not prohibitively expensive. These were draft findings, and the UK and complainants now have the opportunity to respond, although it seems unlikely there will be any points made that will drastically change the findings.

It is odd that the government has resisted addressing the prohibitive costs issue in private nuisance claims when it has been willing to do so in judicial review. Of course, it has protected its own costs liability in environmental matters most effectively by exempting section 288 appeals against the decisions of planning inspectors from the costs caps found in CPR 45.41 (which the Court of Appeal in Venn V SSCLG [2014] EWCA Civ 1539 confirmed is contrary to its duties under the Aarhus Convention). It would only take extending the qualified one-way costs shifting (QOCS) provisions from personal injury claims to nuisance to remedy the situation for prospective private nuisance claims, an opportunity which arose in 2012 with the Legal Aid, Sentencing and Punishment of Offenders Act but was passed over. This would be a timely moment to resurrect that option.

As for Coventry v Lawrence, the complaint there is retrospective as success fees and ATE premiums are no longer recoverable. It would be a very bold move for the Supreme Court to declare the 1999 Act regime incompatible with the ECHR and thereby open the floodgates for claims against the government as the secretary of state described. The court in the past has been reluctant, most notably in claims of negligence against public authorities, to allow a situation to arise where the government could be ‘swamped’ with compensation claims. It seems unlikely the court would feel so outraged by the circumstances in this case as to make a drastic decision.

For practitioners, the prospects for costs in private nuisance claims are unclear. If QOCS were extended to cover these claims, there would at least be the benefit of simplicity – and access to justice in environmental claims. Without the prospect of costs recovery for defendants, although many may see this as unfair, claims would most likely be resolved more efficiently. In terms of the Coventry v Lawrence case, one can only hope that whatever the Supreme Court decides, the costs situation is made more straightforward and fair as a result.

Richard Buxton Environmental and Public Law represented the appellants in Coventry v Lawrence. Views expressed are personal to the author. SJ

Adrienne Copithorne is a partner at Richard Buxton Environmental and Public Law

@RBEnviroLaw

Image above: Daniel Huerlimann-BEELDE / Shutterstock.com