Success fees in mesothelioma cases: can they survive?
Coventry v the United Kingdom [22.10.22]
Given the recoverability of additional liabilities in mesothelioma claims, this judgment and how the UK Government responds may be of keen interest to those in the legacy markets with large asbestos liabilities. The costs in mesothelioma claims are often very high and are exacerbated by the recoverability of both the success fee and ATE premium.
The impact of humans rights on the Access to Justice Act 1999 (AJA) funding regime has been played out in the Supreme Court and European Court of Human Rights (ECtHR) on a number of occasions. In the latest chapter, the ECtHR in Strasbourg has found that the recovery of a success fee and ATE premium breached a defendant’s Article 1 and 6 rights. The decision of the European court affirms the minority decision of Lady Hale and Lord Clarke in Coventry v Lawrence & Others .
The underlying case involved a modest claim for public nuisance that progressed on various grounds to the Supreme Court. The issue of compatibility of the AJA regime with Convention rights is a familiar one to the Supreme Court, having declined to find the regime incompatible in Campbell v MGN  which concerned defamation and privacy claims and Article 10.
The key issues in all of the proceedings to date have been whether the AJA regime imposed disproportionate burdens on defendants in requiring them to pay ATE premiums and success fees. The issue was determined by the Supreme Court in 2015 where a five to two majority found that the regime was a proportionate way of balancing a the rights of litigants.
The Court gave an unanimous decision that the AJA system breached both Article 1 and 6 but delayed its opinion on the appropriate remedy for another day. Whether the UK Government agrees to pay the additional liabilities remains to be seen.
A dissenting judgment was given by Lord Clarke in Coventry who found the AJA regime was disproportionate because it treated different classes of defendant differently, requiring an unsuccessful defendant to fund other cases by payment of a success fee, whilst providing a means of risk free litigation for those who could afford to litigate without using a Conditional Fee Agreement.
The ECtHR focused on the disadvantage facing a uninsured defendant when a claimant benefits from a CFA and ATE. In particular, the Court noted the real risk is that a defendant with a good defence would be driven to a settlement given the level of costs it would be required to pay, which vastly exceeded the costs incurred in order to fund other claims that might fail.
Whilst safeguards exist such as the detailed assessment procedure, cost capping or ATE insurance, the Court felt these were either unavailable or insufficient to guard against an impingement of the right to a fair trial or right to peaceful enjoyment of possessions.
Coventry invited the ECtHR to order for the UK Government to pay a sum equivalent to the success fee, ATE premium and in respect of base costs incurred in the domestic appeals. However, with ongoing domestic proceedings, the decision was adjourned with the parties to submit further submissions within six months.
Coventry is consistent with the EctHR’s judgment in MGN Limited v United Kingdom  where the Court balanced Article 10 rights and freedom of expression against a claimant’s ability bring proceedings for defamation/breach of privacy.
Whilst the ramifications of the decision are yet to be fully worked though, the main rationale for the findings was based on the effect of the AJA regime to uninsured defendants. This may severely narrow the class of individual who may benefit from the decision and remove the ability of insurance companies to benefit.
However, if the Court’s main concern was the impact on a defendant when faced with excessive costs caused by additional liabilities, it is apparent that insurers continue to pay claims where a defence exists to avoid the excessive costs generated by success fee and ATE premiums. In our experience, the 100% success fee for claims that run to trial acts as a major deterrent even when a strong defence exists.
Although untested, there may be a rationale to mount similar challenges for those insurers who are insolvent and act under a Scheme of Arrangement that requires policyholders to pay or part pay the claimant’s costs, given the direct exposure of the policy holder to the excessive costs. However, any challenge will require both careful consideration and case selection.
Secondly, it remains questionable how the domestic courts and ECtHR will balance the competing interests. It is envisaged that any mesothelioma victim has a competing Article 6 right and unlike in media claims often involving high net worth individuals, many mesothelioma victims are blue collar workers without the means to sustain High Court litigation. When compared with the resources available to an insurance company the courts may take a different view when balancing the competing rights.
Thirdly, both MGM and Coventry involved success fees of six figures not often seen in the context of mesothelioma litigation where the success fee is fixed (in claims below £250,000) before trial, and where most claims legitimately settle. However, the cumulative effect of these cases arguably creates a large spend on additional liabilities in the legacy arena where mesothelioma claims remain one the largest costs to insurers and (re)insurers.
It remains to be seen whether the UK Government pays Mr Coventry’s success fee and if such an agreement creates an avenue to force the Government to contribute to the costs of ATE and success fee in other types of claim or forces a rethink to the exemption to Section 44 of the Legal Aid, sentencing and Punishment of Offenders Act 2012. However, previous comments from the Ministry of Justice have suggested there is limited appetite from rule makers to upset the status quo by removing the recoverability of additional liabilities in mesothelioma claims.