Imagine you have been dealing with a sizeable matter for the last few years which has recently settled. As no doubt is always the case you have run the file magnificently and your client is delighted with the result.

From a professional point of view you are particularly pleased with your handling of the funding of the claim. On this occasion you are confident that no one can challenge your entitlement to additional liabilities.

Now imagine that despite the above, your additional liabilities were deemed unrecoverable through no fault of your own. This is the door which has been opened by the Supreme Court In the recent case of Coventry and others v Lawrence and another (No 2) [2014] UKSC 46.

The Claimant was successful and was awarded 60% of their costs, however significant concerns were raised regarding the amount of the same.

The Costs claimed were slightly over £1,000.000 loosely broken down as £398,000 base costs, £319,000 success fee and £350,000 for the ATE premium.

While the base costs of £400,000 were described as ‘regrettable’ and ‘disturbing’ the fireworks come in relation to the Court’s consideration of the additional liabilities. Summarising, the Defendant argued that the significant amount of the additional liabilities represented a barrier to the Defendant’s access to justice and their right to a fair trial as enshrined under Article 6 of the European Convention on Human Rights. As a result of this argument the Supreme Court denied any payment of the additional liabilities pending the matter being relisted for a further hearing.

It is understandable, given the potential billions of pounds on the line, that the case has been at the forefront of recent debate. However no decision has yet been made deeming additional liabilities unrecoverable. In fact the Judgment itself indicates that even on relisting it is possible that no conclusion may be reached. This is likely to rumble on for some time.
Inevitably speculation has been rife as to what course of action the Court is likely to take. With so many vested interests it is difficult to separate the genuinely considered opinion from hyperbolic speculation, however views tend to fall into three main camps:

Firstly it is possible that the Defendant’s argument is fundamentally correct. As a result the Court may be left with little option but to declare the now outdated 1990 and 1999 acts as incompatible with Article 6 of the Human Rights Act. This would result in the Court having to effectively overturn the sections of the acts which allowed for the recovery of additional liabilities. Significantly a finding along these lines would not impact on the recoverability of additional liabilities between parties. However, were a Judgment made on this basis, parties who had paid additional liabilities in the past would potentially be in a position to seek remedy from the Government, effectively for incorrectly interpreting the legislation and allowing the legal sphere to rely on the same; happy Christmas to the taxpayer…

Secondly, it is possible that the Court may deem additional liabilities as unrecoverable, and provide that incorrectly claimed additional liabilities within a case is justification for the reopening of the matter inter partes. This would be both a logistical and a financial nightmare. Much of the caselaw regarding the possibility of reopening concluded matters runs contrary to the notion that cases will be reopened simply because a fresh Court has come to a different decision to that which has been previously made. In brief, the Court will only allow a case to be reopened in ‘exceptional circumstance,’ arguably a breach of one’s human rights satisfies this demand. If the Court’s Judgment is along these lines ultimately the client’s costs are their own and depending on the terms of the Client’s CFA or ATE premium, the individual, the firm or the insurer will have to bear the burden of any repayment.

The final possible result of the rehearing is that the Court finds that additional liabilities were correctly recoverable, what a welcome anticlimax for many this would be. The arguments as to why the Court should not retrospectively disallow the recoverability of additional liabilities are based around either the injustice this would cause to the Claimants, (a breach of their own human rights?), or are based around the impracticality/inconsistency of a finding to the contrary. Possibly the most revealing evidence in support of the likelihood of this outcome is the actions of insurers themselves, who as it stands have been reluctant to rely upon any Coventry based argument in support of the none recovery of additional liabilities.

The Case is due to be heard in February 2015 – until then perhaps it won’t be the sound of jingle bells keeping the legal profession up at night…

Merry Christmas!