THE “OLD” CONDITIONAL FEE SCHEME WAS IN BREACH OF ARTICLE 6:UNINSURED DEFENDANTS NOT SENT TO COVENTRY
Amidst the bustle of recent cases about costs the European Court of Human Rights decision in Coventry v. the United Kingdom – 6016/16 may well be overlooked. The Court found that the “old” system of conditional fee litigation, whereby a defendant was responsible for additional liabilities (that is a mark up on costs by way of success fees) if the claimant was successful, was a breach of Article 6.
” the Court considered that in respect of uninsured defendants, who had born an excessive and arbitrary burden in CFA litigation, the impugned scheme, when viewed as a whole, had infringed the very essence of the principle of equality of arms as guaranteed by Article 6 § 1.”
The applicant to the EHRC (Coventry) had been an uninsured defendant in an action where the claimants acted under a conditional fee. As such they were liable to pay a large amount of success fees when they were unsuccessful.
UNINSURED DEFENDANTS AS A CLASS
The Court considered the applicant’s case.
The merits of the applicant’s case – that is, that he and the third defendant had been individuals or small undertakings carrying on modest businesses without insurance and faced with one-off litigation which had involved them in eye-catchingly large costs exposure – had been largely “untested” before the domestic courts. Nonetheless, it would appear from the proceedings subsequently brought by the applicant against his insurers that he had been informed by the broker that the nuisance litigation had not been covered by his insurance policy. Therefore, regardless of the outcome of the ongoing litigation, the Court would accept that the applicant – not unreasonably – believed himself to be an uninsured defendant throughout the course of the nuisance proceedings. Consequently, the Court will consider the operation of the scheme vis-à-vis uninsured defendants as a class.
The court considered the competing arguments. It found that an unfair burden had been placed on uninsured defendants and the scheme breached article 6.