More Noise: Loser pays on CFA’s?

  Coventry v Lawrence (Part 2)

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A Supreme Court case I commented on recently, elsewhere described as “…an important judgment on the principles of private nuisance for the 21st century…”[i] now has wider ramifications for legal costs in CFA cases. In the supplemental judgment of 23 July, Coventry v Lawrence [2014] UKSC 46[ii] a five member Supreme Court panel decided on the grant of an injunction and damages in a private nuisance case brought by a house owner against operators of a speedway stadium.

One of the remaining issues was whether the injunction for nuisance should be suspended until the house was again habitable, following fire damage. Damages were thought likely to be even more of an adequate remedy in the meantime.

However, the pronouncements on CFA costs have assumed far greater importance than on this case alone. The house owner had been awarded 60% of his costs to be paid by the operators, including base costs, success fee and after the event costs insurance (AEI). On a detailed analysis of the figures, Lord Neuberger said

 the figures are very disturbing

The base costs were £398,000, success fee £319,000 and AEI £350,000 (total £1,067,000). This was “regrettable” in the context of the house being worth a maximum of £300,000, and the nuisance reducing this by £74,000 at most. The operator’s liability to pay the householder’s costs would leap from £238,000 (60% of basic costs only) to £640,200, being 60% of all three elements, based solely on how the householder had chosen to fund their case.

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It had been thought that satellite litigation on costs or CFAs and AEIs at least had subsided, following Callery v Gray [2002] 1 WLR 2000, where the House of Lords decided that, subject to reasonableness, success fees and ATE premiums were recoverable. In Campbell v MGN Ltd (No 2) [2005] 1 WLR 3394, the House of Lords held that the 1999 Act[iii] costs recovery regime did not infringe Article 10 of the European Convention on Human Rights (“ECHR”) (freedom of expression).

However, the operators argued that following the Strasbourg Court in MGN Limited v United Kingdom (2011) 53 EHRR 5 and Dombo Beheer BV v Netherlands (1994) 18 EHRR 213, Article 6 (right to a fair trial) would be infringed if the court required them to pay 60% of the success fee and the ATE premium.

In MGN v UK at para 217, the Strasbourg Court said that “…the depth and nature of the flaws in the system…” introduced by the 1999 Act and the provisions of the CPR were “…such that the Court can conclude that [it] exceeded even the broad margin of appreciation to be accorded to the State in respect of general measures pursuing social and economic interests…”.

As to Article 1 of the First Protocol to the Convention (“A1P1”), the operators rely on the reasoning of the Strasbourg court in James v United Kingdom (1986) 8 EHRR 123.

Faced with these contentions and giving the lead judgment, Lord Neuberger held that it is

open for argument

whether the home owner’s costs claims (success fee and AEI) are a breach of the operator’s entitlement to a fair trial under Article 6 ECHR and/or A1P1. The Supreme Court ruled that if the operator wishes to pursue that argument, it would be wrong for it to decide the point without representations from the Government and other interested parties as interveners. These would include the Attorney-General and the Secretary of State for Justice, and any other intervener sanctioned by the Court.

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Comment

Following the Jackson Reforms, the success fee and AEI would no longer be recoverable in cases where such arrangements were entered in to after April 2013. However, in the instant case (and a vast number of cases continuing through the Courts under the “old” fee regime), until now such success fee and AEI have been regarded as entirely valid and enforceable against the losing side.

A number of questions arise, including whether, if the court considered that there was an infringement of the operator’s rights this ought to be recognised by a declaration of incompatibility. However, the forum for this decision has yet to be resolved, whether this should be again at the Supreme Court, or as stated in Callery v Gray at the Court of Appeal, being “…the primary supervisory and judicial policy-making functions in connection with case-management, procedural and costs issues…” with greater experience on matters concerning costs.

Further affected by this renewed doubt however, are litigants in ongoing cases subject to the old costs regime, where the funding, CFAs, retainers and AEI premiums will now be questioned, to say nothing of all previous cases decided (or settled) on the assumption by the courts that the old regime did not offend against ECHR. If there is a declaration of incompatibility, this could lead to a deluge of compensation claims against the UK Government.

 

[i] (Planning permission no defence to private nuisance claim) http://wp.me/p4DFLr-c

[ii] http://supremecourt.uk/decided-cases/docs/UKSC_2012_0076_Judgment.pdf

[iii] Legal Services Act 1990 Part II, Access to Justice Act 1999

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Disputed Wills: Supreme Court’s New Commercial Contract Approach to Rectification

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In a recent landmark decision by the Supreme Court (the UK former House of Lords) the Law Lords unanimously rectified Mirror Wills on the grounds of clerical error.
They overturned the rulings of the High Court and Court of Appeal, where a stricter interpretation had applied historically. The new approach, including where relevant, applying Commercial Contract Law principles to interpretation has been welcomed as a victory for common sense and flexibility, giving effect to the clear intention of the Testators.
Facts
Mr and Mrs Rawlings were husband and wife who had made “Mirror Wills” in 1999, each leaving their estates to the other, with the survivor leaving their estate to Terry Marley, whom they treated as their adopted son. They had chosen to exclude from the Wills their two biological sons, Terry and Michael Rawlings.
Unfortunately, they had each signed the wrong Will. This meant that neither Will was valid. This wasn’t spotted when Mrs Rawlings died in 2003. After Mr Rawlings’ death in 2006 the discrepancy came to light.
The adopted son applied to the High Court for Mr Rawlings’ Will to be rectified. He claimed the couple clearly intended to leave their estates to him. The High Court ruled against him, deciding that the Wills were invalid. It was impossible to go behind that, therefore Mr and Mrs Rawlings’ estates passed to their estranged sons under the Intestacy Rules.
On a strict traditional approach, their “Wills” could not be rectified by the Court, because neither document satisfied the strict minimum criteria to qualify as a “Will” under s9 of the Wills Act 1837. The document didn’t have Mr Rawlings’ knowledge and approval, accordingly the law on rectification was not applicable. The Judge also held that even if the document could be construed as a “Will”, she was not able to rectify it under s20 of the Administration of Justice Act 1982, which permits rectification where there is a ‘clerical error’, as this was usually limited to typing errors.
Terry Marley’s appeal to the Court of Appeal failed. The Appeal Judges regretted that they had no choice and upheld Proudman J’s decision. In a highly anticipated judgment, the Supreme Court has now reversed the lower Courts’ decision and granted the appeal. Accordingly, the couple’s “adopted” son, Terry Marley, inherits as the couple intended
The Court held that a document does not have to be a valid “Will” within the legal definition, nor have the Testator’s knowledge and approval for it to be treated as a “Will” and subject to rectification.

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Supreme Court Decision
In a much wider interpretation than had tied the lower Courts’ hands, the Supreme Court found that the couple signing the other’s Will by mistake did constitute a “clerical error” under s.20 of the Administration of Justice Act 1982. It would be artificially restrictive to perpetuate a narrow interpretation. The Court held that the Will should be rectified to contain the true wording of the Will Mr Rawlings ought to have signed.
Whilst not decisive in this case, the judgment includes an important development to the law on interpretation of Wills, likely to have far-reaching implications for future cases. The Supreme Court held that if part of a Will is ambiguous and the true meaning has to be decided, the same approach can be adopted as when interpreting a commercial contract. This is to give effect to the intention of the parties (or party) involved. This comparison between Wills and construction of commercial contracts is a new development in the Law, where (except if s21 of the AJA 1982 applied), the intention is identified by interpreting the words used in the light of:

• their ordinary and natural meaning;
• the overall purpose of the document;
• any other provisions of the document;
• the facts known or assumed by the parties when the Will was executed; and
• common sense
• but, discounting subjective evidence of any party’s intentions

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Comment
Although Mr Rawlings’ remaining Estate amounted to approximately £70,000, the ramifications of the judgment are wide ranging. The scope for the Courts to rectify wills and codicils on the basis of clerical error has been extended. The decision adopts a common sense approach to implement the true wishes of the Testators, although it obviously also underlines the importance of adhering to the strict execution formalities under the Act, which may be questionable with the popularity of DIY Wills.
It remains to be seen to what extent this widening of ‘clerical error’ and the Contract Law innovation placing importance on the ‘intention’ of the Testator will impact interpretation of Wills in future.
Although there are concerns that broadening the scope of ‘clerical error’ could “open the floodgates” of litigation, the judgment was highly fact-specific regarding Mirror Wills. The Courts are experienced in resolving borderline cases and justice demanded that the previous artificially narrow interpretations should be relaxed. There was compelling evidence of the deceased’s’ intentions and future cases are likely to be decided on the individual facts. The courts endeavour to carry out Testators’ clear wishes and the decision in Lord Neuberger’s judgment is in line with that principle where everyone is entitled to dispose of their estate as they choose. It is to be hoped that this liberalizing of interpretation and rectification will throw off the restrictive shackles that led to Terry Marley having to pursue two appeals before Mr and Mrs Rawlings’ wishes were realised.