Legal Cost Specialists

Sousa v London Borough of Waltham Forest

Judgment was handed down yesterday by the Court of Appeal in Sousa v London Borough of Waltham Forest [2011] EWCA Civ 194. This case concerned a claimant who suffered subsidence damage to his property caused by tree roots of a tree owned by the defendant. The claimant’s damages were insured under an insurance policy between the claimant and an insurer. The claimant made a claim upon the policy. The insurer satisfied the claim and exercised its rights of subrogation to bring proceedings against the defendant in the name of the claimant. The claim was brought under the terms of a Collective Conditional Fee Agreement between the solicitors for the claimant and the insurer. The defendant objected to payment of the success fee. The judge as first instance disallowed the success fee on the basis that as the claimant was never at risk of having to pay costs, because he had the benefit of an insurance policy for the loss, and it was therefore unreasonable for a CFA to be entered into. The claimant successfully appealed that decision and the success fee was reinstated. The Court of Appeal has now dismissed the local authority’s appeal.

The Court of Appeal ruled that the insurer’s had the same right to enter into a CCFA and recover a success fee as the claimant would have done. The House of Lords’ decision in Campbell v MGN (No. 2) [2005] UKHL 61 was followed so that “the mere fact that a person is able to fund litigation without resorting to a conditional fee agreement does not make it unreasonable for him to do so”.

Important though this decision is for cases of this type, what observers were really looking for was the response of the Court of Appeal to the recent decision in MGN v United Kingdom. The Court had received written submissions in light of MGN and it was expected that this would give an early indication as to whether challenges to success fees in light of MGN might succeed.

Ward LJ, giving the leading judgment said:

“I prefer the view of the respondent that the Court of Appeal remains bound by the decision of the House of Lords: see Kay v Lambeth LBC [2006] UKHL 10, [2006] 2 A.C. 465. If the House of Lords regarded the fees as reasonably incurred, so should we.

The appellant floated a second argument, not previously raised. That is that success fees have such a “chilling” effect as to amount to a denial of justice and a fetter on the freedom of access to the court in breach of Article 6. I agree with the respondent that this is not an argument the appellant should be allowed to run at this stage of the proceedings. I am not prepared to entertain the argument: indeed I am far from convinced on cursory examination that it is well founded.”

The Defendant was therefore not given the opportunity of running the Article 6 arguments that would be clearly central to such a challenge succeeding. This fact alone means that this decision is unlikely to be the last word on the matter.

Moore-Bick LJ held:

“Finally, it is necessary to mention briefly the recent decision of the European Court of Human Rights in the case of MGN v The United Kingdom (Application No. 39401/04), in which the court held that the award of costs in favour of Miss Campbell against MGN that included a success fee (upheld in Campbell v MGN (No. 2)) involved an infringement of the defendant’s right to free speech. Mr. Bacon submitted that the decision supported the wider proposition that it is unreasonable for a claimant who can finance the litigation without recourse to a conditional fee agreement to do so and that therefore Mr. Sousa should not be allowed to recover the success fee as part of the costs in this case.

I am unable to accept that submission for two reasons. First, because in MGN v The United Kingdom the court was concerned with the question whether the liability to pay a success fee involved a disproportionate interference with the newspaper’s right of free speech and was unreasonable on that account. The case is not, therefore, remotely comparable to the present. Second, because unless the liability to pay a success fee can be said to infringe the defendant’s rights under the Convention (which is clearly not the case here), questions of proportionality and reasonableness do not arise. It is for Parliament to decide what arrangements viewed overall will best serve the general requirement for access to justice. Moreover, the submission is contrary to the decision of the House of Lords in Campbell v MGN (No. 2), which remains binding on this court.”

The fact that the Court of Appeal has found itself bound by an earlier House of Lords’ decision, not withstanding MGN v UK, is no surprise. The real question is what will the Supreme Court decide if, and when, this issue reaches them?

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