The recoverability of funding additional liabilities in proceedings which commenced prior to the LASPO changes but where there were later appeals, post the LASPO changes, to the Court of Appeal and Supreme Court.  The Supreme Court has held that the success fees and ATE premium top-ups were recoverable between the parties.

We are expecting there to be lots of authoritative judgments coming out this year relating to the effects of the provisions of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”).  This one has probably not featured on many people’s radar previously, but it is a clearly significant case that may set the tone for subsequent upcoming decisions.

The Supreme Court has given judgment in Plevin v Paragon Personal Finance Limited [2017] UKSC 23 upon the issue of whether, in proceedings commenced prior to the amendments brought about by LASPO, the success fee and top-up of the after the event (ATE) legal expenses insurance premium post the LASPO changes in later proceedings in the Court of Appeal and Supreme Court are recoverable between the parties – holding that they are by a majority of four to one.

This was a review by a full panel of five Supreme Court Justices of the original costs assessment in the Supreme Court that had been undertaken by Master O’Hare and Registrar di Mambro.  Such can be sought where a question of principle arises, which Paragon had raised.  It is unusual for the Supreme Court to give judgments such as this in costs proceedings, which demonstrates the importance of the case and general principles in issue that have a wide implication for other cases which commenced prior to the LASPO amendments under the old funding regime of CFAs and ATE insurance.

The case principally concerns the interpretation of the transitional proceedings within section 44(6) of LASPO for the solicitor’s success fees and section 46(3) for the ATE premium, which are worded slightly differently.

Recoverability of success fees

Deeds of variation were entered into with the Claimant to extend the original CFA, which only covered proceedings up to and including trial, to cover the appeal firstly in the Court of Appeal and later the appeal in the Supreme Court.  The relevant transitional provision meant that success fee recovery was not prohibited provided that:

“The amendment made by subsection (4) does not prevent a costs order including provision in relation to a success fee payable by a person (“P”) under a conditional fee agreement entered into before the day on which that subsection comes into force (“the commencement day”) if

(a) the agreement was entered into specifically for the purposes of the provision to P of advocacy or litigation services in connection with the matter that is the subject of the proceedings in which the costs order is made, or

(b) advocacy or litigation services were provided to P under the agreement in connection with that matter before the commencement day.”

The arguments of the paying party centred upon the variations of the CFA in August 2013 and January 2014 representing new arrangements entered into by the Claimant post 1 April 2013 for the provision of litigation services after that date, such that they were not covered by the transitional provisions and the success fees were not recoverable.

The Supreme Court dismissed the arguments and held that “This is in my judgment a bad point. The “matter that is the subject of the proceedings” means the underlying dispute. The two deeds of variation provided for litigation services in relation to the same underlying dispute as the original CFA, albeit at the appellate stages.”  This meant that the success fee as previously assessed relating to the original Supreme Court proceedings in the sum of £31, 378.92 was recoverable from the paying party, together with the Court of Appeal success fee (still to be assessed).

The Court gave further consideration as to whether a variation of the CFA amends the principal agreement or discharges and replaces it – which

“depends on the intention of the parties. To establish a discharge and replacement, ‘there should have been made manifest the intention in any event of a complete extinction of the first and formal contract, and not merely the desire of an alteration, however sweeping, in terms which are still subsisting’: Morris v Baron & Co [1918] AC 1, 19 (Viscount Haldane).”

The “faint suggestion that the deeds of variation were an ‘artificial device’ designed to avoid the operation of section 44(4) of LASPO” was also rejected.

Recoverability of the ATE premium

The Claimant had taken out an ATE premium with DAS LawAssist on 29 October 2008, at which stage the case was before the County Court.  The policy was later ‘topped up’ to extend cover for the proceedings in relation to the Court of Appeal and the Supreme Court, which occurred after the LASPO changes came in on 1 April 2013.

The relevant transitional provision that made the arguments more complicated for the ATE premium, which went to hearing before the full panel of Justices that heard the original Supreme Court proceedings, provides that:

“The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings who took out a costs insurance policy in relation to the proceedings before the day on which this section comes into force.”

It was held that the relevant issue was the meaning of “proceedings” and not the subject matter of those proceedings, and it was found in favour of Mrs. Plevin that the two appeals constituted part of the same “proceedings” as the trial.  The Court considered that “The question posed by section 46(3) of LASPO is whether the fact of having had an ATE policy relating to the trial before the commencement date is enough to entitle the insured to continue to use the 1999 costs regime for subsequent stages of the proceedings under top-up amendments made after that date.”  Their answer to that question was that “The purpose of the transitional provisions of LASPO, in relation to both success fees and ATE premiums, is to preserve vested rights and expectations arising from the previous law. That purpose would be defeated by a rigid distinction between different stages of the same litigation.”

The dissenting judgment from Lord Hodge was that the provisions should not be construed as protecting any wider expectation of how the litigation may be funded thereafter – and that, in his view, success fees should only be recoverable where the CFA provided for such later proceedings initially.  However, he acknowledged the force of the view that the transitional provisions were intended to cover the whole litigation, but rather considered it was problem in the wording that had been used within the legislation.

In terms of quantum this was the biggest success for the Claimant (and the insurer, DAS LawAssist, given that the premium was self-insured in the event that it was not recovered between the parties), as her ATE premium for the original Supreme Court proceedings had been assessed in the sum of £531, 235, with the assessment of the Court of Appeal premium still to be determined.

Assignment of the Respondent’s/Claimant’s CFA

The Court also dealt with a challenge in relation to the validity of the assignments of the Claimant’s CFA, upholding the decision of the Costs Judges that the CFA was validly assigned to later firms.  Miller Gardner had entered into a CFA with the Claimant in June 2008, and as a result of organisational changes the firm first became Miller Gardner LLP and then Miller Gardener Limited.  The Appellant / Defendant challenged the arrangements on a technical basis in relation to the wording of the transfer agreements, arguing that the provisions only covered work done to the date of the transfer and not work conducted thereafter.  The Supreme Court held that the point “has no merit and was rightly rejected” and that “If this were correct, it would mean that the only right of the successor firm was to bill the clients for work done before the transfer date, leaving them with no solicitor to act for them other than the defunct shell of the old firm. This plainly cannot have been intended.”  It was further noted that even if Paragon’s argument was sound, it would lead nowhere, as a result of correspondence between the solicitor and the Claimant, and Mrs Plevin continuing to instruct them.

Comment

As a matter of general application it demonstrates that, for on-going cases where the funding arrangements were entered into under the pre LASPO arrangements and where there are later proceedings in higher courts, the Claimant can both extend her CFA and take out additional cover with her ATE insurer.  On that point, it is important to note that there must not be an intention of the parties to the CFA to extinguish that retainer (as opposed to varying it) and here the ATE premium were top-ups and not fresh contracts of insurance.  The Supreme Court did not specifically say whether it was permissible for a Claimant, who had the benefit of ATE insurance with one insurer, to take out a separate ATE premium with another insurer where the original insurer was not able or willing to provide top-up cover.  However, given the judgment at paragraphs 21 and 23 this would appear to be permissible.

The Supreme Court has ensured that there continues to be fairness to Claimants who entered into litigation on the basis of the funding system that existed prior to the LASPO changes.  This was the principal reason for its decision at paragraph 21, with it being acknowledged that if the ATE premium was not recoverable it would “alter the balance of risks on the basis of which the litigation was begun.”

It was also a case in which the Claimant recovered damages of £4, 500, yet the assessed costs of the Supreme Court proceedings alone totalled £751, 463.84 (before interest or further assessment costs), with the costs of the other stages of proceedings still to be quantified.  It shows starkly what a difference the old proportionality test made when it came to the assessment of costs (and the application of Rogers v Merthyr Tydfil County Borough Council [2006] EWCA Civ 11347 and Coventry v Lawrence (No. 3) [2015] UKSC 50) in relation to the ATE premium), as compared to recent decisions upon the application of the current proportionality test – although it is worth noting that Mrs. Plevin’s case was a test case.

The case on the whole was one that was hard fought by Paragon (both in terms of the substantive proceedings and in the costs proceedings), and which had set a precedent in terms of the successful recovery of payment protection insurance claims.  I suspect that cases such as this may not be able to proceed under the present funding regime, but that is a different issue in relation to the intentions of Parliament.

Caroline Cousins, Costs Lawyer of A & M Bacon Limited – March 2017.
​A & M Bacon Limited were instructed for the Respondent/Claimant via Miller Gardner Solicitors in the Plevin case.