Supreme Court allows recovery of pre-LASPO additional liabilities

The Supreme Court has allowed the recovery of a pre-LASPO success fee and after-the-event (ATE) insurance premium despite variations to the underlying conditional fee agreement (CFA) and insurance policy after that date, in a significant ruling on the Act’s transitional provisions.

In Plevin v Paragon Personal Finance Ltd [2017] UKSC 23, the Supreme Court dismissed Paragon’s appeal and ordered it to pay Mrs Plevin’s costs.

Those costs were subsequently assessed by Master O’Hare and Mrs Registrar di Mambro at £751,463, including £31,378 for the success fee and £531,235 for the ATE insurance premium.

Giving the ruling of the majority four judges, Lord Sumption said “it need hardly be said that these sums are wholly disproportionate to the relatively modest amount at stake, in the event just £4,500”.

The CFA originally agreed in 2008 with Mrs Plevin’s solicitors, Miller Gardner, covered all proceedings up to and including the trial, and all steps taken to seek leave to appeal from an adverse result at the trial.

In August 2013, the Court of Appeal having given leave to appeal from the dismissal of Mrs Plevin’s case by the trial judge, she and Miller Gardner entered into a deed of variation extending the CFA to cover the appeal.

There was a further deed of variation to cover the appeal to the Supreme Court after the Court of Appeal allowed her appeal.

Paragon argued that the two variations were new agreements entered into after 1 April 2013 for the provision of litigation services after that date. They were not, therefore, covered by the transitional provisions of section 44(6) of LASPO.

This says that the success fee could still be recovered after 1 April if “the agreement was entered into specifically for the purposes of the provision to [a person] of advocacy or litigation services in connection with the matter that is the subject of the proceedings in which the costs order is made”.

Lord Sumption said: “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.

“It follows that, unless the effect of the deeds was to discharge the original CFA and replace it with new agreements made at the dates of the deeds, the success fee may properly be included in the costs order. Whether a variation amends the principal agreement or discharges and replaces it depends on the intention of the parties.”

That was not the purpose of the deeds of variation in this case, he said.

The ATE policy was incepted in 2008 but topped up after 1 April 2013 to cover the Court of Appeal and Supreme Court appeals. ATE taken out before April 2013 is dealt with by section 46(3) of LASPO, which has different wording, talking about a policy taken out “in relation to the proceedings”.

Lord Sumption said this meant that the requisite link was with the “proceedings”, rather than the subject matter of the proceedings, and so the key question was whether the two appeals constituted part of the same proceedings as the trial.

He said: “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.

“It may or may not be reasonable to expect an insured party who fails at trial to abandon the fight for want of funding. That will depend mainly on the merits of the appeal, but an insured claimant who succeeds at trial and becomes the respondent to an appeal is locked into the litigation.

“Unless he is prepared to forego the fruits of his judgment, which by definition represents his rights unless and until it is set aside, he has no option but to defend the appeal. The topping-up of his ATE policy to cover the appeal is in reality part of the cost of defending what he has won by virtue of being funded under the original policy.

“The effect, if the top-up premium is not recoverable, would be retrospectively to alter the balance of risks on the basis of which the litigation was begun.”

He added that, although the legislation used different wording, there was “no rational reason” why Parliament would have meant to treat success fees and ATE premiums differently.

Lord Sumption concluded: “In my opinion, if there has been ATE cover in respect of liability for the costs of the trial, the insured is entitled after the commencement date to take out further ATE cover for appeals and to include them in his assessable costs under the 1999 costs regime.”

Lord Hodge dissented, saying he interpreted the transitional provisions “as protecting only the pre-existing contractual rights of the party to the proceedings and her expectation to recover the success fee, for which she and her lawyers had contracted before the commencement day, from the losing party”.

He continued: “I do not construe the provisions as protecting any wider expectation of how the litigation may be funded thereafter. Thus, the subsequent amendments of the CFA to cover the appellate proceedings and the top ups of the costs insurance policy did not, in my view, fall within the transitional provisions.”

The defendant also sought to challenge the CFA on the basis on ineffective assignment on two occasions when Miller Gardner reorganised itself, first into an LLP and then into a limited company. However, Lord Sumption said that on the basis of the way the agreements transferring over the firm’s assets were worded, the argument had “no merit”.

Paragon argued that ‘work in progress’ included only work already done at the transfer date, not further work on the same matter done thereafter.

“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,” Lord Sumption said.

Charlotte Cousins, a Costs Lawyer at A&M Bacon who acted for the claimant’s solicitors, said: “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 post was posted in ACL e-Bulletin

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Post type
Costs News
Published date
31 Mar 2017

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