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Supreme Court rules Post-LASPO ATE Top-up & considers issues of assignment & Deeds of Variation

The case of Plevin (Respondent) v Paragon Personal Finance Limited (Appellant) was heard on Appeal by the Supreme Court and dealt with recoverability of a top-up to an ATE Premium post LASPO and the Court also dealt with a challenge in relation to the validity of the assignments of the Claimant’s CFA (with the earlier decision of the Costs Judges that the CFA was validly assigned to later firms upheld by the Supreme Court). In addition there was a case specific challenge to the Deeds of Variation which had been drawn and whether these validly transferred the funding arrangement (in respect of changes to Claimant’s solicitor and later changes to allow the original CFA to cover the subsequent appeals). Sean Linley, Costs Consultant, PIC, explores the key points.

Key Points

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

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.”

It follows that in theory a CFA can be extended to cover appeal proceedings and that where the said agreement is a pre-LASPO arrangement additional liabilities thereunder would also be recoverable.

• The Supreme Court also gave an indication that CFA Assignment was lawful ‘in principle’ (echoing the comments of the earlier decision reached by the Costs Judge in this case). This position follows previous judgments given in a number of cases including Griffith and Griffith v Paragon Personal Finance Ltd (unreported), Jones v Spire Healthcare Ltd and Azim v Tradewise Insurance Services Ltd . The Supreme Court did not give a definitive answer on the issue but Plevin does give greater credence to the argument that CFAs can theoretically be lawfully assigned. Plevin is not a conclusive authority on the point. Decisive guidance on the issue of assignment is expected in the Court of Appeal in October 2017 in the case of Budana v Leeds Teaching Hospitals NHS Trust. In the original Budana hearing DJ Besford held that a retainer between the client and Baker Rees had already been terminated before the pre-Jackson CFA could be assigned to the new Solicitors; meaning that there was no valid CFA to be transferred.

• The ATE Premium was ‘topped up’ post-LASPO in order to cover the appeals before the Court of Appeal and the Supreme Court. It was held that the two appeals constituted part of the same proceedings (as Trial) and pursuant to LASPO was recoverable inter partes.

• The decision reached was 4-1 in favour of the Respondent (with all Judges in agreement over the issue of assignment). The only dissent was in relation to whether the top-up element of the ATE Premium was recoverable inter partes. Claimant’s assessed success fee of £31,378.92 and ATE Premium (including top-up) of £531,235.00 were held as recoverable inter partes.

• The case underlies the importance of seeking expert advice when seeking to undertake any form of CFA Assignment whether this been a full assignment to another firm or something as minute as assignment arising from the transfer of a business (i.e. such as in this case where the Solicitor’s firm transferred from an LLP to a limited company). The crucial factors are:

1. A) Ensuring the aforesaid retainer is, in principle, assignable;
2. B) If it is ensure any variation is lawful and crucially does not discharge or terminate the previous agreement.

• It is not clear what the outcome would have been had the ATE been topped up post-LASPO for Trial. This is likely to remain a contentious area. Confidence should be given to lawyers and ATE insurers as to topping-up a pre-LASPO ATE Premium where appeal proceedings arise.

The Judgment

Recoverability of Success Fee and CFA Assignment / Deeds of Variation

• “Mrs Plevin entered into a CFA with her original solicitors, Miller Gardner, on 19 June 2008. Subsequently there were two technical changes of solicitor. They were technical because they both arose out of organisational changes within the same firm. In July 2009, the partners of Miller Gardner reconstituted themselves as an LLP. This was done by appointing administrators of the old partnership, who entered into an agreement with a new firm, Miller Gardner LLP, transferring specified assets to it. In April 2012, Miller Gardner LLP transferred its business to a limited company, Miller Gardner Ltd, under an agreement in similar terms. The point taken by Paragon is that on neither occasion was the CFA validly assigned to the new firm. There was therefore, they say, no effective retainer at the time when costs were incurred in the Supreme Court. The costs judges rejected this argument. I can deal with this point shortly, for in my view it has no merit and was rightly rejected.”

• “It is common ground that the CFA was in principle assignable. Paragon’s argument is based on the terms to the two successive transfer agreements made between the successive Miller Gardner entities.”

• It is right to add that even if the argument were sound, it would lead nowhere. Shortly after each transfer, on 30 July 2009 and 30 April 2012, the new firm wrote to Mrs Plevin informing her about the change, referring to the CFA and saying that they would “continue to represent you on the same terms and conditions as previously.” Mrs Plevin plainly assented to that by continuing to instruct them.

• The CFA originally agreed with Miller Gardner in 2008 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. On 8 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 conduct of the appeal. On 3 January 2014, the Court of Appeal having allowed the appeal and given leave to appeal to the Supreme Court, there was a further deed of variation extending the CFA to cover the appeal to the Supreme Court.

• Paragon’s case is that in relation to the proceedings in the Court of Appeal and the Supreme Court the variations of August 2013 and January 2014 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 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. 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). At the time when the two deeds of variation were executed, the CFA still subsisted (there were outstanding proceedings relating to the costs, for example). Both deeds are expressly agreed to be a variation of the CFA, leaving all of its terms unchanged except for the addition to the coverage of a further stage of the litigation and a change in the amount of the success fee. While the description given to the transactions by the parties would not necessarily be conclusive if the alleged variation substituted a different subject-matter, that cannot be said of either of the deeds of variation.

• There was a faint suggestion that the deeds of variation were an “artificial device” designed to avoid the operation of section 44(4) of LASPO. There is nothing in this point. The deeds of variation were not a sham. An amendment of the existing CFA is a natural way of dealing with further proceedings in the same action. They therefore take effect according to their terms.

Recoverability of the ATE Premium

• The ATE policy was originally concluded on 29 October 2008. It covered legal expenses and liability for the other side’s costs up to and including the “trial period”, which meant the period fixed by the court for the trial. It was “topped up” for the appeal to the Court of Appeal and again for the appeal to the Supreme Court. The top-ups did not give rise to fresh contracts. They were true amendments to the policy which continued in effect subject to the same terms as amended. But on both occasions the amendment was made after LASPO came into force.

• The difficulty arises out of the fact that the language of the transitional provisions relating to ATE premiums is different from that of the corresponding provisions relating to success fees. Section 46(3) provides:

 “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.” 

Whereas section 44(6) of LASPO refers in the context of success fees to an “agreement … in connection with the matter that is the subject of the proceedings”, section 46(3) refers to an insurance policy “in relation to the proceedings”. In other words, the requisite link is with the “proceedings” and not with the subject matter of the proceedings. Before 1 April 2013, there was an ATE policy in place, but it was not a policy in relation to the appeal to the Court of Appeal or the Supreme Court. Accordingly, the critical question is whether the two appeals constituted part of the same “proceedings” as the trial (as Mrs Plevin argues) or distinct “proceedings” (as Paragon argues). If the appeals constituted distinct proceedings, then there was no policy in place at the commencement date with the characteristic required by the Act, namely that it related to the appeals. That, in a nutshell, is Paragon’s argument. 

• It is clear that for some purposes the trial and successive appeals do constitute distinct proceedings. In particular they are distinct proceedings for the purpose of awarding and assessing costs: see Masson, Templier & Co v De Fries [1910] 1 KB 535, 538-539 (Vaughan Williams LJ); Wright v Bennett [1948] 1 KB 601; Goldstein v Conley [2002] 1 WLR 281, at paras 79 (Clarke LJ), 107 (Sir Anthony Evans). The authorities were helpfully reviewed by Rix LJ in Hawksford Trustees Jersey Ltd v Stella Global UK Ltd (No 2) [2012] 1 WLR 3581. In that case, the Court of Appeal held that for the purpose of section 29 of the Access to Justice Act 1999, the costs incurred in respect of an ATE premium were recoverable only in the proceedings to which the policy related, ie as part of the costs of the trial if the policy related only to the trial, and not as part of the costs of the appeal. In Gabriel v BPE Solicitors [2015] AC 1663, para 16, this court applied the same principle when holding that a trustee in bankruptcy, by prosecuting an appeal to the Supreme Court, did not expose himself to liability for the costs of the distinct proceedings conducted by the bankrupt at trial or on appeal to the Court of Appeal. 

• However, “proceedings” is not a defined term in the legislation, nor is it a term of art under the general law. Its meaning must depend on its statutory context and on the underlying purpose of the provision in which it appears, so far as that can be discerned. The context in which the word appears in section 46(3) of LASPO is different and so, in my judgment, is the result.

• The starting point is that as a matter of ordinary language one would say that the proceedings were brought in support of a claim, and were not over until the courts had disposed of that claim one way or the other at whatever level of the judicial hierarchy. The word is synonymous with an action. In the cases cited above, relating to the awarding or assessment of costs, the ordinary meaning is displaced because a distinct order for costs must be made in respect of the trial and each subsequent appeal, and a separate assessment made of the costs specifically relating to each stage. They therefore fall to be treated for those purposes as separate proceedings. The present issue, however, turns on a different point. 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. The fact that costs are separately awarded and assessed in relation to each stage does not assist in answering that question.

• 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. 

• The only substantial argument against this analysis arises out of the difference between the expression “the matter that is the subject of the proceedings” in section 44(6) of LASPO, and “the proceedings” in 46(3). In the ordinary course, there is a presumption that the same expression used in different provisions of a statute has the same meaning wherever it appears. There is also a presumption that differences in the language used to describe comparable concepts are intended to reflect differences in meaning. But the latter presumption is generally weaker than the former, because the use of the same expression is more likely to be deliberate. It will readily be displaced if there is another plausible explanation of the difference. Section 44(6) of LASPO is concerned with the terms on which a solicitor is employed to provide advocacy or litigation services. The subject of any solicitor’s retainer is ordinarily referred to as a “matter”. The word is, for example, persistently used throughout the Code of Conduct published by the Solicitors Regulation Authority. It is used in section 44(6) because the solicitor will commonly have been retained to provide a wider range of services in relation to a “matter” than just advocacy and litigation services. In those circumstances, the subsection had to be drafted so as to require the CFA to be limited to the provision of advocacy and litigation services. The word “matter” is also used, for a rather similar reason, in section 47, which repeals section 30 of the Access to Justice Act 1999 relating to the uplift chargeable by associations and other “bodies” who may have undertaken to meet a potential liability of members or other persons to pay the other side’s costs in litigation. Section 47(2) is a saving for cases where before the commencement date the body in question has given such an undertaking in respect of costs “relating to the matter which is the subject of the proceedings.” The undertaking and the relationship between the body and the beneficiary of the undertaking may be wider than just the conduct of the litigation. By comparison, section 46(3) relates to costs insurance policies which by their nature are concerned with specific litigation. I do not regard the difference of language as being any more significant than that. In particular, Counsel was unable to suggest any rational reason why the legislature should have wished to limit the transitional provisions in section 46(3) to a particular stage in the litigation, while extending the transitional provisions in sections 44(6) and 47(2) to arrangements relating to the underlying “matter”. Neither can I.

• 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. 

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Sean Linley is a Costs Consultant at Partners in Costs (PIC).

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