After the Supreme Court had ordered Paragon to pay Mrs Plevin’s costs, those costs were assessed at £751,463.84, including a solicitors’ success fee and a £531,235 after-the-event insurance premium. The Court confirmed that assessment. Funding arrangements made before 1 April 2013 could still support recovery of those items when later extended for appeals in the same dispute, although Lord Hodge dissented on the transitional provisions.
The assessment under review
The 2014 judgment resolved the substantive appeal. This later decision concerned the costs of taking that appeal to the Supreme Court, in particular a success fee and an after-the-event insurance premium.
The costs were high because Mrs Plevin’s solicitors acted under a conditional fee agreement, or CFA, together with after-the-event, or ATE, insurance. A CFA can provide an extra success fee if the client wins. ATE insurance covers the risk of having to pay costs. Under the Access to Justice Act 1999, rules of court required both the success fee and the ATE premium to be recoverable from the losing party. Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ended that regime on 1 April 2013, subject to transitional provisions. The dispute was whether those provisions still applied.
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Under rule 53 of the Supreme Court Rules 2009, Paragon sought a review of the assessment on two questions of principle. The first was that the CFA had not been validly assigned when the solicitors’ firm changed its form. The second was that the success fee and ATE premium were payable under arrangements made after the 2012 Act came into force. Lord Sumption referred the application to the panel which had heard the substantive appeal, and the Court gave judgment in open court because the second question was of some general importance.
Assignment of the CFA
Mrs Plevin entered into the CFA with Miller Gardner on 19 June 2008. In July 2009 the partnership became Miller Gardner LLP, and in April 2012 that LLP transferred its business to Miller Gardner Ltd. It was agreed that the CFA could in principle be assigned. Paragon relied on the transfer agreements and argued that only work already done passed to the new firm, leaving no effective retainer for the Supreme Court costs.
Lord Sumption held that the argument had no merit. The 2009 agreement transferred work in progress so that the buyer would carry on the business as a going concern from the transfer date. Unfinished work was therefore included. The 2012 agreement did not repeat that exact wording, but the intention that the practice continue was equally clear. Even if the transfers had been ineffective, the point led nowhere. On 30 July 2009 and 30 April 2012 the new firm wrote to Mrs Plevin, referred to the CFA, and said that it would “continue to represent you on the same terms and conditions as previously.” She assented by continuing to instruct it. Lord Hodge agreed, and the costs judges had rightly rejected the challenge.
The success fee
The 2008 CFA covered the proceedings through trial and steps taken to seek leave to appeal from an adverse result. The trial judge dismissed Mrs Plevin’s case. After the Court of Appeal gave leave, a deed of variation dated 8 August 2013 extended the CFA to that appeal. After the Court of Appeal allowed her appeal and gave leave to appeal to the Supreme Court, a further deed dated 3 January 2014 extended it to that appeal. Both deeds were made after 1 April 2013. They left the existing terms unchanged except by adding a further stage and altering the success fee.
Section 44(6) of the 2012 Act preserves a success fee payable under a CFA entered into before the commencement day if the agreement concerned advocacy or litigation services in connection with “the matter that is the subject of the proceedings”, or if such services had already been provided in connection with that matter. Paragon said that the deeds were new agreements for appellate work and were outside the saving.
Lord Sumption rejected that argument. The “matter” was the underlying dispute, and the deeds provided services in that same dispute at later stages. A variation discharges and replaces the original contract only where the parties show an intention wholly to extinguish it, rather than merely to alter terms which continue. He applied that test from Morris v Baron & Co. The original CFA still subsisted, including because costs proceedings remained outstanding, and both deeds were expressly variations. They were not a sham. Amending the existing CFA was a natural way of covering further proceedings in the same action, so the success fee could be included in the costs order.
The ATE premium
The ATE policy was concluded on 29 October 2008 and covered legal expenses and liability for the other side’s costs during the trial period. It was topped up for the Court of Appeal and again for the Supreme Court. The top-ups amended the existing policy rather than creating new contracts, but both amendments came after 1 April 2013. Before the costs judges, Paragon conceded that the premium was recoverable. Because the issue was novel and important, the Supreme Court allowed Paragon to withdraw that concession, on terms that Paragon pay the costs of the issue in any event.
The insurers agreed to be bound by the clause which should have been incorporated:
4. We will indemnify you against your liability, if any, to pay your insurance premium for your policy if you win and cannot recover the premium in full or in part.
Lord Sumption recorded that such a clause is common, though not invariable, in ATE policies for non-business litigants. If the premium could not be recovered from the losing party, the cost would fall on the insurers rather than the insured, but ATE insurance would not then be a viable method of funding.
The insurance saving is worded differently from the success-fee saving. Section 46(3) applies where, before the commencement day, the party took out a costs insurance policy “in relation to the proceedings”. The original policy related to the trial, not in terms to the later appeals. Paragon argued that each appeal was a distinct set of proceedings, so no qualifying policy for those appeals existed on 1 April 2013.
Lord Sumption accepted that trial and appeals are distinct proceedings when costs are awarded and assessed, because a separate order and assessment is required at each stage. Authorities including Hawksford Trustees Jersey Ltd v Stella Global UK Ltd (No 2) and Gabriel v BPE Solicitors support that treatment for those purposes. But “proceedings” is not defined in the legislation and is not a term of art. Its meaning depends on the context and purpose of the provision.
In ordinary language, proceedings brought to support a claim continue until the courts have disposed of that claim at whatever level. The purpose of the transitional provisions is to preserve vested rights and expectations created by the former law. Treating each stage as wholly separate would defeat that purpose. A claimant who succeeds at trial and then becomes the respondent to an appeal is locked into the litigation unless prepared to give up the fruits of the judgment. Topping up the original policy is part of the cost of defending what that funding helped her win. Refusing recovery would retrospectively alter the balance of risks on which the litigation was begun.
The difference in statutory language did not change the result. A solicitor’s retainer is commonly described as a “matter” and may be wider than advocacy and litigation, which explains the wording of section 44(6). A costs insurance policy is by its nature concerned with specific litigation. No rational reason was suggested for confining the insurance saving to one stage while extending the other transitional provisions to the underlying matter. Lord Sumption therefore held that an insured with ATE cover for the trial before the commencement date could later take out further ATE cover for appeals and include it in assessable costs under the 1999 regime.
Lord Hodge’s dissent
Lord Hodge agreed on the assignments but not on sections 44(6) and 46(3). He read both provisions as protecting only the contractual rights, and the associated expectation of recovery from the losing party, which existed before 1 April 2013. They did not protect a wider expectation about how the litigation might afterwards be funded. Later amendments to the CFA and later policy top-ups were therefore outside the savings.
On that reading, recovery of a success fee depends on the pre-existing CFA already covering the relevant stage. It should not matter whether later cover is added by variation or by a new agreement. For insurance, the question is which proceedings the pre-commencement policy covered. Lord Hodge accepted that a successful claimant forced to defend a judgment on appeal would be in an unenviable position, but he could not find in Parliament’s words an intention to preserve the old regime for the whole litigation. He would have allowed the appeal on that ground.
Verdict: By a majority, the Court confirmed the costs assessment. Assignment of the conditional fee agreement did not defeat recovery. The transitional rules preserved recovery of the success fee and insurance premium in these proceedings. Lord Hodge agreed on assignment but dissented on the transitional rules.
Source: Plevin v Paragon Personal Finance Ltd (costs) [2017] UKSC 23
