CFAs and ATE Premiums

Post LASPO Deeds of Variation and Assignments

The Supreme Court has ruled that post LASPO variations to a pre-LASPO CFA did not constitute “new agreements” – see Plevin –v- Paragon Finance Ltd [2017] UKSC 23.

There were two subsequent Deeds of Variation which respectively covered Appeals to the Court of Appeal and the Supreme Court. As they were entered into after the 1st April 2013 the Defendant had argued that they were not covered by the transitional provisions of section 44(6) of LASPO.

This section provided that the success fee could still be recovered after 1st April if “the agreement was entered into specifically for the purpose of the provision of advocacy or litigation services in connection with that matter that is the subject of the proceedings in which the costs order is made”.

Lord Sumption took the view that this was a “bad point” as “the matter that is the subject of the proceedings means the underlying dispute”. In his Judgment, “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 fees 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 clearly not the purpose of the Deeds in this case.

With regard to the ATE premium, the original policy was incepted in 2008 but then “topped up” as necessary post LASPO to cover the two appeals. ATE taken out pre-LASPO is dealt with by section 46(3) of LASPO which talks about a policy taken out “in relation to the proceedings”.

Lord Sumption said this wording meant that the requisite link was with the “proceedings” rather than the subject matter of the proceedings and so the key point was whether the two appeals formed part of the same proceedings as the trial. He found that:

“The purpose of the transitional provisions in relation to both success fees and ATE premiums, is to preserve vested rights and expectations arising from previous law. That purpose would be defeated by a rigid distinction between different stages of the same litigation”.

Lord Sumption went on to say:  “The topping up of [her] ATE policy to cover the appeal[s] is in reality part of the cost of defending what [she] has won by virtue of being funded under the original policy”.

He 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 the assessable costs under the 1999 costs regime”.

Whilst Lord Hodge dissented, saying “…the subsequent amendments of the CFA to cover the appellate proceedings and the top ups of the costs insurance policy did not [in his view] fall within the transitional provisions”, the Supreme Court went on to dismiss Paragon’s appeal and ordered it to pay Mrs Plevin’s costs.

Paragon also attempted to challenge the CFA on the basis of ineffective assignment on two occasions when Mrs Plevin’s solicitors (Miller Gardner) reorganised itself, first into an LLP and subsequently into a limited company.

On that point, Lord Sumption held that on the basis of the wording of the agreements transferring over the firm’s assets, this argument had “no merit”.

This is a very important decision for Claimant firms.