Kerry Underwood


with 2 comments

Recoverability and transitional provisions 

In Plevin v Paragon Personal Finance Ltd [2017] UKSC 23

the Supreme Court considered the effect of the transitional arrangements in relation to the abolition of the recoverability of additional liabilities effected by the Legal Aid, Sentencing and Punishment of Offenders Act 2012. (LASPO).

Assignment of the Conditional Fee Agreement

Mrs Plevin entered into a CFA with her solicitors, Miller Gardner, on 19 June 2008 and thus the success fee was recoverable.

However there were two technical changes of solicitor arising out of organisational changes within the same firm.

In July 2009, the partners reconstituted themselves as an LLP and this was done by appointing administrators of the old partnership, who entered into an agreement with the 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 Limited, under a similar agreement.

The paying party maintained that on neither occasion was the CFA validly assigned, and therefore there was no effective retainer at the time when the costs were incurred in the Supreme Court.

Here, somewhat unusually, it was common ground that the CFA was in principle capable of assignment, and therefore the argument was about the construction of the actual documents.

Given the concession that CFAs are in principle capable of assignment the Supreme Court simply considered the actual wording of the agreements and held that the Conditional Fee Agreement was, on each occasion, assigned.


Recoverability of the success fee

It having been established that there was a valid Conditional Fee Agreement in place all of the time, through the three different legal entities, the next question for the Supreme Court to consider was whether the success fee was recoverable.

The original CFA 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 was 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.

Consequently they were not covered by the transitional provisions in section 44(6) of LASPO.

The Supreme Court rejected that argument and said that the “matter that is the subject of the proceedings, as set out in section 44(6)(a) of LASPO meant 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.

Consequently 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 was recoverable.

Whether a variation amends the Principal Agreement or discharges and replaces it, depends on the intention of the party.

Paragraph 13 the Supreme Court said:

“….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.

  1. 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.”



That is a very helpful decision for those with Conditional Fee Agreements in that it upholds the right to vary an agreement after 13 March 2013 whilst preserving recoverability.

However on the issue of assignment it takes matters no further as it was conceded that a Conditional Fee Agreement is capable of assignment, something which generally remains very much in dispute.


Recoverability of the ATE premium

Curiously, the paying party, Paragon, had conceded at the hearing in front of the costs judges that the ATE premium was recoverable, just as they had conceded that the Conditional Fee Agreement was in principle capable of assignment.

In relation to the ATE premium point the Supreme Court gave Paragon leave to resile from the concession on condition that they pay the costs of the issue in any event.

The Supreme Court set out the facts concerning the ATE policy at paragraph 16:-

“16.       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. By mistake, the wrong standard terms were incorporated into the policy, but the insurers have agreed to be bound by Clause 4 of the insuring clause in the form which ought to have been incorporated. This provided:

“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.”

We were told that this is a common, although not invariable provision in ATE policies issued to non-business litigants. Its effect is that if the premium is not included in the assessed costs awarded to the insured, the loss falls on the insurers and not on the insured. The significance of the point as far as the insured is concerned is that whichever of them is bound to meets the cost of the ATE premium, if it is not recoverable from the losing party ATE will not be a viable method of funding.“

The Supreme Court then went on to point out that the wording in LASPO of the transitional provisions relating to ATE premiums was different from the wording in relation to success fees.

The wording in relation to ATE premiums is contained at section 46(3) and reads:
“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.”

Section 44(6) of LASPO, dealing with success fees refers to an “agreement… in connection with the matter that is the subject of the proceedings”.

Thus in relation to an insurance policy it has to be “in relation to the proceedings”, whereas in relation to the success fees it is “the subject matter of the proceedings.”

Here there was an ATE policy in place before 1 April 2013 but it was not a policy in relation to the appeal to the Court of Appeal or to the Supreme Court.

Thus the issue here for the Supreme Court was whether the two appeals constitute part of the same “proceedings” as the trial or not.

If the appeals constituted distinct proceedings, then there was no policy in place at the commencement date as required by the Act in relation to the appeal.

The Supreme Court then pointed out that “proceedings” is not a defined term in the legislation and 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, in so far as that can be discerned.

At paragraph 18 of the judgment the Supreme Court reviewed a number of decisions that had held that a trial and successive appeals do constitute distinct proceedings.

Essentially for policy reasons, the Supreme Court distinguished those cases and held that provided that there was ATE cover in place in respect of liability for the costs of the trial, then the insured is entitled after the commencement date – 1 April 2013 – to take out further ATE cover for appeals and to recover the cost of those additional premiums.

The Supreme Court said this:

“20.        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 Page 8 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.

  1. 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.”



This may be a just solution, essentially for the reasons given in paragraph 21, but it is hard to square this decision with previous decisions and with the different wording in the different sections of LASPO.

In my view the logic of Lord Hodge, dissenting, set out at paragraphs 25 to 38 makes more sense.

However, that is neither here nor there as this is a binding decision by the most senior court in the land.


Supreme Court upholds recoverability of success fees and ATE premiums

In Times Newspapers Limited v Flood [2017] UKSC 33

the Supreme Court unanimously dismissed three appeals by newspaper publishers who were claiming that their right to freedom of expression under Article 10 of the European Convention on Human Rights was breached by them being ordered to pay to the claimants’ success fees and ATE premiums.

Each of the newspaper publishers had been involved in libel trial and MGN had faced allegations of hacking into phone messages.

In each case the publisher lost and was ordered to pay the claimant’s costs including the success fee and After-the-Event insurance premiums, which remain recoverable in defamation and privacy claims.

The publishers relied upon the decision of the European Court of Human Rights in MGN v United Kingdom [2011] ECHR 66 where the court held that the right to freedom of expression was infringed by the order to pay the success fees and ATE premiums.

However here the Supreme Court said that the government of the United Kingdom was not a party to the appeals and therefore it would be inappropriate for the Supreme Court to express a concluded view on whether the rights of the publishers were infringed.

In the case involving Associated Newspapers Limited the Supreme Court accepted that either the publisher or the claimant had to suffer an injustice but ruled that the level of injustice to the claimant would be significantly more substantial.

The President of the Supreme Court, Lord Neuberger said:

“It is a fundamental principle of any civilised system of government that citizens are entitled to act on the assumption that the law is as set out in legislation (especially when its lawfulness has been confirmed by the highest court in the land), secure in the further assumption that the law will not be changed retroactively – i.e. in such a way as to undo retrospectively the law upon which they committed themselves.”

Lord Neuberger said it would be wrong to make it more difficult for claimants in defamation actions to obtain access to justice than claimants in other types of civil claims.


The claimant recovers success fee for work carried after Litigation Friend replaced 

In Mole and another v Parkdean Holiday Parks Ltd and another [2017] EWHC B10 (Costs) (29 March 2017)

the Senior Courts Costs Office held that a claimant could recover a CFA success fee under a costs order against the defendants, in respect of work undertaken by the Claimant’s solicitors after the Official Solicitor replaced his mother as litigation friend.

In 2006, his mother entered into a CFA for the Claimant’s claim, which described her as the client (as the Claimant’s mother and litigation friend).

In April 2013, the Official Solicitor replaced her as litigation friend. In July 2013, the Official Solicitor signed a “deed of ratification and affirmation” describing the Claimant as the client and instructing Claimant’s solicitors to continue with the claim under the terms of the CFA.

Defendant contended that the Official Solicitor could not ratify or affirm the CFA as the Claimant’s agent, as a person lacking capacity could not act as principal and, therefore, the CFA was never with the Claimant himself. The deed took effect as a new CFA into which the Official Solicitor entered after 1 April 2013, meaning no success fee was recoverable (section 44(4), LASPO).

Referring to Blankley v Central Manchester Children’s University Hospitals NHS Trust [2015] EWCA Civ 18, the Master held that the 2006 retainer remained effective throughout the claim, despite the Official Solicitor replacing the mother.

The claim for costs in the period after the Official Solicitor’s appointment did not depend on the Official Solicitor having entered into a new agreement on 1 April 2013.

An agreement rendering the claimant liable to pay the success fee under the original CFA for the period after the Official Solicitor’s appointment already existed. The Claimant’s incapacity did not prevent him being a principal for these purposes, or otherwise incurring the relevant costs liability.

The decision avoids three problematic outcomes:

  • The original CFA being found to have been terminated on the basis of a non-party’s contentions and against the parties’ wishes, when both were able to continue performing their obligations.


  • The Official Solicitors being liable for the success fee and potentially having to pass on liability to Claimant.


  • (Assuming that the success fee is otherwise recoverable) the Defendant thereby receiving a windfall.

Proportionality and ATE insurance premiums

In Demouilpied v Stockport NHS Foundation Trust [2016] EW Misc B40 (CC)

Manchester County Court dismissed two appeals by claimants in clinical negligence cases against assessments of block rated ATE insurance premiums.

In each case there had initially been a provisional assessment, and in each case the claimant challenged that provisional assessment, leading to an oral hearing.

The judge held that under the post-April 2013 proportionality regime the court no longer had a discretion to award disproportionate costs under CPR 44.3(2) in relation to additional liabilities.

The court also held that when determining proportionality the court was not allowed to take into account matters beyond the specific cases before it.

In other words the court was not entitled to take into consideration wider issues relating to the ATE market.

The court also held that individual items could be found to be disproportionate, even though the global costs figure was not disproportionate.

ATE insurance premiums remain recoverable from the losing party in clinical negligence cases in relation to the cost of medical reports in relation to causation and liability.


Written by kerryunderwood

April 20, 2017 at 9:44 am

Posted in Uncategorized

2 Responses

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  1. when will i receive your book that i have paid for please?

    Brian Varney Legal Costs Consultant 10, Sherwood Close Ashford Kent TN24 9PT Tel. 01233 650717 or 07770 661669 (We do not use fax) DX 30201 Ashford (Kent)

    Brian Varney

    April 20, 2017 at 10:03 am

    • When it has been printed, which I anticipate will be next week, but if you would prefer a refund, then please let me know and I will refund the whole sum immediately.



      April 20, 2017 at 4:52 pm

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