JUDGMENT
Plevin (Respondent) v Paragon Personal Finance
Limited (Appellant)
before
Lady Hale, Deputy President
Lord Clarke
Lord Sumption
Lord Carnwath
Lord Hodge
JUDGMENT GIVEN ON
29 March 2017
Heard on 6 February 2017
Appellant Respondent
PJ Kirby QC Robert Marven
Thomas Bell Andrew Clark
(Instructed by Harrison
Clark Rickerbys
Solicitors
)
(Instructed by Miller
Gardner Solicitors
)
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LORD SUMPTION: (with whom Lady Hale, Lord Clarke and Lord
Carnwath agree)
1. On 12 November 2014, this court gave judgment dismissing Paragon’s
appeal and ordering them to pay Mrs Plevin’s costs in the Supreme Court [2014]
UKSC 61. Those costs were subsequently assessed by Master O’Hare and Mrs
Registrar di Mambro in judgments given by them on 5 February 2015.
2. Costs in the Supreme Court were high, mainly because Mrs Plevin’s
solicitors were acting under a conditional fee agreement (“CFA”), with after the
event insurance (“ATE”). They were assessed at £751,463.84, including £31,378.92
for the solicitors’ success fee and £531,235 for the ATE insurance premium. It need
hardly be said that these sums are wholly disproportionate to the relatively modest
amount at stake, in the event just £4,500. This was a common feature of the costs
regime introduced by the Access to Justice Act 1999, which ultimately led to its
abrogation on the recommendation of Sir Rupert Jackson’s Review of Litigation
Costs (2010). Subject to transitional provisions, the 1999 costs regime was brought
to an end with effect on 1 April 2013 by Part 2 of the Legal Aid, Sentencing and
Punishment of Offenders Act 2012.
3. Rule 53 of the Supreme Court Rules 2009 provides for a party dissatisfied
with an assessment of costs made at an oral hearing to apply for any question of
principle arising from an assessment to be reviewed by a single Justice, who may
refer the matter to a panel of Justices. Paragon applied for a review of the costs
assessment on two grounds, both of which raise questions of principle. The first
ground relates to the success fee. It is said that the CFA was made with the solicitors
originally instructed by Mrs Plevin and was not validly assigned to the two firms
who successively replaced them on the record. The second ground relates to both
the success fee and the ATE premium. It is said that they were not recoverable,
because they were payable under arrangements made by Mrs Plevin after the 2012
Act came into force. The application was referred to me as a single Justice. I referred
it to the full panel which sat on the substantive appeal, because the second ground
raised questions of some general importance. For the same reason, we are dealing
with the matter by a formal judgment delivered in open court.
Assignments of the conditional fee agreement
4. 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
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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.
5. 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.
6. The operative clause of the 2009 transfer agreement was Clause 2.1, which
transferred ten categories of asset to the new firm “to the intent that the Buyer shall
from the Transfer Date carry on the Business as a going concern.” The only relevant
category of assets for present purposes is “the Work in Progress”. This is defined in
Clause 1.1 as meaning “all partly completed goods or services allocated by the Seller
or the Administrators to the Contracts.” “Contracts” means “the contracts,
instructions, orders and engagements placed with the Seller … by its clients insofar
as they have not been fully performed by the Transfer Date.” Paragon’s argument is
that “Work in Progress” includes only work already done at the transfer date. It does
not, they say, cover 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.
The point about work in progress is that it is in progress, and Clause 2.1 expressly
transfers the work in progress “to the intent that the Buyer shall from the Transfer
Date carry on the Business as a going concern.”
7. The relevant provisions of the 2012 transfer agreement are substantially the
same, except that the words just quoted are absent. However, the intention that the
practice should be carried on is equally plain.
8. 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.
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Recoverability of the success fee
9. Section 27 of the Access to Justice Act 1999 amended the Courts and Legal
Services Act 1990 by inserting new sections 58 and 58A. These authorised
conditional fee agreements between litigants and their legal representatives, which
might include provision for a success fee. Section 58A(6) provided that rules of
court might provide for the success fee to be recoverable as costs. Section 29
provided that where ATE insurance was in place against the risk of incurring liability
for costs, rules of court might provide for the premium to be recoverable as costs.
Rules of court were subsequently made requiring both the success fee and the ATE
premium to be included in the costs awarded to a party. At the relevant time the rules
were contained in CPR Part 44. These arrangements were abrogated by the Legal
Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”). The Act
amended the Courts and Legal Services Act 1990. Section 58A(6) of the Courts and
Legal Services Act 1990 (as amended by section 44(4) of LASPO) now provided
that a success fee may not be recoverable as costs. Section 58C(1) (as amended by
section 46(1) of LASPO) made similar provision for ATE premiums, except that
their recovery in clinical negligence actions might be authorised by regulations.
These changes came into force on 1 April 2013, subject to transitional provisions. It
is on the transitional provisions that the present issue turns.
10. 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.
11. LASPO section 44(6) provides that the amendment of the 1990 Act to prevent
the inclusion of a success fee in the assessed costs
“does not prevent a costs order including provision in relation to
a success fee payable by a person (“P”) under a conditional fee
agreement entered into before the day on which that subsection
comes into force (“the commencement day”) if
(a) the agreement was entered into specifically for
the purposes of the provision to P of advocacy or
litigation services in connection with the matter that is
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the subject of the proceedings in which the costs order
is made, or
(b) advocacy or litigation services were provided to
P under the agreement in connection with that matter
before the commencement day.”
12. 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.
13. 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.
14. 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.
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Recoverability of the ATE premium
15. I turn therefore to the corresponding issue about the ATE premium. Before
the costs judges it was conceded that the ATE premium was recoverable as part of
the costs. Because of the novelty and importance of the issue, we gave Paragon leave
to resile from this concession on terms that they should pay the costs of the issue in
any event, and directed an oral hearing limited to that issue.
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.
17. 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.”
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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.
18. 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.
19. 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.
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
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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.
21. 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.
22. 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
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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.
23. 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.
Conclusion
24. For these reasons, I would confirm the assessment of the costs judges.
LORD HODGE: (dissenting)
25. I agree with Lord Sumption on the question of the assignments of the CFAs.
But I regret that I find myself in disagreement on the interpretation of the transitional
provisions in sections 44(6) and 46(3) of LASPO.
26. The interpretation of the word “proceedings” formed a significant part of the
legal debate before this court. I agree that there is no good policy reason for
Parliament to have introduced differing transitional protection for CFAs on the one
hand and cost insurance policies on the other. Where I differ is that I interpret 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. 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. I set out my reasons below.
27. When Parliament enacted LASPO it removed the right of a successful party
to recover from the unsuccessful party by way of a costs order both a success fee
payable under a conditional fee agreement (section 44) and also (subject to an
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exception with which this appeal is not concerned) all or part of the premium of the
successful party’s costs insurance policy (section 46).
28. But in each case Parliament included a transitional provision to protect the
party who had already entered into such funding arrangements before those sections
came into force on 1 April 2013.
29. In relation to CFAs section 44(4) of LASPO amended section 58 of the
Courts and Legal Services Act 1990 (“the 1990 Act”) to prohibit the costs order
from providing for the recovery of a success fee. Section 44(6) of LASPO provided:
“The amendment made by subsection (4) does not prevent a
costs order including provision in relation to a success fee
payable by a person (“P”) under a conditional fee agreement
entered into before the day on which that subsection comes into
force (“the commencement day”) if –
(a) the agreement was entered into specifically for
the purposes of the provision to P of advocacy or
litigation services in connection with the matter that is
the subject of the proceedings in which the costs order
is made, or
(b) advocacy or litigation services were provided to
P under the agreement in connection with that matter
before the commencement day.” (emphasis added)
30. It is clear that this provision requires there to be a CFA in existence before
the commencement day and that the success fee was payable by P under that CFA,
whether it related specifically to the matter (subsection (6)(a)) or was sufficiently
wide as to cover that matter (subsection (6)(b)). A success fee payable under a CFA
entered into after 1 April 2013 is not recoverable. It seems to me that this transitional
provision was designed to preserve both the pre-existing contractual rights of the
parties to the CFA and their expectation that there would be an entitlement to recover
the success fee arising under that contract from the unsuccessful party through a
costs order. Thus, if the pre-existing CFA covered a dispute through several levels
of the court hierarchy, costs orders could allow the recovery of the success fee at
each level so covered. If not, the costs orders would not.
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31. Two sections further on in LASPO, section 46(1) introduced into the 1990
Act the new section 58C prohibiting the recovery by a costs order of the premium
of a costs insurance policy. Section 46(3) provided:
“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.”
(emphasis added)
32. It is clear that this provision required there to be a costs insurance policy in
place before the commencement day. Again, the subsection protects the contractual
rights of the parties and their expectation of an entitlement to recover the policy
premium through a costs order. But Parliament chose to use different words to define
the scope of the protection given to the expectations associated with the relevant
contract. In this subsection it is not a policy covering the matter which is the subject
of the proceedings but a policy “in relation to the proceedings” that is exempted
from the new regime. Does that difference matter or are both transitional provisions
seeking to achieve the same result?
33. I can detect no good reason why the two transitional provisions should have
a different effect and Counsel suggested none. For the following three reasons I have
come to the view that each is designed to protect the expectations of a party arising
out of her contractual arrangements for the funding assistance as they existed before
the commencement day.
34. First, the protection which section 44(6) gives to the recovery of success fees
applies only in so far as the pre-existing CFA covers the appeal proceedings and not
otherwise. Thus a claimant whose CFA covered only the proceedings at first
instance could not rely on the transitional provision if she or he had to enter into a
new CFA for an appeal, for example if she or he had to instruct different legal
representatives. To my mind the transitional protection cannot depend on whether
the contract for a success fee at later stages of the action is achieved by varying or
assigning the original CFA on the one hand or entering into a new CFA on the other.
If Parliament had wanted to allow the litigant to say “I’ve started so I’ll finish”, it
would not have made the transitional protection depend upon the success fee being
payable under the pre-existing contract.
35. Secondly, the protection for the costs insurance policy premium in section
46(3) covers the party who has timeously taken out “a costs insurance policy in
relation to the proceedings”. This wording focuses on the scope of the pre-existing
costs insurance policy. It is common ground that the word “proceedings” can bear a
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broad or a narrow interpretation, covering either the proceedings at one level of the
court hierarchy (as in Masson Templier & Co v De Fries [1910] 1 KB 535, Wright
v Bennett [1948] 1 KB 601, Hawksford Trustees Jersey Ltd v Stella Global UK Ltd
(No 2) [2012] 1 WLR 3581 and Gabriel v BPE Solicitors [2015] UKSC 39) or the
proceedings in the case at all levels of the hierarchy. In applying the subsection the
question to be asked is: “what are the proceedings in relation to which the party has
obtained a costs insurance policy?”
36. Thirdly, in my view the public policy expressed in each of the transitional
sub-sections can be reconciled if the words “the proceedings” in section 46(3) are
construed as referring to such proceedings as were covered by the precommencement day insurance policy. In other words, the question posed in the
previous paragraph is answered by reading the pre-existing insurance policy. Again
the transitional protection does not depend on whether, as in Mrs Plevin’s case, the
policy was varied to cover the further stages of the litigation or a new costs insurance
policy was entered into to cover those stages. Each transitional provision protects
the pre-existing contractual rights and the pre-existing expectations, arising from
those rights, as to recovery from the losing party.
37. This interpretation would not cause concern if the claimant had lost at first
instance and had herself or himself to initiate an appeal. The claimant who had lost
and wished to appeal would be in a position similar to anyone else who had not put
in place funding arrangements for a litigation before the commencement date and
had to assert a claim under the post-LASPO costs regime. But it is undoubted that
an individual claimant, who wins at first instance and must thereafter defend the
judgment in her or his favour when the defendant appeals, would be in an unenviable
position on this approach. Having commenced litigation with the security of a CFA
and a costs insurance policy, the claimant could find herself or himself having to
defend the judgment without the benefit of the costs insurance policy:
“They have tied me to a stake; I cannot fly. But, bear-like, I
must fight the course.” (Macbeth Act 5, 7, 1-2)
I therefore acknowledge the force of the view that transitional provisions which
covered the whole of the litigation would be sensible. My difficulty is in seeing that
intention in the words which Parliament has used.
38. I would have allowed the appeal on this ground.
