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Ben Petrecz

Ben Petrecz

Costs Lawyer & Partner

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Recoverability of additional liabilities in the post-Jackson era

AWARE22/06/2017
Costs Aware Issue 3

The Supreme Court recently looked at various issues concerning the recoverability of additional liabilities between parties in the post-Jackson era, in the case of Plevin v Paragon Personal Finance Ltd [2017] UKSC 23.

In this case proceedings were commenced pre-LASPO, but where the CFA had been varied and assigned and a top up ATE premium obtained post-LASPO in respect of later proceedings in the Court of Appeal and Supreme Court.

Issue 1 – Assignment of CFA

It being common ground that the CFA was in principle assignable, it was held on the facts that both assignments (from Partnership to LLP; from LLP to Limited Company) were valid and intended by the parties.

Issue 2 – Recoverability of Success Fee

It was permissible to enter into a Deed of Variation extending the CFA to cover the conduct of the appeal and further appeal.

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).

This was consistent with the transitional provisions of section 44(6) of LASPO thereby permitting a costs order to include provision for recovery of the success fee.

Issue 3 – Recoverability of ATE premium

The original ATE policy was purchased on 29 October 2008 covering up to and including the trial period. The policy 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.
The Supreme Court looked at the difference in the wording of the transitional provisions at section 46(3) of LASPO compared to the wording found at s44(6) concerning success fees.

The critical question examined by the Supreme Court was whether the two appeals constituted part of the same “proceedings” as the trial or distinct “proceedings”. The Court reasoned:

  • For some purposes the trial and successive appeals do constitute distinct proceedings (e.g. for the purpose of awarding and assessing costs); 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 propose of the provision in which it appears, so far as can be discerned

  • The context in which the word “proceedings” appears in section 46(3) of LASPO is different to section 44(6) and so is the result

  • The question posed by s46(3) of LASPO is whether the fact of having had an ATE policy before the commencement date of 1 April 2013 relating to the trial 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

  • Topping-up an ATE policy to cover an appeal is in reality part of the cost of defending what has been won by virtue of being funded under the original policy

  • The effect, if the top-up premium(s) is not recoverable, would be retrospectively to alter the balance of risks on the basis of which the litigation 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) and “the proceedings” in 46(3)

  • s44(6) 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”

    • It is used in s44(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

  • By comparison, s46(3) relates to costs insurance policies which by their nature are concerned with specific litigation

If there has been ATE cover in respect of liability for the costs of the trial, the insured is entitled after the commencement date (1 April 2013) to take out further ATE cover for appeals and to include them in his assessable costs under the 1999 costs regime.

What does this mean for paying parties?

Where a CFA and associated insurance policy have been purchased by claimants prior to 1 April 2013, there is a need to consider the costs consequences of bringing or defending any appeals or further proceedings.

This will typically involve considering the litigation risks, the costs benefit analysis and third party costs reserve against the likelihood that the CFA is likely to be varied by deed and any insurance cover ‘topped-up’ to cover the appeal.

As a result, the court is entitled to order the payment of these additional liabilities in any order for costs against the defendant.