In 2008 the claimant entered into a conditional fee agreement under section 58A of the Legal Services Act 1990, as inserted by section 27 of the Access to Justice Act 1999, with her original firm of solicitors, to cover all proceedings up to and including trial. An after the event insurance (“ATE”) policy was taken out to cover legal expenses and liability for the other side’s cost up to and including the “trial period”. The claimant’s original firm of solicitors subsequently changed due to organisational changes within the firm whereby its business was successively transferred in 2009 and 2012 respectively to new firms of solicitors. In October 2012 the trial judge gave judgment against the claimant. In August 2013 the claimant entered into a deed of variation extending the conditional fee agreement to cover the conduct of an appeal, and she topped up the ATE to cover an appeal to the Court of Appeal. In January 2014 the Court of Appeal allowed the claimant’s appeal and the Supreme Court granted permission to appeal. When the appeal came to the Supreme Court the claimant’s solicitors were acting under a further deed of variation of January 2014 extending the conditional fee agreement to cover that appeal, and with the ATE topped up again. In November 2014 the Supreme Court dismissed the appeal and ordered the first defendant to pay the claimant her costs in the Supreme Court. The costs in the Supreme Court were assessed at an amount which included the solicitors’ success fee under the conditional fee agreement and the ATE premium. The first defendant sought a review of the costs assessment under rule 53 of the Rules of the Supreme Court on the grounds that the conditional fee agreement entered into with the solicitors whom the claimant had originally instructed had not been validly assigned to the new firms; that neither the success fee nor the ATE premium was recoverable because they were payable under arrangements made by the claimant after the coming into force in April 2013 of sections 44(4) and 46(1) the Legal Aid, Sentencing and Punishment of Offenders Act 2012 which amended the 1990 Act so that success fees and ATE premiums were not recoverable as costs; and that the variations of the conditional fee agreement entered into in August 2013 and January 2014 and the topping up of the ATE were not covered by the transitional provisions of section 44(6) and 46(3) of the 2012 Act. The matter was referred to a single justice of the Supreme Court who referred it to a panel of justices of the Supreme Court for review.
On review by the panel of justices —
Held,(1) that a conditional fee agreement was in principle assignable and the conditional fee agreement entered into with the claimant’s original solicitors had been validly assigned.
(2) Confirming the inclusion of the success fee in the assessment of costs (Lord Hodge JSC dissenting), that the words “matter that is the subject of the proceedings” in section 44(6) meant the underlying dispute; that the two deeds of variation provided for litigation services in relation to the same underlying dispute as the original conditional fee agreement, albeit at appellate stages; that unless the effect of the deeds were to discharge the original conditional fee agreement and replace it with new agreements made at the dates of the deeds, the success fee could be properly included in the costs order; that whether a variation amended the principal agreement or discharged and replaced it depended on the intention of the parties; that at the time when the two deeds of variation had been executed the conditional fee agreement still subsisted and there were outstanding proceedings relating to it; that both deeds were expressly agreed to be a variation of the conditional fee agreement, leaving all 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; that the deeds of variation were not a sham intended to avoid the operation of the provisions of the 2012 Act and an amendment of the existing conditional fee agreement was a natural way of dealing with further proceedings in the same action so that they took effect according to their terms; and that, accordingly, the success fee had been properly included in the assessment of costs.
(3) Confirming the inclusion of the ATE premium in the assessment of costs (Lord Hodge JSC dissenting), that the topping up of the ATE had not given rise to fresh contracts but had been true amendments to the policy which had continued in effect subject to the same terms as amended; that the transitional provisions concerning insurance policies in section 46(3) referred to the “proceedings”, the meaning of which, not being a term defined in the legislation or a term of art under the general law, depended on its statutory context and on the underlying purpose of the provision in which it appeared so far as that could be discerned; that, as a matter of ordinary language, the proceedings had been brought in support of a claim and were not over until the court had disposed of the claim at whatever level of the judicial hierarchy; that the purpose of the transitional provisions was to preserve vested rights and expectations arising from the previous law and that purpose would be defeated by a rigid distinction between different stages of the same litigation; that an insured claimant who succeeded at trial and became the respondent to an appeal was locked into the litigation and had no option but to defend the appeal unless he was prepared to forego the fruits of his judgment which represented his rights unless and until it was set aside; that the topping up of his ATE policy to cover the appeal was in reality part of the cost of defending what he had won by virtue of being funded under the original policy; that if the top-up premium were not recoverable it would retrospectively alter the balance of risks on which the litigation had been begun; that where there had been ATE cover in respect of liability for the costs of the trial the insured was entitled after the commencement date to take out further cover for appeals and to include them in his assessable costs under the 1999 costs regime; and that, accordingly, the ATE premium was properly included in the assessment of costs.
P J Kirby QC and Thomas Bell (instructed by Harrison Clark Rickerbys Solicitors) for the first defendant.
Robert Marven and Andrew Clark (instructed by Miller Gardner Solicitors) for the claimant.