The impact of the four to one majority decision will be limited only to those cases where an ATE policy was entered into before the 2013 Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) came into force, said legal costs expert Keith Levene of Pinsent Masons, the law firm behind Out-Law.com. However, he said that there were a number of cases still in the pipeline to which the ruling would be significant.
"This is a sensible and understandable interpretation of the transitional provisions by the Supreme Court," he said.
Successful parties to civil litigation have been unable to recover success fees under conditional fee agreements (CFAs) and ATE premiums in the majority of cases since 1 April 2013, when LASPO came into force. However, the legislation contained transitional provisions applicable to policies entered into before this date.
In November 2014, the Supreme Court ruled in favour of Susan Plevin in a payment protection insurance (PPI) mis-selling case against a personal loan provider, Paragon Personal Finance Ltd. Paragon was also ordered to pay costs. The company then appealed against a costs order dated 5 February 2015, on the grounds that it should not be required to cover the "wholly disproportionate" cost of the solicitors' success fee and ATE insurance premium.
Plevin entered into the CFA with her solicitors, Miller Gardner, in 2008. The agreement 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. The original ATE policy, dated 29 October 2008, covered legal expenses and liability for the other side's costs up to and including the 'trial period', and was later 'topped up' for the appeals to the Court of Appeal and the Supreme Court. On both occasions, the amendments were made after LASPO came into force.
During the trial period, Miller Gardner went through internal restructuring, which meant that the CFA had to be assigned to newly-constituted firms on two occasions. Paragon's argument that these assignations, both of which took place after LASPO came into force, meant that the CFA should be treated as a new agreement each time was dismissed by all five judges. Its argument that the two appeals should not be treated as part of the same 'proceedings' for the purposes of the ATE policy was dismissed by four of the five judges.
Giving the judgment of the court, Lord Sumption said that although a trial and its appeals were "distinct proceedings" for some purposes, the term was not one that was defined in legislation. Its meaning therefore depended on the "statutory context and on the underlying purpose of the provision in which it appears"; in this case, in the transitional provisions set out in LASPO.
"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," he said. "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," he said.