The case of Jarndyce v Jarndyce is notorious in Dickens’ Bleak House for appearing to go on forever, and Plevin v Paragon Finance has a lot of Bleak House about it.
This was originally a case about Payment Protection Insurance (PPI). Now it is one about costs.
First the background. In March 2006, Mrs Plevin, then aged 61, had taken out a 10 year loan with Paragon to consolidate her existing borrowing and for home improvements. The principal sum advanced was £34,000, but with an “optional insurance premium [to] cover your secured loan facility”, this had added an additional £5,780 for the premium and interest of £2,310. The total was therefore of £8,090.42 on top of the original advance.
For providing the cover, which included sickness and redundancy protection, Norwich Union received £1,630 with the broker, taking £1,870 commission and Paragon the remaining £2,280. Thus less than 30% of the premium had actually gone to the insurer who was covering the risk. In addition, the policy only covered five years of the term and Mrs Plevin was not told about the commission. Nor did she receive any advice about the suitability of the product, given as she was a lecturer with no dependents, who already had redundancy, sickness benefits, and life cover as part of her employment.
Dissatisfied with her loan, Mrs Plevin had issued proceedings in the County Court in January 2009, arguing that there had been an unfair relationship between her, the broker, and Paragon within the meaning of section 140A of the Consumer Credit Act 1974, and that the credit agreement should be re-opened under section 140B. By then, the broker was insolvent and the Financial Services Compensation Scheme settled her claim for £3,000.
That left Paragon, against which the value of the claim was under £5,000.
Before Recorder Yip QC, Mrs Plevin’s claim failed on 4 October 2012. However, she appealed to the Court of Appeal, which allowed her appeal on 16 December 2013 by adopting a “broad construction” to section 140A, and directed that the case be remitted to the County Court for a rehearing.
Dissatisfied, Paragon appealed to the Supreme Court, but its appeal was dismissed with costs on 12 November 2014 for different reasons to those given below, with the justices finding that the non-disclosure of the amount of the commissions had made Paragon’s relationship with Mrs Plevin unfair under section 140A, sufficient to justify the reopening of the transaction under section 140B. Again, the case was remitted to the County Court to decide what relief should be ordered.
That left the mere matter of the costs!
… to costs
Mrs Plevin had funded her claim up to trial under a conditional fee agreement (CFA) dated 19 June 2008 with Miller Gardner (MG) solicitors. As a safeguard, she had also taken out after-the-event (ATE) insurance to meet Paragon’s costs if she lost. During the proceedings, there had been technical changes of solicitor because MG had reconstituted itself as an LLP in July 2009 and into a limited company in April 2012. On each occasion, administrators had transferred assets by deeds of variation, including the CFA, to the new entity, and Mrs Plevin had maintained her instructions to the solicitors on the same terms thereby assenting to the transfers. Whether or not it is possible to do that viz to assign the benefit of the agreement (the right to be paid) as well as burden of it (the obligation to complete the work) as a matter of law, is, as they say, a moot point (see Davies v Jones).
On 5 April 2015, Mrs Plevin’s costs in the Supreme Court were assessed by the registrar and Master O’Hare as costs officers at £751,463.80, including £31,378 for the success fee and £531,235 for the ATE premium (reduced from about £750,000!), Paragon having contended unsuccessfully that a CFA cannot be assigned as a matter of law.
By the time of the appeal against the registrar’s assessment which followed, it had become common ground that Mrs Plevin’s CFA, could, at least in principle, be assigned (paragraph 5 of the judgment) and Paragon’s argument, as now advanced, was that on neither occasion of MG’s reconstitution had that assignment been validly completed (paragraph 4). Its case was that, in relation to the proceedings in the Court of Appeal and the Supreme Court, new agreements had been entered into to provide litigation services after 1 April 2013. Accordingly, section 44(4) and 46(1) of the Legal Aid (Sentencing and Punishment of Offenders) Act (LASPO) applied, under which success fees and ATE insurance premiums can no longer be recovered from losing parties in most types of litigation, including PPI claims. Consequently, Paragon, it was said, had no liability to pay them.
It can be seen, therefore, that the issue for the justices was not whether a CFA, being a personal contract, was capable of being assigned as a matter of law but was, instead, limited to a pure point of construction: did the deeds of variation validly transfer the solicitors’ litigation services to the reconstituted MG entities, rather than being shams designed to avoid the operation of sections 44 to 46 of LASPO? Insofar as Plevin has been reported as being authority for the proposition that the justices have endorsed the validity of assignments of CFAs as a matter of legal principle, such reporting is incorrect as, quite simply, the point was not before the court.
What then did the justices decide? In Lord Sumption’s view, Paragon’s contention that the variations were new agreements made after 1 April 2013 was:
“…a bad point. The “matter is that 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 … 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 … 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.”
So Paragon lost and the decision of the costs officers on the success fee was upheld.
Topping up ATE premiums
And the ATE premium? Paragon lost that too, albeit that Lord Hodge dissented!
The issue was whether the premium could be “topped up” for the appeals to the Court of Appeal and to the Supreme Court. The difficulty here for Mrs Plevin was that for some purposes, such as assessing costs, trial and successive proceedings constitute distinct proceedings: whilst there had been an ATE policy in place before 1 April 2013 for the trial, at the point of the appeals, there was none because the trial period was over. The critical question was whether the two appeals constituted part of the same proceedings as the trial. Lord Sumption dealt with it in this way:
“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 previous law. That purpose would be defeated by a rigid distinction between different stages of the same litigation… an insured claimant who succeeds at trial and becomes the respondent to an appeal is locked into the litigation. Unless he is prepared to forgo 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 … 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 assessible costs under the 1999 [pre LASPO] costs regime”.
Watch this space
So, almost 11 years to the day since she took out her loan with Paragon, and nearly nine years since she signed her CFA with MG, Mrs Plevin’s Jarndyce-like case has finally come to an end, with her on the winning side at that. But, as explained above, the judgment is not an answer to the critical point: can the benefit and burden of a personal contract such as a CFA be assigned at all? Of course, Lord Sumption could have given a steer by saying, “It is very surprising that the principle that the CFA can be assigned is common ground”, if he thought that the law did not permit it, but none of the justices were willing to go there.
To find out the answer, it is going to be a case of “watch this space” until Budana v Leeds Teaching Hospitals NHS Trust is heard by the Court of Appeal on appeal from Distsrict Judge Besford in October. He had held that a purported assignment of a CFA was ineffective, so the assignee firm, unlike MG, went unpaid for its work. “Watch this space” indeed!