In this significant ruling, the Supreme Court has addressed the effect of the transitional provisions of the Legal Aid, Sentencing and Punishment of Offender Act 2012 (LASPO). The court’s decision highlighted the need to preserve vested rights and expectations in spite of the arrangements that were abrogated by LASPO regarding Conditional Fee Agreements (CFA) and After the Event (ATE) Insurance.

In 2008 the claimant entered into a CFA which covered all proceedings up to and including the trial and all steps taken to seek an appeal thereafter. Alongside this, ATE insurance was taken out to cover the cost of the litigation. On 1 April 2013, LASPO came into effect and provided that ATE insurance policies and success fees under CFAs which were taken out or entered into on or after that date could not be recovered as costs from an opponent. Nonetheless, the claimant extended the CFA by way of deeds of variation entered into in 2013 and 2014 to cover the progress of the dispute in the Court of Appeal and Supreme Court. The ATE insurance was similarly “topped up” twice during this period.

The Supreme Court was required to consider two points. First, whether the post-LASPO deeds of variation of the CFA constituted new agreements which would not be recoverable under the rules introduced in 2013. Secondly, whether the hearing of the case in the Court of Appeal and later the Supreme Court were part of the same proceedings. If they were then the ATE insurance would cover the entire course of litigation and would thus be recoverable as costs from the opponents.

On the first point it was held that, provided the deeds of variation did not discharge the original CFA and replace it, the success fees in the CFAs could legitimately be included in the claimant’s recoverable costs. It was further held that the transitional provisions of the LASPO rules were not limited to a particular stage of litigation and that the claimant could therefore benefit from them at every stage of the case’s progress through the courts. Thus, the ATE premium could be recovered in line with the expectations of the claimant when they took out the original policy prior to LASPO.

This decision provides that success fees under CFA and ATE cover may properly be included in the costs order for the trial to entitle the claimant to benefit from the transitional provisions in section 44(6) and section 46(3) LASPO. This provides much-needed clarity in cases that have in place agreements which pre-date LASPO.

The judgment is available here