Court looks to commercial sense behind “ambiguous” CFA

Supreme Court: Plevin case reached the highest court

An “ambiguous” conditional fee agreement (CFA) needed to be interpreted by reference to the “commercial common sense of the relationship” between a law firm and after-the-event (ATE) insurer, the High Court has ruled.

The decision of His Honour Judge Pearce in the Commercial Court in Manchester is the latest stage of a case that reached the Supreme Court in relation to LASPO’s transitional provisions.

In Plevin v DAS Legal Expenses Insurance Company Ltd [2019] EWHC 1339 (Comm), Susan Anne Plevin purchased a PPI policy from Paragon Personal Finance Ltd.

She subsequently contended that she was entitled to relief under section 140B of the Consumer Credit Act 1974 in respect of that purchase. Though unsuccessful at first instance, the Court of Appeal upheld her appeal, and the Supreme Court then dismissed Paragon’s appeal.

The case was remitted to the county court, where Mrs Plevin was awarded damages of £4,500. The judge adjourned the issue of costs. Paragon made various applications to the Supreme Court, including one to set aside the costs order made on its earlier appeal, but these were dismissed with costs.

The county court finally ordered Mrs Plevin to pay Paragon’s costs from 27 January 2015 to 2 March 2015 but that otherwise there should be no order as to costs in respect of the claim.

Now-defunct Manchester firm Miller Gardner acted for Mrs Plevin under a CFA, with ATE insurance provided by DAS.

The court had first to decide whether Mrs Plevin’s liability for Miller Gardner’s costs was limited to what was recovered from Paragon by the terms of CFA, which defined a ‘win’ as “an agreement or judgment in your favour and including provision for a costs order or award payable to you by your opponent”.

The claimant argued that this meant she had just to obtain judgment for damages or other payment, regardless of whether the court made an order for costs in her favour, while DAS said the claimant needed both.

HHJ Pearce found the CFA ambiguous, saying: “This is not a case in which one party can show that its reading of the language of the CFA is more natural than that of the other. The use of ‘including’ rather than ‘includes’ undermines the claimant’s proposed interpretation; the inclusion of ‘and’ undermines the defendant’s case.”

He continued: “There is force in the argument of each party that the other’s interpretation of the CFA could give rise to an outcome that cannot have been intended.

“The claimant’s interpretation would lead to a situation in which she might be liable to meet Miller Gardner’s costs simply because a costs order was obtained en route to an unsuccessful claim.

“Equally, it would seem unlikely that the parties would have intended a situation to arise that can be contemplated on the defendant’s case in which the claimant recovers a substantial sum by way of damages but does not obtain a costs order in her favour, thereby avoiding any liability for the solicitors’ own costs.”

However, he said the defendant’s interpretation “more naturally coincides with the commercial common sense of the relationship”.

Other parts of the CFA led the judge to conclude that a win was achieved by obtaining judgment (or settlement) in the claimant’s favour coupled with an inter partes costs order in her favour, and that her liability for those costs was to the extent of that order.

This meant the question of whether the indemnity provided by DAS would pay Miller Gardner’s costs did not need to be addressed, but HHJ Pearce did so for the sake of completeness.

The problem was a “frank contradiction” between the policy terms and schedule. The policy said DAS “will pay your solicitor’s basic charges, disbursements, barrister’s fees and success fee and your opponent’s legal costs and disbursements if you win… but the court orders that you pay part or all of these costs”.

However, the schedule states the cover to be “own solicitor’s disbursements and opponent’s costs and disbursements”.

The judge saw force in DAS’s argument that the policy was a generic document and the schedule “individualised” for the particular claim, meaning that “commercial common sense would lead one to consider the terms that were specific to be the ones that took preference”.

This meant the claimant was covered in respect of any liability for her own side’s disbursements and the costs of her opponent, but not her solicitor’s own basic fees or any success fee.

HHJ Pearce went on to find that the CFA and ATE covered the remitted proceedings – as they were part of the claim against Paragon for damages and refunds – and that the ATE covered the detailed assessment proceedings relating both the county court, and the Court of Appeal and Supreme Court parts of the case.

“The determination of costs following a trial (or indeed an appeal) is a central part of the litigation process,” the judge said.

“Given that, on my finding, the business policy does not act so as to limit the ‘trial phase’ to the end of the trial (rather than the end of proceedings), the interpretation of the policy so as to cover the costs of detailed assessment proceedings following the trial is a more natural reading and one which accords with commercial common sense.”

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