Transfer of Pre-LASPO CFAs upheld

Budana v The Leeds Teaching Hospitals NHS Trust [2017] EWCA Civ 1980, 5 Dec 2017

In an eagerly awaited judgment, the Court of Appeal overturned the County Court decision of District Judge Besford and ruled that a pre-LASPO CFA could be validly transferred from one firm to another so as to preserve the right to recover success fees where the claimant and both firms of solicitors expressly agreed.

Circumstances

The appeal concerned a pre-LASPO CFA entered into between the claimant and Baker Rees (“BR”). On 22 March 2013 BR wrote to the claimant to inform her that they had decided to stop handling personal injury litigation, and that they would automatically transfer her file to Neil Hudgell Limited (NH).

On 25 March 2013, BR transferred the CFA retainer to NH by way of an assignment deed. The deed purported to assign all BR’s rights as between themselves and the claimant, and all BR’s obligations owed to the claimant.

The claimant expressly consented to this arrangement by a deed of assignment dated 31 March 2013 (although it was not signed until 10 April 2013). LASPO came into force on 1 April 2013, abolishing the recovery of CFA success fees.

The claim settled and the claimant sought to recover costs including success fees. During the detailed assessment of costs the issue arose whether the purported assignment of the CFA from BR to NH was effective in law.

At first instance, the County Court held that the claimant could not recover from the defendant any fees and disbursements incurred by BR and could only recover base fees and disbursements (excluding success fee) incurred by NH.

The Appeal

The claimant appealed against the decision that BR’s fees were irrecoverable because the retainer had been terminated at a time when it had been only part performed.

The defendant cross-appealed against the rejection of its arguments that the assignment was ineffective.

The defendant thus invited the court to approach the matter from first principles arguing that:

1. That there was nothing to assign as at 25 March 2013, and
2. That if there was anything to assign as 25 March 2013, it was in principle non-assignable but took effect as a novation on 10 April 2013, turning the CFA into a post-LASPO CFA with attendant irrecoverable success fee.

The Issues

The claimant appealed and the issues considered were as follows:

1. The “termination issue” - was firm A’s CFA terminated when it ceased to act for the claimant on 22 March 2013?
2. The “assignment / novation issue” - if the CFA was not terminated, was it effective as an assignment (as opposed to a novation)
3. The “LASPO issue” - If the CFA amounted to a novation after 1 April 2013, should the novated CFA nevertheless be treated as a CFA entered into before 1 April 2013 for the purposes of LASPO?
4. The “Liability issue” - If the CFA was terminated, was the claimant nevertheless liable to pay for the work done by firm A (and so recover such fees and disbursements from the defendant)?

The Decision of the Court of Appeal

1. The “termination issue” - the court held unanimously that BR did not terminate their retainer by their letter dated 22 March 2013. They could not do so unilaterally as the claimant had the right to choose between termination and affirmation of the retainer. In entering into the arrangements with NH the claimant elected not to terminate her retainer but to transfer it to NH.
2. The assignment / novation” issue - The majority (Gloster and Beatson LJs) considered that the BR CFA had been novated. All three parties had agreed that BR would be discharged from their obligations with NH assuming them with the claimant’s express consent. The court relied upon Bingham L.J. in Southway Ltd v Wolff (1991) 57 BLR 33 who said that such arrangements amounted to a novation: “If A wishes to assign the burden of the contract to C he must obtain the consent of B, upon which the contract is novated by the substitution of C for A as the contracting party.”
3. The “LASPO” issue - the court was unanimous that, whether the BR CFA had been novated or (per Davis L.J.) assigned, the parties’ agreement and stated intentions were that NH would act as the claimant’s solicitor on terms governed by the provisions of the BR CFA. On that basis, applying a purposive interpretation to Section 44 of LASPO (abolition of CFA success fees after 1 April 2013) and mindful of the words of Lord Sumption in Plevin v Paragon Personal Finance Ltd [2017] UKSC 23, [2017] 1 WLR 1249 who said: “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…”. The court held that it would be an over-technical application of the law of novation to prevent the claimant from recovering costs in respect of a success fee simply because her claim had been transferred to a new firm of solicitors.
4. The “liability issue” – the court did not need to determine the issue as the claimant was entitled to recover all her costs and disbursements under the BR CFA.

Keoghs Comment

The Court of Appeal have reached a pragmatic solution to technical issues taken by the defendant in finding that despite the novation the claimant was entitled to recover costs in respect of the success fee.