Post-LASPO assignment of CFA does not extinguish a claimant’s right to recover success fee
Court of Appeal decides that a pre-April 1 2013 CFA was novated when a claimant agreed to instruct a replacement firm – but that LASPO transitional rules allow their success fee to be recovered regardless.
BUDANA v THE LEEDS TEACHING HOSPITALS NHS TRUST & ANOR  EWCA CIV 1980
Assignment of CFAs Post LASPO: Key Points
- A two-to-one majority of judges concluded that the CFA transfer between advisors in this case amounted to a novation rather than an assignment.
- But the distinction was not crucial to the case’s outcome: their Lordships were guided by the intention of Parliament that cases that originally commenced before 1 April 2013 should be treated differently to those started after that date. LASPO’s transitional provisions would be interpreted accordingly.
- As a result, their Lordships decided that the claimant’s pre-LASPO success fee could be recovered, even though she formally agreed to instruct her replacement firm after the 1 April 2013 LASPO cut-off date.
The Court of Appeal explored how a solicitors’ retainer under a CFA might be transferred from one firm to another in relation to work undertaken that spanned the enactment of LASPO 2012. The case was heard as a “leapfrog” appeal from a costs order made by District Judge Besford, dated 4 February 2016. Both the claimant and the defendants in this case were appealing separate parts of DJ Besford’s order (paragraph 1).
In this personal injury-based dispute, the claimant originally instructed Baker Rees (BR). In doing so, the claimant was aided by a CFA with BR, which specified that she agreed to pay a 100 per cent success fee if she won her case. However, during the course of her dispute – which she ultimately won – BR exited the personal injury market. Consequently, BR sold its book of personal injury business to another law firm, Neil Hudgell Ltd (paragraphs 5 – 8).
Prior to the disposal, on 22 March 2013, BR wrote to the claimant, informing them that “we will automatically transfer your file to Neil Hudgell Ltd (NH) on 25 March unless you instruct us otherwise.” No such instruction by the claimant occurred (Paragraph 5-6). However, the claimant later verbally agreed to the proposal in a phone call on 31 March 2013, on the understanding that NH would continue to handle her case “under the same CFA as she had had previously.” She then signed a letter of instruction and deed of assignment, between herself and NH, on 10 April 2013. However, the deed was dated 31 March 2013 (paragraph 9).
This dispute centered on whether the successful claimant was entitled to recover her costs under the original BR CFA from the defendant, including the success fee. In essence, she argued that she had assigned her pre-LASPO BR CFA to NH, and was therefore entitled to all of her costs. The defendant, by contrast, argued that she could only recover her base costs under the NH CFA, and not any costs or success fee under the BR CFA (paragraph 22).
Between them, the two sides identified four key issues at the center of the dispute (paragraph 25):
- Had the BR CFA been terminated by the 22 March letter?
- If it had not been terminated, was the BR CFA effective as an assignment, as opposed to a novation?
- If the CFA had been transferred as a novation, should section 44 of LASPO 2012 be interpreted in a way that it allowed for CFAs that had been entered into before 1 April 2013 but also novated after that date?
- Alternatively, if the CFA had been terminated, was the claimant liable to pay NH for the work done by BR under the NH CFA in any event?
All three judges in this Court of Appeal decision issued their own judgments.
On the first point, all three judges explicitly – or implicitly – agreed with each other: neither BR’s conduct, nor its letter of 22 March, amounted to a termination of the BR CFA. Lady Justice Gloster, who delivered the lead judgment, said: “even if BR had indeed wished to end the contract, or their obligations thereunder, they could not, in the particular circumstances of the case, do so unilaterally” (paragraphs 37 – 39). As Lord Justice Davis noted in his own judgment, “at no stage did the claimant treat what had happened as repudiatory of the contractual retainer and accept such repudiation. To the contrary, she explicitly affirmed the arrangements by thereafter entering into the letter of instruction and deed on 10 April 2013” (paragraph 86). In reaching this conclusion, their lordships rejected DJ Besford’s lower court decision that the BR CFA had been terminated (paragraph 23).
On the assignment versus novation point, Davis LJ ultimately decided that what “remains critical to the proper outcome of this case is that the parties were intending that the terms of the original BR CFA should continue to apply and have effect: and should do so by way of an assignment. The court, in my judgment, should seek to give effect to that” (paragraph 98). However, both Gloster LJ and Beaston LJ disagreed with Davis LJ’s decision. Both separately concluded that the “agreement in this case must be analysed as a novation” (paragraphs 72 and 119). Here, a majority of the Court of Appeal agreed with DJ Besford’s lower court analysis (paragraph 23).
On this third, and critical point, all three judges were once again in agreement: when interpreting section 44 (6) of LASPO 2012, the CFA should be treated as being entered into prior to the 1 April 2013 cut-off date. As such, the success fee should be recoverable (paragraphs 77, 110 – 111, 114). In doing so, their Lordships overturned DJ Besford’s lower court conclusion that there was no BR CFA in existence on 1 April 2013 (paragraph 24).
In reaching their decision, Gloster LJ effectively agreed with the policy position made by the Law Society, which had intervened in this case. The Law Society’s counsel had argued that “such a construction was necessary in order to achieve intention expressed by Parliament: namely, a division between litigants who had instructed solicitors before LASPO came into force and those who had done so post-LASPO” (paragraph 75). Davis LJ acknowledged that this amounted to a “broad interpretative approach” to the meaning of section 44 (6) of LASPO. However, he also noted that, on this occasion, such an approach “accords with the clear policy” underpinning the Act’s transitional provisions (paragraph 111).
In light of their decisions in relation to issues 1-3, their lordships declined to offer a judgment in relation to issue 4 (paragraph 78).