The long‐awaited Court of Appeal Judgment in Budana ‐v‐ The Leeds Teaching Hospital NHS Trust has finally been handed down. With three separate Judgments, running to a total of 119 paragraphs, it is little wonder that it took five months!
The Lady and Lords reached the same conclusion; success fees following a transfer of business from one firm to another firm are in principle recoverable. However, they reached their conclusions in different ways.
The matter involved a pre‐April 2013 conditional fee agreement entered into between the Claimant and Baker Rees. On 22 March 2013, Baker Rees informed the Claimant they would no longer be handling personal injury claims and suggested the Claimant transfer her case to Neil Hudgell Ltd under the same funding arrangement.
The firms entered into a transfer agreement for the sale to and purchase by Neil Hudgell of Baker Rees’ book of personal injury business.
On 10 April 2013, following contact from Neil Hudgell, the Claimant signed and returned a deed of assignment as between her and Neil Hudgell.
The Defendant sought to argue that the Claimant could only recover her base costs under a second conditional fee agreement that Neil Hudgell entered into with the Claimant as a back‐up, and not the costs of Baker Rees or any success fee.
The Defendant’s position was that the Baker Rees conditional fee agreement had terminated following their letter of 22 March 2013 or alternatively, if it had survived, it could not have been transferred by assignment, but only novated, which would have fallen foul of LASPO and the Conditional Fee Agreements Order 2013 and therefore was not an enforceable contract.
All Judges agreed that the letter of 22 March 2013 did not amount to termination of the conditional fee agreement. The disagreement was over whether the agreement had been assigned or novated.
Lady Justice Gloster found there was no reason in principle why rights and benefits under a firm of Solicitors’ contracts with its clients or its books of business should not be capable of assignment. The crucial element was one of consent.
She also found that the conditional benefit principle (the Defendant’s position that the benefit and burden of the CFA could not be assigned) was not relevant in the present circumstances and that Rafferty J in Jenkins ‐v‐ Young Brothers Transport Ltd had wrongly sought to enlarge the scope of the conditional benefit principle in her Judgment.
Lady Justice Gloster found the correct contractual analysis was that the contract assigning the rights, liabilities, benefits and burdens to Neil Hudgell was a novation and accepted the Claimant’s submission that Section 44(6) of LASPO and article 6 of the Conditional Fee Agreements Order 2013 should be interpreted so as to include a conditional fee agreement entered into before 1 April 2013 and novated after then.
She found support for this in the matter of Plevin ‐v‐Paragon Finance Ltd, where Lord Sumption stated the purpose of the transitional provisions of LASPO in relation to success fees and ATE premiums was to preserve the vested rights and expectations arising from the previous law. She stated that purpose would be defeated by an overtechnical application of the doctrine of novation.
Lord Justice Davis was of the view that the Court should give effect to the parties’ intention, which was that the conditional fee agreement be assigned, and he approved the conclusion of Rafferty J in Jenkins. However he did agree with Gloster LJ that the Defendant’s approach to novation was too narrow and would tend to frustrate the policy underlying the legislation.
Either way, it is hoped that the Court of Appeal’s clarification will reduce the number of fishing expeditions being pursued by Defendants in relation to matters involving pre‐April conditional fee agreements.