Budana -v- The Leeds Teaching Hospitals NHS Trust. Appeal of Claimant from the order of Judge I P Besford, dated 4th February 2016, filed 28th June 2016

Before LADY JUSTICE GLOSTER Vice President of the Court of Appeal, Civil Division

Much anticipated guidance provided for the profession to the question of when a conditional fee agreement (CFA) can be assigned from one law firm to another.

Matter heard as a test case and was leapfrogged to the court of Appeal from the decision of District Judge Besford, a regional costs judge in Kingston Upon Hull County Court.

In the court below, DJ Besford held that the CFA was not validly assigned from Baker Rees (“BR”) to Neil Hudgell Ltd Solicitors (“NH”), as the agreement had been terminated prior to the assignment when Baker Rees closed its personal injury practice.

Writing to its clients ahead of the introduction of LASPO, Baker Rees said: “In light of the impending reforms, we have decided to stop handling personal injury litigation. When making this decision we were concerned to make sure that our existing clients were properly protected. To this end, we have put in place a process to transfer your case to a firm of solicitors who are specialists in personal injury litigation and who intend to continue this type of work.”

DJ Besford considered the letter to be “unambiguous”. Baker Rees had ceased to handle personal injury litigation. There was no offer or suggestion that they would continue to act pending the client’s instructions or even that they would give a reasonable amount of time for the client to consider the position before ceasing to act.

D J Besford considered the solicitors to have taken “a decision to cease to handle personal injury litigation, probably prior to the letter being sent out. The retainer had been terminated by BR. I entirely accept… that there was no CFA to transfer as of 25 March 2013.”

The judge held that he was bound by the High Court ruling in Jenkins v Young Brothers Transport Ltd [2006] EWHC 151, whilst acknowledging the criticisms of it made by the defendant’s counsel, Roger Mallalieu.

The issues before the Court of Appeal:

  • Was the BR CFA terminated by the 22 March letter?
  • If the BR CFA was not terminated, was the transfer of BR CFA effective as an assignment (as opposed to a novation)?
  • On the premise that the BR CFA was not terminated, but that the transfer took effect as a novation, should sec 44 of LASP nevertheless be interpreted to include a CFA entered before 1 April and novated after April 1, 2014
  • If, instead, the BR CFA was indeed terminated, was the Claimant liable to pay NH for the work done by BR under the NH CFA in any event.

Dealing with issue 1) Lady Justice Gloster considered it was “clear” that the BR CFA was not terminated by BR’s conduct finding “neither the 22 March letter not any (purported or actual) transfer of the BR CFA could amount to a termination of the contract without the claimant having elected to treat the contract as terminated”.”

The BR CFA survived, and BR remained entitled to payment, if it fulfilled its entire obligations under the contract.

In a lengthy judgment with regard to issues 2 & 3 (referred to  as the focal points of the appeal) Gloster LJ considered that 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 in today’s business environment” adding that she did not consider that “the question of assignability of rights and benefits is limited to a situation where the claimant’s solicitor moves to a different firm )as in Jenkins)”.

Preferring the claimant’s submission in relation to the construction of sec. 44 of LASPO Gloster LJ concluded the issue in the claimant’s favour finding the success fee payable to NH was payable under the CFA agreement entered before 1 April 2013.

In light of the decisions on issues 1-3 issue 4 did not require consideration.

The appeal was allowed with the cross-appeal dismissed.

LJ Davis whilst agreeing the appeal should be allowed and the cross appeal dismissed did so for reasons that differed from Gloster LJ approving the decision reached in Jenkins

LJ Beatson agreed with Gloster LJ that the correct analysis of the agreements and arrangements between the claimant, BR and NH resulted in novated contract rather than an assignment and agreed that, although there was a new contract between the claimant and NH, for the purpose of Section 44 (6) of LASPO the success fee payable to NH qualified as a “success fee payable…under a cfa entered into before” 1 April 2013 and agreed the appeal  should be allowed and the cross-appeal dismissed commenting on the disagreement between Gloster LJ and Davis LJ with regard to the assignment or novation” issue Beatson LJ concluded the arrangement in this case “must be analysed as a novation”.

Nicholas Bacon QC who led the appeal for the Claimant in the Court of Appeal described the decision as probably the most significant costs case post Jackson.  It brings to an end years of uncertainty over the assignment of solicitors’ retainers and legitimatises the transfer arrangements which were deployed in the case and thousands of others. They described it as “a tremendous victory for the solicitors’ profession and indeed for those members of the Bar whose fees were caught up in the assignment arguments up and down the country”.

Full judgment made available by 4 New Square chambers